Japaul Oil & Maritime Services has announced its plan to change the name of the company to Japaul Gold and Ventures Plc in a bid to delve in mining and technology business activities.
This was disclosed in a notice, which was signed by the Company Secretary, Micheal Edeko, and sent to the Nigerian Stock Exchange (NSE). According to the notice, Japaul intends to seek investors’ consent to raise additional equity capital up to N27 billion whether by way of Right Issue, Public Offer or Private Placement.
It stated, “We intend to seek the approval of our shareholders to increase the authorised share capital from 6 billion to 60 billion ordinary and/or Preference shares and carry out share reconstruction.
“The Directors be, and are hereby authorised to do all things necessary and incidental to the achievement and fulfilment of the above special resolutions including amending the Memorandum and Articles of Association of the company.”
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According to the notice, the company’s 15th AGM would hold at the Japaul Corporate Head office, Ikeja, Lagos on July 29th, 2020. The consolidated statement of financial position of the company, as of December 31, 2019, would be presented to the shareholders at the virtual meeting.
What it means: If Japaul succeeds in increasing its share capital from 6 billion to 60 billion, it means bad and good news for investors. It could be bad because it represents the issuance of additional shares, which dilute the value of investors’ existing shares.
The good news is that additional share may benefit investors in the form of increased returns on equity, through capital gains, higher dividend payouts.
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Share reconstruction: Share Reconstruction otherwise known as a reverse stock split is a process whereby a company reduces the total number of outstanding shares it has by cancelling out shares it does not need.
How it may affect investors: While some argue that share reconstruction does not affect the value of investors’ shares in a company, others insist that the exercise can turn to a nightmare for shareholders. The market may feel the fundamentals of the company is so weak they do not even apply any sentimental value towards the share reconstruction.
For instance, if Japaul share price changed from 23kobo, as at June 19, 2020, to 46kobo after a scheme of Share Reconstruction, the market may still feel the value the company is worthless and price it less. Therefore the company can drop below 46kobo or lower than the 23kobo it was trading before the reverse split.
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Meanwhile, the results of the company for the financial year ended in December 2018 showed that revenue fell from N1.9 billion in 2017 to N936 million in 2018. Losses, though lower year on year, remain dire. The firm made a loss after tax of N6.5 billion in 2018, as against a loss after tax of N13.2 billion recorded in 2017.
The company’s auditors, PKF, have flagged the firm’s growing concern assessment as a key audit matter. The group’s shareholder funds have been eroded to the tune of N34.6 billion, as at 31st December 2018. These have culminated from past operating losses in the last four years. Total indebtedness stood at N58.35 billion as at the 31st of December 2018 with a gearing ratio of 169:1.
The share price of Japaul Oil & Maritime Services closed at N0.23 on Friday, June 19, 2020. While its price earning ratio stands at 0.04, the earning per share and price to book ratio stands at 6.53 and 0.2421 respectively.