Industrial & Medical Gases Nigeria Plc (IMG) has opened its rights issue offer running from August 22 to October 2, 2025.
The company is offering 199,797,458 ordinary shares of 50 kobo each at N32.00 per share, on the basis of 2 new ordinary shares for every 5 held as of May 21, 2025.
At that qualification date, IMG’s share price stood at N39.85, meaning the rights issue was floated at a steep 24% discount to the market.
Since then, however, the stock has shed 16%, closing at N33.30 yesterday and recording a year-to-date loss of 12.3%.
This decline now raises the critical question: Does the rights issue a buy for existing shareholders present an attractive entry point for new investors?
A closer look at the fundamentals provides direction.
Case for optimism: Strong long-term growth
Over the last five years, IMG has demonstrated that it can grow:
- Revenue expanded at a 21.44% CAGR, reaching a cumulative N26.65 billion.
- Profit grew faster, at a 34% CAGR, totaling N1.62 billion.
- Cash flow from operations reached N2.9 billion over the period.
This shows a company that has been able to scale both sales and earnings consistently, supported by its strong position in Nigeria’s healthcare and industrial gases markets.
Its three production plants across Lagos, Port Harcourt, and Kaduna give it geographic reach, while its broad product mix ensures demand resilience.
For existing shareholders, this track record argues in favor of taking up the rights issue as a way to stay invested in a company with a proven growth engine.
Case for caution: Momentum slips
The recent picture is less encouraging.
- In H1 2025, IMG posted 19% revenue growth to N4.23 billion, showing continued demand strength.
- However, profit after tax plunged 69% to N476 million, down from N1.52 billion in H1 2024.
The driver was a sharp drop in foreign exchange gains. IMG booked N240 million in FX gains in H1 2025, compared to N1.2 billion in H1 2024.
This lower windfall significantly compressed profit, overshadowing otherwise solid topline performance.
In addition, the company recorded a negative operating cash flow of N281.5 million in H1 2025.
Together, the weaker FX tailwind and negative cash flow highlight the fact that IMG’s near-term fundamentals are under pressure.
Valuation: Are the shares expensive?
Even after the recent price decline, IMG still looks pricey on traditional metrics:
- P/E ratio of 33x, nearly double the industry average of 17x.
- P/S ratio of 2.28x, also above the industry benchmark of 1.78x.
This suggests investors are already paying a premium for IMG’s growth story.
The rights issue at N32 per share gives existing shareholders a slightly cheaper entry point than the market price (N33.30), but it does not materially change the premium valuation.
Post-issue impact
If the rights are fully subscribed, outstanding shares will rise from 499.5 million to about 699.3 million units, a 40% dilution.
With the current market capitalization of about N18.3 billion, the post-issue valuation will reflect a larger equity base
Shareholders’ funds are expected to nearly double from N5.99 billion to about N12.38 billion, following the injection of fresh capital from the offer.
This adjustment will reduce IMG’s price-to-book ratio from 3.45x, already below the industry average of 4.4x, to a more attractive 1.48x, further strengthening the valuation case post-issue
However, while this improves IMG’s balance sheet strength, it also means that earnings per share (EPS) could come under pressure unless profitability rebounds strongly in the near term.
On dividends, IMG paid N0.80 in 2024, up from N0.50 in 2023, translating to a 2.40% yield at current prices.
This is below market average, but it reflects management’s effort to reward shareholders despite capital demands.
Still, dividend income alone may not justify the stretched valuation.
Verdict: Two sides of the coin
The rights issue comes at a discount, and for long-term shareholders who believe in IMG’s market leadership and proven growth record, it presents an opportunity to deepen exposure at a cheaper price.
The capital raise will also strengthen the balance sheet, providing funds for expansion and operational resilience.
However, this opportunity is not without caveats. Investors must weigh the short-term earnings pressure, sustained negative free cash flow over five years, and a valuation that remains rich compared to peers.
- For existing shareholders: Subscribing makes sense if you have conviction in IMG’s long-term story. The discounted price allows you to average down and position for a potential rebound once fundamentals improve, devoid of FX volatility. Ignoring the offer could mean dilution of your holding
- For potential investors: The rights issue itself is not directly open to you, but the market price may adjust after the exercise. Entering now is essentially a bet on a medium-to-long-term rebound and continued dividend payouts. Conservative investors might prefer to wait for clearer signs of cash flow stability before taking a position.
