Capital Markets
From The Report: Nigeria 2012
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The stock market is the continent’s third largest by capitalisation after Johannesburg and Cairo. The Nigerian Stock Exchange (NSE) includes a main board with 186 equities, a board dedicated to SMEs with 12 listings, and a single exchange-traded fund. While investors welcomed what they saw in 2010 as a fleeting recovery in markets, 2011 was more challenging, as it came on the back of sustained volatility in global markets and fallout from the 2008 margin lending crisis. However, regulators have seized on the crisis as an opportunity to restructure exchange fundamentals by improving transparency and governance, while a pipeline of new issues and instruments is being built. These could translate to significant opportunities for value investors.
This chapter contains interviews with Oscar Onyema, CEO, Nigeria Stock Exchange; and Wale Agbeyangi, Managing Director, Cordros Capital. It also includes share analyses on six local firms, with information provided by Cordos Capital.
Articles from this Chapter
Open for business: Efforts to encourage greater use of financial markets are well under way
OBG talks to Oscar Onyema, CEO, Nigeria Stock ExchangeOBGplus
Interview: Oscar Onyema How have closed-end and exchange-traded funds affected investor confidence and liquidity? OSCAR ONYEMA: A lack of asset classes was at the core of the downturn of 2009, and to recover confidence and liquidity we must diversify. We aim to have five asset classes by 2016. Next are options and futures, which will start to be introduced in 2014, after the roll-out of our new trading platform. The key is to drive risk management; we want to give investors robust products, and…
OBG talks to Wale Agbeyangi, Managing Director, Cordros CapitalOBGplus
Interview: Wale Agbeyangi How can the strong performance of fixed-income assets encourage a viable retail trading platform? WALE AGBEYANGI: With investors demanding more fixed-income securities, new platforms have to be created to take advantage of increasing demand. As inflation continues to stay in the double digits the search for positive real returns should mean a sustained rise in fixed-income market activity. For instance, the launch of a range of fixed-income products, including corporate…
Beyond the primary market: Envisioning a greater diversity of instrumentsOBGplus
A long slump in equities has spurred authorities and market participants to try to deepen and diversify types of market instruments in a more concerted fashion. A first milestone was reached in December 2011, when West Africa’s first exchange-traded fund (ETF) was listed on the Nigerian Stock Exchange (NSE). Succeeding in the exchange’s “five products in five years” strategy will be key to attaining the stated ambition of combined capital markets capitalisation of $1trn by 2016. Strong…
The thick of it: Stockbrokers are now becoming the focus of more regulatory attentionOBGplus
Some of the hardest hit players during the 2008 crash, stockbrokers now look set to experience major regulatory changes in the coming years. Alongside stricter oversight and higher capital requirements from the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE) is upgrading its trading platform and spinning off its post-trade settlement mechanism to allow for greater transparency and more efficient trading. Should these reforms succeed, the effect on the brokers’ market…
At the centre: The role of bonds is shaping the sector in a number of waysOBGplus
A number of factors suggest Nigeria has all the makings for a vibrant bond market, one that has come a long way since its inception a decade ago. In the last few years a sustained downturn in equities has diverted investment towards money markets and fixed income instruments, while sovereign bond issuance has successfully established a yield curve since 2008. By the end of 2011 Nigeria’s 48 bonds reached a market capitalisation of N2.09trn ($13.38bn) for federal bonds, N1.34trn ($8.58bn) for…
Creative capitalisation: Private equity has become attractive as an alternative to more traditional funding methodsOBGplus
Among many industry players, private equity (PE) has rapidly developed as an alternate source of funding for Nigeria’s corporations. Initially dominated by development finance institutions (DFIs), the sector is attracting a growing number of private funds both foreign and, increasingly, domestic, thanks to the rapid growth of pension assets. While channels for divesting remain somewhat constrained, recovery in the equities market will add the option of public listing. While still a relatively…
Cadbury Nigeria: Food and beverageOBGplus
THE COMPANY: Cadbury Nigeria manufactures and markets sugar confectionery, food drinks and food products. The company also processes cocoa and exports cocoa products via its subsidiary Stanmark Cocoa Processing. Cadbury Nigeria holds a 90% stake in Stanmark and obtains 100% of its cocoa requirement from the subsidiary. In February 2010 Cadbury Schweppes Overseas, a wholly owned subsidiary of Kraft Foods, acquired 74.99% of Cadbury Nigeria. The remaining 25.01% equity is held by a group of individuals and institutional investors. Following a major strategic review in 2008, the company commenced an extensive restructuring exercise to restore…
First Bank: BankingOBGplus
THE COMPANY: First Bank of Nigeria has diverse operations in the Nigerian financial services industry, rendering it a top financial service provider. The First Bank Group has 717 branches and 1600 automatic teller machines nationwide. It maintains strong ratings across the board and received a BS 25999 certification in Business Continuity Management Systems from the British Standards Institute, validating its framework based on international best practices to managing business continuity and it ability to achieve key business objectives even with major or minor disruptions. 1Q12 RESULTS ANALYSIS: Gross earnings rose to N92.3bn ($590.7m),…
Guaranty Trust Bank: BankingOBGplus
THE COMPANY: Guaranty Trust Bank (GTB ank), with its business spanning Anglophone West Africa and the UK, is one of the most respected and service-focused banks in Nigeria. The bank currently has shares outstanding of over N29.4bn ($188.2m), translating to a market capitalisation of over N400bn ($2.56bn). Its assets base has grown to about N1.6trn ($10.2bn), with a shareholders fund of over N235bn ($1.5bn). In 2007 the bank became the first Nigerian financial Institution to undertake a $350m Regulation S Eurobond issue and a $750m global depositary receipts (GDR) offer. GTB ank is rated B+ by Fitch and Standard & Poor’s, a reflection…
Julius Berger Nigeria: ConstructionOBGplus
THE COMPANY: Julius Berger Nigeria was first incorporated as a private limited company in 1970, but went public in1979 with shares quoted on the Nigeria Stock Exchange (NSE). The company’s principal activities cover planning, design and construction of civil engineering and building works. The company operates in the following sectors: residential and commercial construction, transport, energy and utilities (including oil, gas and water) and industrial construction. Julius Berger is vertically integrated with its own production of raw materials, such as cement and steel, and its own logistics chain. The firm maintains a high reputation for…
Lafarge Cement WAPCO Nigeria: Building materialsOBGplus
THE COMPANY: Lafarge Cement WAPCO Nigeria has leveraged its manufacturing heritage to become a significant strategic player in the building materials sector. Created in 1833, Lafarge is a global industry leader, with top-ranking positions in all of its businesses: cement, aggregates and concrete, and gypsum. Having acquired West African Portland Cement (WAPCO), AshakaCem, Atlas Cement, as well as a substantial stake in Unicem, Lafarge dominates the Nigerian cement industry, overseeing companies with a total production capacity of about 8.5m tonnes per annum. The Lafarge cement division maintains a significant presence in 20 African countries…
Nigerian Breweries: BeveragesOBGplus
THE COMPANY: Nigerian Breweries is the leading brewing company in Nigeria, operating eight breweries and distributing across the country. The company has a rich portfolio of leading brands, including Star, Gulder, Legend, Climax, Heineken, Maltina, Amstel Malta and Fayrouz. As of December 2011, the company had 7.56bn outstanding shares, translating into a market capitalisation of N715bn ($4.6bn). In October 2011 Nigerian Breweries acquired majority equity stakes in Sona Systems and Life Breweries from Heineken NV. This followed Heineken’s acquisition in January 2011 of controlling stakes in five Nigerian breweries from Sona Group. The move…
