Welcome to Nairametrics’ company focus, a weekly column that aggregates key information about small-cap companies listed on the Nigerian Stock Exchange. This is for the benefit of the investing public, particularly those who may be considering acquiring new shares soon. This week’s focus is Rak Unity Petroleum Company Plc, an oil and gas company that has been operating in Nigeria for thirty seven years.
Get to know everything there is to know about this company’s business model, its competition, financial performance, and more.
Corporate Information about the company
Initially incorporated as a limited liability company on December 20th 1982, Rak Unity Petroleum Company Plc is an indigenous oil and gas company with headquarters in Lagos, Nigeria. According to available information, the company is specialised in the merchandising and distribution of petroleum products across Nigeria. Examples of these products are: petrol/premium motor spirit, kerosene, lubricants, automotive gas oil (AGO), gas, etc.
It should be noted that Rak Unity Petroleum Company Plc is a subsidiary of Toparte Nigeria Limited, a little-known entity which owns about 85% of the company’s shares.
About the company’s segments
Moving on, information available on the company’s website states that it operates along three key segments which include: its retail outlets, bulk supply services, and dump/delivery services. The first segment entails ownership of filling stations which are situated in major cities and towns across Nigeria. These filling stations sell the products for which the company is known, albeit at retail prices.
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The retail segment is completely different from the bulk segment, which entails the importation of large volumes of petroleum products that are then sold (wholesale price) to other smaller companies that are also engaged in the business of distributing such products. Similar to this is the third segment, which has to do with the construction of petroleum product dump sites, which are also managed by Rak Unity Petroleum on behalf of paying clients, who are typically companies that are also engaged in the same business.
The company’s target market
Rak Unity Petroleum Company Plc primarily targets retail petroleum product consumers in Nigeria. These are everyday consumers who buy PMS for their cars, diesel for their generators, lubricants for their engines, gas and kerosene for their stoves, etc. It also targets commercial/industrial users of such products such as manufacturers who need large quantities of diesel to generate electricity for their plants.
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In the same vein, Rak Unity Petroleum offers services to other players in the downstream sector of Nigeria’s oil and gas industry. As we can see from its segmentation above, the company offers various services to competitors, services ranging from bulk importation of products to the provision and maintenance of storage facilities.
The company’s listing on the Nigerian Stock Exchange and ownership structure
Our company focus subject was listed on the Alternative Securities Market (ASeM) of the Nigerian Stock Exchange, on March 21st, 1989. This was barely two years after its conversion to a public company on the 16th of November, 1987 and some seven years after its incorporation. Information available on the company’s website claims that it is “the first Nigerian indigenous player to be listed on the Stock Exchange.” And this claim might as well be true.
The company currently has a market capitalisation of merely N22,649,813.20, according to the Nigerian Stock Exchange. Its shares outstanding stands at just N56,624,533. The last trading activity on the company’s shares was on October 11th, 2018 when about 400 units of shares were traded at N0.40. This amount (i.e., N0.40) unsurprisingly remains the company’s unchanged share price till date.
Why no one seems to be interested in this stock?
As noted in the beginning of this piece, Rak Unity Petroleum Company Plc has one major investor who controls the ownership of the company’s shareholdings. This company is Toparte Nigeria Limited. According to information obtained from Rak Unity Petroleum’s full-year 2017 financial year result, Toparte Nigeria Limited owns a total of 48,131,159 units of shares which amounts to about 85% of the total shareholding. This leaves other investors (including the investing public), with just 8,493,734 units of shares (15%).
The adverse effect of this situation is that the company’s stock lacks liquidity. The absence of free float, therefore, makes it impossible to trade the stock. A 2015 Nairametrics analysis of this same issue predicted that the company’s share price, which at the time was N0.50, would remain unchanged for a long time to come. This is due to the lack of liquidity which meant that trading of the stock was nearly non-existent and continues to be.
Nearly four years since 2015, the share price has declined from N0.50 to N0.40. Liquidity is still almost non-existent, and no one seems to be buying or selling the stock, despite the rather consistent dividend payments the company continues to dole out.
Financial performance and comparison with competitors
There are about eleven oil and gas companies that are listed on the Nigerian Stock Exchange. Out of this total, about eight operate in the downstream sector; engaging only in the merchandising of petroleum products. The remaining ones are either mainly focused in oil exploration, or have business models that enable them to combine both exploration and the sale of refined petroleum products.
For the sake of fairness, we compared the unaudited Q3 2018 financial statement of Rak Unity Petroleum Company Plc with those of the other NSE-listed companies that also operate in the downstream sector. Below are our findings:
- Total Nigeria Plc generated a revenue of N226.9 billion in Q3 2018, with a profit after tax of N7.6 billion.
- MRS Oil Nigeria Plc made a revenue of about N76 billion and a loss after tax of N426.7 million
- Forte Oil Plc’s Q3 2018 revenue stood at N94.8 billion. The company made a profit after tax of N78.7 million.
- Eterna Plc made a revenue of N205.3 billion with a profit after tax of N1.1 billion.
- Conoil Plc made N75.8 billion in revenue and a profit after tax of N1.5 billion.
- 11 Plc generated N125 billion worth of revenue, and a profit after tax of N7.8 billion.
- RakUnity Petroleum Company Plc generated a revenue of N7 billion and a loss after tax of N2.6 million.
Note how the company generated the least revenue and still ran at a loss during the nine month period. Performance in Q3 2017 was much better, in that the company had generated a revenue of N7.7 billion and made a profit after tax of N57.7 million.
Brief look at the company’s board members
There are six key members of Rak Unity Petroleum’s board of directors, according to information made available by the company. These individuals include the Managing Director, Engineer James Ogungbemi, the Chairman, Mr Edo-Abasi Bassey Ukpong, and Mr O.C. Okonkwo, a Non-Executive Director. Others are: Mrs Nonny Patricia Ugboma, Mrs Moroti Adedoyin-Adeyinka, Mrs Aderonke Olayemi Onadeko, and Mr Said Moddibo Ahmed, all of whom are Non-Executive Directors.
Recommendation for the company
Rak Unity Petroleum Company Plc should, perhaps, consider a review of its shareholding structure. A possible divestment by the majority shareholder could enable other shareholders to come onboard, along with the much-needed capital that could help drive growth.