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FOCUS: These companies aren’t generating wealth for shareholders

There are more than a hundred companies whose securities are listed on the Nigerian Stock Exchange. But not all of them generate wealth for investors.

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NSE records 18.18% decline in banks' market capitalisation

There are more than a hundred companies whose securities are listed on the Nigerian Stock Exchange (NSE). As you may well know, the whole essence for listing securities on any bourse is so that they could be traded. This is very important, because it is only when stocks are consistently bought and sold by the investing public, that wealth is created for both companies and their shareholders.

However, in the case of some companies on the NSE, this hasn’t quite been the case. As a matter of fact, little or no wealth is being created for the people that own shares in these companies. And the reason for this is simple – not all these securities are traded; at least not in the real sense of it.

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Conversely, two things are bound to happen when companies’ listed securities experience little or no trading activities over a period of time. According to a well-known capital market source, trade inactivity leads to share price depreciation which ultimately results in zero wealth being created for shareholders. Therefore, shareholders of NSE companies with low share prices need to be worried for their investment.

“First, we need to understand how a company’s value is created. When a stock’s price increases, it does so because there are more people willing to buy the stock (demand it) than people willing to sell it (supply it). This high demand in relation to supply creates value for the stock because buyers must compete against one another for it. And the more they want the stock for themselves, the more they are willing to pay for it.

“The opposite occurs when a stock price decreases, which simply results from a low demand in relation to supply. Just as a high number of buyers create value, a high number of buyers erodes value.”

On that note, welcome to Nairametrics’ company focus for this week. Today, we are doing it a little differently – focusing on a number of companies whose share prices have consistently been low on the NSE. We decided to look into this matter because a growing number of readers have emailed recently to enquire about their shareholdings and why they haven’t been earning dividends since they acquired said shares.

If you have a similar complaint, just know that the reason you haven’t been earning any dividends is because the overall value of the company you co-own is low. That said, below are the companies with the lowest share prices, according to reliable information.

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Tantalisers Plc

This company’s share price has, over time, hovered around N0.20. This explains why its market capitalisation is valued at just N642,325,581.40, even as shares outstanding is 3,211,627,907.

Financially, Tantalisers Plc hasn’t been performing very well. It consecutively ran at a loss between 2013 and 2016, until 2017 when it reported a profit after tax of N443.3 million. In 2018, however, it returned to loss-making. This is because the company’s unaudited third quarter result for the year shows that it ran at a loss of N213.5 million. We reported that this could be a pointer to a possible overall loss for the fiscal year ended December 31st, 2018.

Tantalisers Plc is the NSE’s only listed Fast Food Company. It has been in existence for more than twenty-two years, following its 1997 incorporation. Its business model entails the cooking and selling of staple Nigerian and foreign dishes such as jollof/fried rice, pastries, Chinese cuisines, etc.

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Tripple Gee and Company Plc

Incorporated in 1980, Tripple Gee and Company Plc is a Nigerian company whose business model entails the printing of sensitive financial instruments and other security documents for financial institutions and government agencies.

But investors are disinterested in the company’s stock; hence, the reason why the share price has remained at N0.77 for a long time. Market capitalisation is N381,114,580.00, while shares outstanding is 494,954,000.

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In recent years, Tripple Gee and Company Plc has struggled to achieve profitability. It did, however, record a profit after tax of N12.7 million for Q3 2018.

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Rak Unity petroleum Company Plc

This company has a share price of N0.40, which has remained unchanged over a long period of time. Its market capitalisation stands at N22,649,813.20, and shares outstanding totals 56,624,533.

Incorporated in 1982 and listed on the NSE in 1989, the company is specialised in the merchandising of petroleum products such as premium motor spirit, automotive gas oil, kerosene, gas, etc.

Rak Unity Petroleum Company Plc generated a loss after tax of N2.6 million in Q3 2018, which makes it one of the worst performing companies in its sector.

Neimeth International Pharmaceuticals Plc

The company specialises in the manufacturing and merchandising of pharmaceutical products for both humans and animals. It has been operating this same business model for 61 years since it was first established in Nigeria back in 1957.

It has, however, struggled to be profitable recently. Its share price is a mere N0.67. However, the company’s market capitalisation is N1,272,435,262.36. Also, shares outstanding totals 1,899,157,108.

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McNichols Plc

This company has a share price of N0.51, a market capitalisation of N166,617,000.00, and shares outstanding totalling 326,700.000.

It is a relatively new player in the fast moving consumer goods sector, having just been incorporated in 2004. It was listed on the Nigerian Stock Exchange on December 18, 2009. It recorded a total revenue of N640.9 million in Q3 2018, with a profit after tax of N27.8 million.

Japaul oil & Maritime Services Plc

This company’s shareholders already have a lot of reasons to regret their investment, and a low share price is one of them. This is because it has a share price of N0.23, a total shares outstanding of 6,262,701,716, and an overall market capitalisation of N1,440,421,394.68.

The Nigerian company operates in the oil and gas sector, offering a range of services such as maritime, logistics, drilling/installations, and dredging services. But despite its many potential sources of income streams, the company reported a loss after tax of N5.5 billion in Q3 2018.

It was incorporated in 1994 and listed on the Nigerian bourse in 2005.

Other notable mentions

  • First Aluminium Nigeria Plc: This company’s share price is within the range of N0.29.
  • Evans Medical Plc: N0.50
  • DAAR Communications Plc: N0.40
  • Courteville Business Solutions Plc: N0.20
  • Afromedia Plc: N0.50
  • Academy Press Plc: N0.40

If you own shares in any of the companies mentioned above and others like them, you should know that you co-own companies that are no longer perceived to be very valuable by other investors. Already, the initial price at which you acquired the shareholding have depreciated. If you should choose to continue holding on to the shares (in hopes of better days to come), you should also bear in mind that the chances of further depreciation abounds. However, a decision to sell would mean that you would be selling for far less than the amount you spent to acquire them in the first place.

It can be an uneasy decision to make. But no matter how you decide, ensure to consult your stockbroker.

Emmanuel holds an MSc. in International Relations and a B.A in Philosophy & Logic, both from the University of Ibadan. He is a communications professional. As a Lead Business Analyst at Nairametrics, he focuses mostly on quoted companies, their products/services, and the economy in which they operate. Emmanuel is also experienced in the areas of corporate communication, brand communication, corporate storytelling, public relations, business research, management/strategy, etc. You may contact him via his email- emmanuel.abara@nairametrics.com.

2 Comments

2 Comments

  1. Anonymous

    March 4, 2019 at 2:48 pm

    You left Chams Plc in your list. It’s worse than some on your list. I bought 500,000 units in the year 2008 at N5.50 per share. I have been trying to sale it even at 20k per share but no buyers.

  2. Anakor, Sam

    May 5, 2019 at 10:41 pm

    What of RESORT SAVINGS AND LOANS PLC?
    Are they still there? Any hope at all?
    But the irony of it all is that while the Shareholders weep themselves out, the Directors of this “Moribund Companies” smile to the banks with their fat salaries and allowances.
    Who will save us – NSE, SEC or CSCS?

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Business News

Access Bank Plc reports profit of N40.9 billion for Q1 2020

Access Bank Plc recorded a profit after tax of N40.9 billion in the first quarter period ended March 31st, 2020, according to the company’s latest earnings report which was released earlier this afternoon.

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Access Bank 

Access Bank Plc recorded a profit after tax of N40.9 billion in the first quarter period ended March 31st, 2020. This is according to the company’s financial statement for Q1 2020, which was released earlier this afternoon. Other key details about the company’s Q1 financial performance can be seen below.

Net Interest Income: Access Bank’s net interest income for the period under review stood at N72.2 billion. This indicates a 27% increase compared to N56.8 billion that was recorded in Q1 2019.

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Personnel and Operating Expenses: In Q1 2020, the tier-1 bank incurred a total cost of N19.6 billion in personnel expenses. This shows a 53.5% jump compared to N12.8 billion in Q1 2019. In the same vein, other operating expenses also jumped sharply to N63.5 billion, marking a 69.8% increase when compared to N37.4 in Q1 2019.

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Profit before tax & profit after tax: Access Bank’s profit before tax for Q1 2020 stood at N46.2 billion. This is 2.6% more than N45.1 billion reported in Q1 2019. On the other hand, profit after tax decreased slightly by 0.53% to N40.9, down from N41.1 billion.

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Note that Access Bank’s earnings per share (basic) for the period decreased to 121 kobo as against 139 kobo. Diluted earnings per share also decreased to 119 kobo in Q1 2020 as against 137 kobo in Q1 2019.

READ ALSO: World Bank says remittances to Nigeria, other LMICs will drop by 20% in 2020

You may download the full report right here.

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SumoBank rebrands to SumoTrust, introduces bank account numbers

An online savings platform, SumoBank has rebranded as it metamorphosed to SumoTrust to continue the race of digital savings App in Nigeria.

The firm, launched its operation as a digital savings and investment platform, has grown from 0 to serving about 4000 customers.

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SumoBank rebrands to SumoTrust, introduces bank account numbers

An online savings platform, SumoBank has rebranded as it metamorphosed to SumoTrust to continue the race of digital savings App in Nigeria.

The firm launched its operation as digital savings and investment platform, and has grown from 0 to serving about 4000 customers.

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The development was announced on the Sumobank blog on the 27th of December 2019 by the Chief Executive Officer, Igwe Chrisent.

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“In 6 months, we have grown from 0 to serving almost 4000 customers and to serve you better; we decided to carry out a product-service survey which will help us to do more.

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“Based on the feedback we got from our ‘Esteemed users’ on our Product and service survey; we’re happy to announce that our vision just got bigger and we’ve set out to give you the very best of platform for Savings, Investment, learning and more.

“Because our vision got broader and clearer, it is important to know that having ‘Bank’ attached to our name will not serve the product updates which will be effected in the coming months/years, so we decided to pick a new name.”

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[READ MORE: Mr Biggs rebrands, launches new model restaurants across Nigeria)

Highlights of rebranding: The Change of name from SumoBank to SumoTrust also came with some updates on the SumoTrust savings App which include:

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  • Addition of NUBAN ACCOUNT numbers which allow users to have their unique bank account numbers for transactions (deposits) in their SumoTrust account.
  • Group Saving feature which allows users to go on a savings mission with a group of friends, family, associations, challenges, etc to reach a savings goal. See image below:
  • The article also mentioned that their Learn feature (Motute) which will enable you to teach or learn anything from anywhere in the world will be ready and announced in a few months and will be released on Entrepreneur Platform. This means the Sumotrust’s partnership with Entrepreneur Platform will enable you to access the company’s course for free and get third party course at a discounted rate.

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From this, it is clear Sumobank (SumoTrust) is preparing to become another big company to come out of Nigeria or there’s something else we don’t know yet, whichever it is, Both names sound alike and non will be forgotten easily since they are all ‘Sumo’.

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Business News

Cornerstone Insurance in consolidation talk with two underwriting firms

Cornerstone Insurance Plc is planning to consolidate with some insurance companies ahead of the recapitalization deadline set by NAICOM. 

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cornerstone, Cornerstone Insurance in consolidation talk with two underwriting firms ahead of recapitalisation , Cornerstone Insurance Plc announces resolution of its bloard meeting

Cornerstone Insurance Plc is in merger talks with some insurance companies ahead of the recapitalization deadline set by the National Insurance Commission (NAICOM) for the insurance sector.

The move is to strengthen its capital base. The Group Managing director of the company, Ganiyu Musa, said consolidation with other market players was more efficient compared to just seeking fundraising.

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Although Musa didn’t reveal the names of the insurance companies negotiating with Cornerstone Insurance, he said consolidation would place the firm in a stronger position, boost expertise, improve technical capacity and even strengthen the capital base of Cornerstone Insurance.

While the consolidation is expected to aid the company’s recapitalization process, Musa said the Cornerstone Insurance had already met the recapitalization request by NAICOM.

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According to him, the company has exceeded the N18 billion new minimum capital required by the insurance market regulator. Musa said the sale of its property and head office boosted the liquidity of the company, placing its finances in a better footing.

“The sale of our new property along Lekki axis has further increased the liquidity of the company to meet and surpass expectations. The company would have loved to keep the property for the long run, but we were challenged with the fact that real estate investment is not admissible in the ongoing recapitalisation.

“This necessitated the sale of the building for a handsome amount that covers the cost of the building project and still left with profit. At present, we are in a stronger financial position to scale through the exercise as our balance sheet is stronger and healthy,” he said. 

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[READ MORE: NAICOM boss makes case for recapitalisation, insists exercise will build a stronger insurance sector)

He added that, “The company came out from its loss position of N1.7 billion in 2017 to N1.8 billion profit in 2018, even as the 2019 profit outlook is showing sign of higher profit from that of the previous year, judging from its 2019 third-quarter report.”

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While the insurance companies don’t have a choice but meet the deadline through fundraising and consolidation, the chairman of Mutual Benefit Assurance, Akin Ogunbiyi, said the company was against the planned recapitalisation scheme by NAICOM.

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The company has said it could survive the wave of the recapitalisation, it said its concern was for other players who might become victims to the plan. Mutual Benefit also condemned the handling of foreign acquisitions in the Nigerian market.

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