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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.

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.

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.

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.

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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.

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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.

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.

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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.

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Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs. He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor. Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan. If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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 Half Hour

We wanted to help users pay themselves first – Piggyvest

In a chat with Nairametrics, Joshua Chibueze talked about the idea that sparked the birth of PiggyVest.

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We wanted to help users pay themselves first – Piggyvest

Imagine that you put all your money in one jar, and all your bills in another jar. Chances are that the jar of bills is the one that would never run dry.

Month after month, people spend a huge percentage of their income on living expenses from rent to food, transportation, utilities, and the likes. More often than not, they forget to set aside a little money for themselves. Simply put, they pay everyone else but themselves.

This was the concept around which Piggyvest (formerly Piggybank) was built. Speaking at the Nairametrics Business Half Hour show, Co-founder of Piggyvest, Joshua Chibueze, said that the purpose of Piggyvest was to help people create an automated system, where they could pay themselves first, by setting aside a fixed amount or percentage, before making other expenses.

READ: World’s largest oil company to pay $75 billion annual dividend, despite plunge in profits

Describing the Fintech, Joshua posed a number of questions, “Piggyvest is that place you keep money that is your own money. Beyond having multiple bank accounts, how do you pay yourself? You work month after month, and pay bills, but where do you pay yourself? Where do you keep money that belongs to you and only you? How do you plan towards those heavyweight bills.”

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How a piggybank tweet birthed PiggyVest

On the last day of December 2015, a lady posted a tweet that went viral. The tweet detailed how she had saved N365,000 by faithfully setting aside N1000 in a wooden piggy bank every day of the year. According to her, she ensured to pay herself, by setting aside the sum before making any other expense.

As people continued to share the post and comment about how they might not have the discipline to accomplish it, Joshua and his team (Odunayo Eweniyi, Somto Ifezue, and others, who were working on PushCV at the time), decided to find a way to digitize the process, so salary earners and the self-employed could also set aside money for their personal projects and financial goals. They sampled thoughts from some of their PushCV clients and found it was a concept many would really be interested in.

Three weeks later, the first version of Piggybank had been launched, although it took till April 2016, before the fully tested version was ready for use.

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“It was not all easy because we were trying to do something no one had done in Nigeria. The other companies doing something similar were outside the country, so all we had to rely on was the customer feedback.”

No member of the team had any banking experience, so building the app was a total reflection of customer feedback and user experience. Notwithstanding, they understood that people were concerned about the security of funds; hence, they gradually progressed to the use of bank-level security to ensure against hacking.

In subsequent years, the team added an extra layer of security with a two-factor authentication preventing transactions, unless the user could provide the password and the answer to the security question.

Other steps include; SMS verification instead of email verification, as e-mails are more susceptible to hacking than mobile numbers.

From 1,000 to over 1 million users

At the outset, the intention was to get to the first 1000 users. “We felt that if we could get to 1000 users, it would be worth it. We ran on our funds and did not make any money in the first year, because we were still trying to understand our users and find our feet,” he said.

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After successfully helping users save 21 million in the first year and over 70 million in the second year; the company attracted investors, and by 2018 they had secured a $ 1.1million round in seed funding. This came as a plus, because the business had grown organically at the time, and was already profitable enough to sustain its operations.

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Fintech versus Asset managers

Piggybank first partnered with a couple of Microfinance banks, before partnering with a Commercial bank. In 2018, they raised some $1.1million from investors and acquired a microfinance bank license, a money lenders license, and a cooperative license, allowing them to operate a Trustee agreement with an external asset manager.

There are products tailored for different reasons, so people trying to establish their savings culture could go for an option that allows them to save consistently, and withdraw once in a quarter. There are also options that could allow users to steadily build an investment culture, and others meant for people saving towards a project.

In April 2019, the company rebranded and became Piggyvest. It currently serves over a million users, helping them save and invest “billions of Naira every month that they would probably be tempted to badly spend.”

The more interesting part is that there are no fees for the services, but customers get to make some money, as Piggyvest splits the returns with customers; however, users may have to pay a 2.5% charge, when a customer withdraws his funds before the agreed date.

READ: Effective financial planning after taking a pay cut in Nigeria

Breaking the trust challenge

Financial institutions in Nigeria generally have to deal with the challenge of trust deficit among the customers, but this is even more for fintechs like Piggyvest. According to Joshua, despite taking added measures to secure customers’ funds, any delayed transaction tends to breed some distrust among the users, and the company has to deal with this by providing information.

“This is the reason why we don’t do more of marketing but prefer to let people sell us with their testimonies. Customers tend to believe more the testimonials from other satisfied customers, and this how we have gotten over 1.5 million users and improved customer trust,” he explained.

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When the economy went into lockdown, the business showed itself to be pandemic proof, as savings improved after the initial shock. The remote working policy was introduced, so that even in the aftermath of the lockdown, operations continued unhindered.

“We are a customer-centric brand, and the feedback from customers is our motivation. We are out to give them the best experience ever,” he concluded.

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Company Profile

NPF Microfinance Bank: Providing ‘friendly’ financial services for almost 3 decades

NPF microfinance bank has shown resilience over the years, and this is reflected in its consistent positive performance.

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NPF Microfinance Bank: Providing 'friendly' financial services for almost 3 decades

The Police is your friend is a cliché many are familiar with, but most do not know that this friendship extends to financial services. Incorporated as a community bank in 1993, with License No. FC 00200, the Nigerian Police Force (NPF) Microfinance bank has been providing banking services to the Nigerian banking public for almost three decades.  

However, it is one of those stocks that hardly make the headlines, except for landmark events. This friendly microfinance bank is the pick for Nairametrics corporate profile this week.  

READ: CBN releases new capital base, sanctions for Microfinance Banks in new draft guidelines

Incorporation  

NPF Microfinance Bank Plc (Formerly NPF Community Bank Ltd), was incorporated on 19th May, 1993, to provide services such as retail banking, loans and advances, and other allied services to both serving and retired officers and men of Nigeria Police Force, its ancillary institutions, and later on, the general banking public.  

The Bank mission says it is targeted at providing banking and other permissible financial services to poor and low-income households and micro enterprises, with emphasis on members of the NPF Community. 

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It commenced operations on 20th August, 1993 with a single branch in Ikoyi, having obtained a CBN provisional license to operate as a community bank. The bank obtained its full license to operate as a Community Bank on 24th January 2002. Five years later, it converted from its Community Bank status to a Microfinance Bank, following CBN directive which allowed it to open branches in all the states. It was registered as a Public Limited Company on 13 July, 2006, and received an approval-in-principle to operate as a Microfinance Bank on 10 May 2007. 

NPF microfinance bank obtained the final license on December 4, 2007, but its stocks did not get listed on the main board of the NSE, until December 2010, after 17 years of operations. 

READ: Strong performance from Stanbic IBTC, despite weak retail banking position

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Its stock price is considered quite stable, trading within a narrow band, with its price-earnings ratio estimated to be about 9.45 times earningsslightly higher than the 9.3 times earnings, which is the average PE ratio on the NSE. 

The bank’s authorized capital at inception was N500,000.00, made up of 500,000 ordinary shares of N1.00 each. This has grown over the years to its current level of N2 billion, made up of N4 billion ordinary shares of 50k each, of which 2,286,637,766 ordinary shares of 50k eachare issued and fully paid up. 

At a share price of N1.22, the current Market Cap is put at N2.789 billion.  

Branch network has increased to about 35 branches across several states in the country. In August 2019, the bank reaffirmed an earlier decision to embark on another public offer to raise funds for the purpose of incorporating Information Technology to meet customers needs and branch improvement, and to fund a three-year strategy from 2019 to 2021. 

READ: UBA Plc H1’2020 results, a true reflection of its rightsizing decision? 

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Management  

Mr. Akinwunmi M. Lawal has been Managing Director since June 2014, while the Board of Directors has been chaired by Azubuko Joel Udah (Esq.) since 2015. 

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Mr. John Kwabe Tizhe and Mr. Francis C. Nelson are Executive Directors; while Mr. Usman Isa Baba, Mr Aminu Saleh PaiMr Jibrin G. Gane, Mr. Salihu Argungu Hashimu, Mr. Abdulrahman SatumariMr. Dasuki Danbappa GaladanchiMrs. Rakiya Edota Shehu, and Mr. Mohammed D. Saeed are Non-Executive Directors. 

Recent financials 

Although the NPF microfinance bank may not boast of a large customer base like most of the popular commercial and microfinance banks in the country, the bank has consistently shown favorable financials over the decades. The bank stocks is highly illiquid, but it has consistently and successfully paid dividends for the last 21 years, paying as much as N114.3 million in dividends for 2018.  

The audited results for FY 2018, shows a N300 million growth in gross earnings from N3.6 billion in 2017 to N3.9 billion in 2018, while there was a decline in profitThis decline is partly traceable to the 128.6% increase in marketing expenses from N63 million in 2017 to N144 million in 2018, while Directors’ remuneration rose 63%, from N65 million in 2017 to N106 million in 2018. 

READ: Access Bank posts Profit Before Tax of N74.31 billion in H1 2020

Profit before tax fell sharply from N819 million in 2017 to N287 million in 2018, and Profit after tax also dropped from N631 million in 2017 to N195 million in 2018.  For 2019, the Profit Before tax shot up to over N1 billion, while Profit after tax grew to N796.4 million.  

Within the 2018 financial year, customer deposit grew by 14.67% from N9.126 billion to N10.465 billion, while total asset increased from N15.952 billion in 2017 to N17.597 billion in 2018. In comparison, 2019 customer deposits grew further to N11.32 billion, and total assets increased further to N19.58 billion.  

The bank attributed the poor performance in 2018 to the adoption of the IFRS 9, which caused a rise in net impairments, a N700 million growth in operating expenses, as well as a N266.48 million fraud committed by one of its middle management staff in the Sokoto branch. Although N35 million was recovered of the sum, shareholders bore the brunt of the loss, as dividend per share dropped from 17 kobo in 2017 to 5 kobo in 2018.  

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READ: Transcorp Hotels to raise N10billion through Rights Issue 

Whatever steps the company took to prevent a repeat of frauds, it was not effective; because 2019 saw an increase in frauds committed by members of its staff. The bank recorded frauds amounting to N2.1 million in four separate incidences, and another N12.26 million ATM electronic fraud. Though some of the money was recovered, over N12 million remained unrecovered at the end of the financial year.   

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Conclusion 

NPF microfinance bank has shown resilience over the years, and this is reflected in its consistent positive performance. However, it will have to work more on tightening lose ends to prevent cases of fraud and forgeries, which dips into its yearly profits and takes a chunk from shareholders dividends. 

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Company Profile

Julius Berger to diversify into Agro-processing industry

Julius Berger has resolved to diversify into Agro-processing in its quest for more rigor in its operations.

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Expatriates, Julius Berger to diversify into Agro-processing industry

The Board of Julius Berger has approved a diversification opportunity for the company in Agro-processing, at the board meeting held on Tuesday, September 22, 2020.

The company made this known in an Adhoc announcement sent to the Nigerian Stock Exchange (NSE), the investing public, and other stakeholders in the Capital market. The Adhoc announcement, which is dated 23rd, September 2020, was signed by the Company’s Secretary, C.E. Madueke.

Explore the Nairametrics Research Website for Economic and Financial Data

Nairametrics found that the board’s decision to seek out opportunities in the Agro-processing industry, is based on its quest for more operational rigor, given the widespread economic vulnerabilities in the country, and also the resultant reforms by the Government.

READ: Julius Berger’s latest earnings report shows 56.1% profit growth in 9 months 

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The board reiterated that Julius Berger’s business is centered around a long-term strategy, and the board is keen to deliver on that strategy, by maintaining and strengthening the Company’s competitive advantages in the Construction sector, and Capital market.

(READ MORE: Julius Berger Nigeria Plc announces N2 dividend payout to shareholders)

The Board of Directors and the Executive Management of Julius Berger, strongly believe that this diversification direction would support the continued success of the Group in the future, and align with the government’s strategic objectives to stimulate value creation in Nigeria.

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Back-story: It is important to note that, in November 2019, Nairametrics reported that Julius Berger announced its diversification into the oil and gas industry, with the acquisition of a 20% equity stake in Petralon Energy Limited.

READ: Can Berger Paints increase market dominance by reducing prices?

The Board stated that the investment is in line with the strategic goals of Julius Berger on diversification, and would enable the acquisition of know-how and experience in the oil and gas sector.

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