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What UACN decision to un-bundle UPDC means for its shareholders

How do you explain going from revenue of N11.7 billion per annum to N2.3 billion in 5 years? In fact, try explaining going from a profit of N3.5 billion to an astonishing loss of N10.9 billion. This, unfortunately, has been the story of UPDC Plc.



What UACN decision to un-bundle UPDC means for its shareholders

How do you explain going from revenue of N11.7 billion per annum to N2.3 billion in 5 years? In fact, try explaining going from a profit of N3.5 billion to an astonishing loss of N10.9 billion. This, unfortunately, has been the story of UPDC Plc, a property development company listed on the Nigerian Stock Exchange.  

Between December 2015 and June 2019, this company has lost over N20 billion in shareholders’ funds following years of accumulative losses. Last year alone, it posted a loss after tax of about N10.9 billion about half of its total accumulated losses till date. Add to about N11.4 billion in external interest-bearing loans and another N15.1 billion in trade and tax payables you realize this is a real estate company on its way to financial insolvency.  

Thus, during the week UACN Plc and its subsidiary UPDC Plc issued separate press releases outlining a set of actions that they expect will rescue this very dire situation. According to the press release, a combined initiative of recapitalization and restructuring will be deployed to help salvage the situation. Here is a summary; 

  • UACN will unbundle its investments in UPDC by issuing its shares in the company to its shareholders on a pari passu basis.  
  • This means, if you are a shareholder in UACN, you will now hold direct shares in UPDC. UACN currently owns 64% shares in UPDC 
  • UPDC will also unbundle its 60% ownership in UPDC REITs, its subsidiary also giving its own shareholders direct ownership into UPDC REITs. 
  • At the end of this process shareholders in UACN will own shares directly in UACN, UPDC and UPDC REITs. 
  • UPDC will also seek to raise about N15.9 billion via a rights issue, from its new shareholders, which it will use to pay down loans.  

What this means for shareholders: The UACN group has for years undergone various restructuring as they attempt to reposition for profitability. To understand the possible implication of these set of unbundling of the group, one will have to look at each company on its own merit.  

  • UACN the main company has about 4 main segments. In April 2018, the company announced new shareholders, Blakeney GP 111 Ltd, Stanbic Nominees Limited, and Themis Capital Management now had shares above 5% each in the company. This followed a N15 billion rights issue sold by the company in 2017.   
  • UACN has about 6 revenue segments, Animal Feeds, Paints, Packaged Foods, QSR, Logistics, Real Estate, and others.  
  • All its segments are profitable except for its real estate segment which reported a loss before tax of N13.2 billion. This helped dragged the company into an after-tax loss of N9.5 billion in 2018. Without the lossmaking Real Estate business, UACN would have posted a profit of about N3 billion.  
  • UACN share price has also plummeted from N56.9 to about N4.5 in the last 5 years while dividend per share as gone from N1.75 in 2014 t0 N64kobo last. 
  • Surely, shareholders have not gained anything from holding on to their loss-making real estate business. 

The Real Estate Company, UPDC has performed even worse over the last five years explaining why the company’s management and board of directors have decided to unbundle it. 

  • UPDC has even fared worse. Its share price has gone from about N15 five years ago to 82 kobo, one of the worst performances on the stock exchange. 
  • Despite several restructuring, sell-offs, and spin-offs the company’s fortunes have failed to turn for the better. 
  • Billions spent on real estate properties with poor market values and rental yields have failed to deliver anything positive for shareholders. 
  • The company even struggled to manage a hotel which we believe it overpaid for. Last year, it agreed to sell Golden Tulip among other properties yet that did not stop it from posting record N10.9 billion loss after tax. 
  • Ironically the company has sold off its profit-making hospitality business leaving its loss-making property sales and development for shareholders to own. The company lost N9.2 billion last year alone. 
  • The company explains this unbundling will help shareholders benefit from the gains of restructuring. Of course, they will have to stump about N15.9 billion in new equity. Yet another effort that could end up in futility for the company.   
  • The best decision will probably be allowing shareholders to own a stake directly in UPDC REITs. 

UPDC REITs remains the group’s business with a little bit of managerial sanity and profitability. In fact, the Real Estate only company has been paying dividends as one would expect from a REIT. However, it is not without its own challenges.  

  • Its share price has since halved from N10 to about N5.4 since its listing about 5 years ago. 
  • Despite this, it has continued to post profits from rent from its properties and low operating cost.  
  • Ironically most of its properties were spin-offs from UPDC Properties. When the REIT was set up, they promised a rental yield of about 7%-9%. We did warn back then that wasn’t attractive. 
  • Rental yields for most of the properties it owns is between 5-8%. 
  • Investors in UPDC REITs can, however, expect to get dividend yields as high as 10% based on the current share price. Those who bought at N10 will only enjoy a 5% yield. 

Bottom Line: If there is one reason why some analysts detest Holdco’s then this is one. This has been one of the worst conglomerates on the stock exchange. Thus, unbundling is a welcome development. Even though we do not expect it to provide much shareholder value in the short term it at least places all three companies on the path to value creation.

The management of these companies should also consider quitting once the restructuring is concluded. It had to take Themis Capital induced management restructuring to turn things around. Folasope Aiyesimoju the company CEO has made a bold move with this unbundling. This could well be the start of many positive things to come.



Blurb articles are succinctly written opinions editorials from content contributors expressing their views on financial reports, macroeconomic data, and economic policies. Blurb is recommended for readers seeking 'straight to the point' information and viewpoints that can help shape better investment decisions.

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Analysis: Total Nigeria needs a financial overhaul

 Total Nigeria’s Q1’20 results are a testament that some might have it worse than others as it recorded a revenue drop of 9.3% to N70.2 billion



Total Nigeria, Analysis: Total Nigeria needs a financial overhaul

The Oil Industry has had a particularly tough year, owing primarily to the novel pandemic. The International Energy Agency (IEA) predicts that the global oil demand is expected to further decline this year as Covid-19 spreads around the world, constraining travel as well as other economic activities.

Organizations like Total depending on international trade will be forced to scale down operations until restrictions ease off. However, Total Nigeria’s Q1’20 results are a testament that some might have it worse than others.

The period recorded a revenue drop of 9.3% to N70.2 billion in the first quarter of this year compared to Q1 2019. Total earns its revenue from three main sectors namely: Networks, General Trade, and Aviation. Revenue from Aviation fell by 39.5%. The decline in Networks is attributed to the reduced demand as a result of the enforced lockdown and restriction on travel across the nation.

READ ALSO: Analysis: MTN’s blow out Q1 profit vs Covid-19 headwinds  

Yet, it is clear that the company had its own challenges pre-COVID-19. In the quarter, it attained a loss after tax of N163 million which was 65.6% better than the loss after tax of the comparative quarter; it is overwhelmed by a myriad of distinct issues.

First off, its revenue has experienced a steady fall over the years; reasons for this is tied largely to its lack of importation of petroleum products.

It is also burdened by inefficiencies in its operations evident in its high operational and direct expenses, as well as its high debt over the past years. The company has carried on huge loans and borrowings in its books: N40.6 billion in 2019 and only a marginal reduction of N2.2 billion in the current year.

(READ MORE:Nigeria’s Bonga crude oil export terminal shut down)

Even higher are its expenses after an 8.38% reduction in the just-released results, it arrived at N69.7 billion for Q1 2020. Amongst its high operational expenses is the high and increasing technical fees it pays to its parent company. From N251 million in the first quarter of last year, it incurred around N700m in the year under review. It also has cash flow issues with about N22b in negative cash and cash equivalents. In its 2019 report, it revealed that the year had been tough with its cost of doing business rising exponentially as evident in its interest expense, 395% higher than the previous year as a result of repayment for products and a high level of borrowing.

Total Nigeria records loss for the first nine months of 2019, Analysis: Total Nigeria needs a financial overhaul


The company, in its last full year annual report, noted that to make significant savings to both operational and capital expenditure costs, a series of initiatives relating to cost efficiency, process optimization, and significant reduction of working capital requirement and finance costs, were put in place and are in motion for this year.

READ ALSO: STERLING BANK: Reduced fee income, weak operating efficiency drives steep decline in pre-tax profit

As Dr. Fatih Birol, IEA’s Executive Director put it “The coronavirus crisis is affecting a wide range of energy markets – including coal, gas, and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand transport fuels.”

However, Total’s position goes beyond the impact of the pandemic. Its rebound rests on its ability to carry on with cost control and lower debt commitments, together with the speed of the containment of the virus. That said, the company might need to raise capital soon while also coming up with formidable strategies to strengthen its business model.

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Merger, Tax incentive boosts BUA Cement FY 2019 result

BUA Cement Plc recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.



BUA Cement gives succour to host communities in Edo

One of the industries set to experience the downsides of the Covid-19 pandemic is the construction industry. Given the slowdown in construction activities as a result of the lockdowns and constrained economic activities, the reasons are not farfetched.

Prior to the outbreak of the pandemic, Globe Newswire had predicted an accelerated growth pace of the global construction industry from 2.6% in 2019 to 3.1% in 2020. This growth has now been revised to 0.5%. What is even more daunting is that the revised growth rate is based on the assumption that the outbreak will be contained across all major markets by the end of the second quarter of 2020.

It is only after that (including freedom of movement in H2 2020) that events could facilitate reverting to the normal course of activities to foster businesses in the industry like BUA Cement or those that depend on it to restart activities.

Nigeria’s third-largest cement company, BUA Cement Plc, however, still has its 2019 victories in order. Involved in the manufacturing and sales of cement, BUA Cement has 3 major subsidiaries and plants in Northern and Southern Nigeria.

(READ MORE:Update: BUA Cement Plc lists N1.18 trillion shares on NSE)

With a market capitalisation of N1.18 trillion ($3.3 billion), BUA is the third most capitalised company on the NSE. Its recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.

Kalambaina Cement Line 2, BUA Group, Kalambaina Cement, CCNN, Merger, Tax Incentive Boost BUA Cement FY 2019 Results

The company’s profits also increased by 69.1% from N39.17 billion in 2018 to N66.24 billion in 2019. Core operating performance was strong, and this was supported by strong cement sales in the domestic market, impairment writes back, and other income.

Deal book 300 x 250

The main reason for the company’s increased earnings is from the cost synergy and increased revenue as a result of the merger that took place between CCNN Plc and Obu Cement Company Limited.

There was also a striking jump in its income statement on its tax for the year. For FY 2019, it incurred a tax expense of N5.6 billion, in comparison to the N24.9 billion tax credit it received in FY 2018.


This was as a result of a reversal of previous tax provision made on Obu Line 1; it received approvals for an extension of the company’s pioneer status on Obu line-1 and Kalambaina line-2 in February 2020, to leave effective tax rate at just over 8% in 2019. The pioneer status will help the company save funds that will otherwise have been spent on higher taxes.

(READ MORE:Dangote Cement to access more debt funding)

BUA reported an impressive FY’19 result. Its performance shows the growing strength of the company and its increasing market share. On the back of the strong performance, management declared an N1.75 dividend per share that translates to a dividend yield of 5.5% on current prices.

Cash flow position was also robust with a strong closing cash balance – from N2.8 billion in 2018 to N15.6 billion as at year ended 2019. The company’s growth, as well as the impact of its merger, present a great buy opportunity of the highly capitalized, low-cost stock. As of today when the market closed (21st May) its share price stood at N35.60 from a 52-week range of N27.6 and N41.

READ ALSO: COVID-19: Best and worst case scenarios for the Nigerian economy

What we see is a great growth stock further heightened by the population expansion and increased urbanization. However, we expect the impact of the Covid-19 pandemic to be felt from the Q1 results of the company.


The industry could slow down for the year as the level of commercial construction also slows down. Yet the best part of holding stocks like this is that even with stalled operations for a period, a resurgence will always emerge.

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Analysis: Airtel Nigeria is winning where it matters

Airtel has left no stones unturned in ensuring that its provisions are top-shelf – subscribers to the network, of course will have their own ideas.  



Analysis: Airtel Nigeria is winning where it matters.

Airtel might have won our hearts over with internet-war adverts starring our favourite tribal in-laws, but its fundamentals are what will make us the bucks that keep us happy. Airtel Africa Ltd is a subsidiary of Indian telecoms group, Bharti Airtel Ltd; the group has left no stones unturned in ensuring that its provision of prepaid plans, credit transfers, mobile internet services, messaging, roaming facilities and more, are top-shelf – subscribers to the network, of course, will have their own ideas.

Since last year when Airtel Nigeria became the second telecommunication company in Nigeria listed on the NSE, the company has experienced a steady level of growth. With a presence in 14 African countries, the group’s strength lies in its diversity with stronger companies mitigating the poor performances of others.

Performance Overview: Airtel Africa 

Airtel Africa’s report for the year ended March 2020, revenue jumped by 10.9% from $3.1 billion at the year ended 2019 to $3.4 billion in 2020. The consolidated profit before tax also jumped by 71.8% from $348 million in 2019 to $598 million in 2020. However, profit for the period dropped by 4.23% with earnings of $408 million in 2020 from the $426 million it had earned in 2019. A reason for this is the tax figure that moved from a credit of $78 million in 2019 to tax payments as high as $190 million in 2020. Total assets also jumped by 2.41% from 2019’s value of $9.1 billion to $9.3 billion in 2020 primarily as a result of their acquisition of more property, plant, and equipment (PPE). The total customer base grew by 9.3% to 99.7 million for the year ended.

Full Report here.

Revenue growth of 10.9% was driven by double-digit growth in Nigeria and East Africa. However, the rest of its African operations experienced a decline in revenue. Its success in Nigeria is especially commendable, considering the fact that the company lost more than 100,000 subscribers in Nigeria between December 2019 and January 2020. Raghunath Mandava, Chief Executive Officer, remarked that the results which were in line with the group’s expectations, “are clear evidence of the effectiveness of our strategy across Voice, Data and Mobile Money.”

(READ MORE: NCDC and NNPC-IPPG reinforce #TakeResponsibility theme with multi-lingual campaign)

Behind The Numbers – Nigeria

Airtel Nigeria’s performance indicates the company is making the right calls in a very competitive industry. Nigerians are fickle when it comes to data and voice but will spend if the service is right. The company grew its data revenue by a whopping 58% to $435 million a sign that its strategy to focus on data is working. Voice Revenues for the year was up 15% to $850 million. In total, Airtel Nigeria’s revenue was up 24.4% to $1.37 billion. Ebitda margin, a number closely watched by foreign investors 54.2% from 49% a year earlier. Operating profit for the year ended also jumped by 52.6% for the year from 2019 and 32.4% from Q1 2019. Total customer base in Nigeria also grew by 12.5%.

Regulation forces Airtel Africa to initiate shares listing in Malawi , Analysis: Airtel Nigeria is winning where it matters.

Deal book 300 x 250

Nigeria is surely critical to Airtel Africa’s future seeing that it contributes about one-third of its revenue. Recent results thus indicate it is winning where it matters most and it must continue to stay this way if it desires to survive a brutal post-COVID-19 2020. Telcos are expected to be among the winners as Nigerians rely more on data to work remotely but there are other players in this game. Concerning the impact of the pandemic, he explained that at the time of the approval of the Group Financial Statements, the group has not experienced any material impact arising from the impact of COVID-19 on its business.

On cash flows…

The group has also taken measures to enhance its liquidity. The CEO explained that it is moving its focus to enhance liquidity towards meeting possible contingencies.


“Having considered business performance, free cash flows, liquidity expectation for the next 12 months together with its other existing drawn and undrawn facilities, the group cancelled the remaining USD 1.2 billion New Airtel Africa Facility. As part of this evaluation, the group has further considered committed facilities of USD 814 million as of date authorisation of financial statements, which should take care of the group’s cash flow requirement under both base and reasonable worst-case scenarios.”

To this end, they have put in the required strategies to preserve its cash as its cash and cash equivalents, consequently, jumped by 19.1%.

(READ MORE: COVID-19: MTN says it has put strict measures in place to preserve resources)

Buying opportunity

Investors looking at this impressive result will be wondering if this portends a buying opportunity. Airtel Nigeria closed at N298 on Friday and has remained at this price for about a month. The stock is quite illiquid and is not readily available to buy.

It’s the price to earnings ratio of 4.56x makes it quite attractive. Further highlighting this opportunity is its price-to-book ratio which is as low as 0.5273, suggesting that the stock could be undervalued. Whether it is available to be bought, is anyone’s guess.





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