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Investors Shift to Low-priced Stocks to Beat Recession

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Nigerian Exchange Limited - Investors King
  • Investors Shift to Low-priced Stocks to Beat Recession

Investors appeared to be showing preference for low-priced equities, otherwise known as penny stocks, as continuing decline in share prices at the stock market brings several growth stocks around the 100 kobo mark.

Trading reports by the Nigerian Stock Exchange (NSE) showed that low-priced stocks have dominated activities charts in recent period, in what market analysts regarded as a shift of emphasis from liquidity to potential for higher dividend yield and capital appreciation.

In the immediate past week, three stocks, which trade around N1 were the most active. The trio of Sterling Bank PLC, FCMB Group PLC and Transnational Corporation of Nigeria accounted for 250.205 million shares worth N237.138 million in 3,654 deals, representing 28.6 per cent of the total equity turnover volume. Total turnover at the NSE last week stood at 873.838 million shares worth N8.024 billion in 15,944 deals.

In the previous week, the trio of FBN Holdings Plc, Access Bank PLC and FCMB Group PLC also accounted for 226.665 million shares worth N757.967 million in 1,879 deals, representing 33.4 per cent of the total equity turnover volume for the week.

Head, Financial Advisory Group, GTI Capital Limited, Mr Hassan Kehinde, said the trend showed that investors were taking earnings and dividend yields as major consideration in their portfolio allocation.

According to him, with the low share prices of several stocks, there is potential for good dividend yields by the end of this year notwithstanding the depressed bottom-line due to the tough operating environment.

FBN Holdings Plc, the holding company for First Bank of Nigeria and its previous subsidiaries, had grown its total balance sheet to N5.1 trillion by the third quarter of this year as the financial conglomerate pooled gross earnings of N417.3 billion within nine months.

Key extracts of the nine-month report showed that FBN Holdings retained its leading position as the largest bank in Nigeria, in terms of balance sheet position. Total assets rose to N5.1 trillion by September 2016, representing 21.6 per cent growth on N4.2 billion recorded at the beginning of this year. Customer deposits rose by 10.9 per cent to N3.3 trillion as against N2.97 trillion recorded by the year ended December 31, last year. Net customer loans and advances closed September 2016 at N2.2 trillion, an increase of 22.2 per cent on N1.8 trillion recorded at the beginning of the year.

The report indicated that gross earnings rose by 7.0 per cent to N417.3 billion in third quarter of the year as against N390 billion recorded in comparable period of 2015. Net-interest income had risen by 5.2 per cent to N202.9 billion in 2016 as against N192.9 billion in 2015. Non-interest income jumped by 56.5 per cent to N131 billion in third quarter 2016 as against N83.7 billion in third quarter of last year. Operating income rose by 20.7 per cent to N333.9 billion as against N276.6 billion. The group increased impairment charge for credit losses from N46.6 billion to N114.7 billion while operating expenses reduced by 5.1 per cent to N161.8 billion as against N170.4 billion. Profit before tax thus declined marginally by 3.5 per cent from N59.6 billion to N57.5 billion. Profit after tax also dropped by 15.3 per cent to N42.5 billion in third quarter 2016 as against N50.2 billion in third quarter 2015.

Also, Sterling Bank Plc rode on the back of increasingly better operating and credit management efficiency to build up the quality and profitability of its core banking business in the third quarter.

Key extracts of the interim report and accounts of Sterling Bank for the nine-month period ended September 30, this year showed considerable improvements in key underlying fundamentals of the bank as it continues to grow its main focus of retail banking.

The report showed that net interest margin, which measures the profitability of the core lending business, improved to 8.5 per cent in third quarter of the year as against 7.9 per cent in comparable period last year. The proportion of non-performing loans (NPL) to gross loans and advances, which indicates assets quality and the efficiency of the credit risk management, also improved significantly from 4.8 per cent December 2015 to 2.5 per cent in third quarter 2016. This brings Sterling Bank well ahead of the 5.0 per cent industry thresholds for NPL set by the Central Bank of Nigeria (CBN). The bank’s cost of funds also improved to 5.3 per cent in third quarter 2016 compared with 6.2 per cent in corresponding period of 2015.

Further analysis of the financial statement showed that net interest income rose by 37.6 per cent from N30.2 billion in third quarter 2015 to N41.5 billion in third quarter 2016. Non-interest income, however, reduced by 47.6 per cent to N10.8 billion as against N20.5 billion mainly because of 34.2 per cent decline in fees and commission. This moderated the gross earnings to N79.65 billion in third quarter 2016 as against N81.81 billion in comparable period of 2015.

With curtailed increase of five per cent in total expenses in spite of a 17.9 per cent inflation rate year-on-year as at last September, profits before and after tax stood at N6.07 billion and N5.54 billion in third quarter of the year. Profits before and after tax were N8.30 billion and N7.55 billion in third quarter of last year.

The balance sheet of the bank emerged stronger during the period. Net loans & advances increased by 46.2 per cent to N495.3 billion last September as against N338.7 billion recorded at the beginning of this year. This was driven primarily by foreign exchange revaluation. Customer deposits also improved from N590.9 billion as at December 31, 2015 to N595.1 billion last September. Total assets excluding contingent liabilities increased by 11.4 per cent to N890.3 billion as against N799.5 billion at the start of the year.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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4DX Ventures, Flutterwave Invest in CinetPay, Payments Processor Company

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CinetPay, a digital finance platform that enables merchants in Francophone Africa to seamlessly accept and make payments, has announced a $2.4 million seed fundraising round from 4DX Ventures and Flutterwave. The investment will boost CinetPay’s sales and marketing efforts across nine markets in West and Central Africa.

Since its 2016 launch in Côte d’Ivoire, CinetPay has processed over 30 million transactions for 350 active merchants in nine countries, including Côte d’Ivoire, Senegal, Cameroon, Mali, Togo, Burkina Faso, Benin and Guinea. CinetPay’s platform provides a single interface for businesses to process over 130 different payment operators, from mobile money to credit and debit cards and e-wallets, eliminating the need for merchants to spend months integrating with different systems in order to manage sales and revenues.

Used by a broad range of businesses from e-commerce platforms to digital public services, insurance companies and schools, CinetPay simplifies the process of accepting payments online or via mobile Point of Sale (PoS) devices with best in class security protocols.

By bringing Flutterwave onboard, CinetPay is building on a successful commercial partnership that has evolved since 2019, and this investment follows Flutterwave’s recent acquisition of Disha and marks the unicorn’s first direct investment in the region.

“For a first institutional investment, we couldn’t have asked for two better partners in 4DX Ventures and Flutterwave,” said Idriss Marcial Monthe, CEO & Co-Founder of CinetPay. “We’ve watched firsthand as thousands of merchants waste crucial time, even up to 6 months, getting their payment systems in order. Now we’ve got the resources to market and sell our optimal solution across the region and we’re excited to ensure that all businesses in our region never miss a sale again. We have selected highly strategic partners as investors and are excited about the immediate next steps we take together in terms of simplifying and improving digital payments in Francophone Africa.”

The rapid growth in a wide range of digital payments channels across the continent over the last decade has led to a disaggregated market. Two-thirds of global mobile money transactions are driven by users in sub-Saharan Africa, with 562 million registered accounts by the end of 2020, while the number of e-commerce users on the continent is expected to double from 281 million in 2020 to 520 million by 2025. This trend continues with public institutions as well, with more bodies now offering digital public services, such as payments for ID cards, Visas and COVID tests, and school fees, which are often paid digitally. With such a multiplicity of payments required across different verticals from a growing number of sources, CinetPay is fast building its presence in the region.

“We’ve been tracking the Francophone Africa market for some time now, and have been impressed by Cinetpay’s ambitious goal to digitize payments across the region,” said Walter Baddoo, Co-Founder and General Partner at 4DX Ventures. “The company has demonstrated deep product knowledge with a differentiated offering and a strong brand with customers. We look forward to partnering with the Cinetpay team alongside our long-time portfolio company, Flutterwave, to help usher in the next phase of digital payments across the Francophone region.”

“We’re building the payments infrastructure for Africa, making it easier for businesses to grow and expand their customer base on the continent and worldwide,” said Olugbenga Agboola, Founder and CEO at Flutterwave. “Having collaborated with the Cinetpay team for a number of years now, our shared vision to simplify payments on the continent further strengthens our commitments to working towards creating endless possibilities and experiences for all our customers. Cinetpay is well positioned for the next chapter of growth and we’re excited to work with the team to help scale the business to achieve maximum impact and value for its customers.”

Available on desktop and mobile, CinetPay is quick to set up and designed with a modular approach that integrates within a merchant website and accepts Mastercard, Visa and all major local mobile money in 9 markets from MPESA to MTN mobile money and Orange Money.

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Additional Pension Fund Assets Invested in Banks in Third Quarter (Q3) of 2021

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pension funds - Investors King

The National Pension Commission has released a new report on pension fund assets, which has shown that investment in Local Money Market Securities had more pension fund assets invested in banks than in papers through Open Market Operations, as well as fixed deposits of banks in the third quarter of 2021.

The report from the NPC also showed that the total invested fund placed with banks as a percentage of the total pension fund assets sat at 17.10 percent, which translates to N2.22 trillion in September, rising from 13.15 percent or N1.66 trillion in June 2020.

It showed that investment in commercial papers which constitutes about 0.5 percent of investment in pension fund assets, went down to N0.68 trillion from N0.72 trillion (which constitutes 0.57 percent).

The report also addressed corporate debt securities, stating that the amount invested in the space went up by 1.82 percent to N0.97 trillion in Q3 from the N0.95 trillion which it had recorded in Q2.

Cash and other assets which are responsible for 0.46 percent (or N59.79 billion) of the total pension fund assets in September 2021 also fell from 0.59 percent (or N74 billion) in June 2021.

All funds invested in real estate properties as a section of the total pension fund assets went down to 1.18 percent (or N153.4 billion) from 1.24 percent (or 156.88 billion) in the period which was under review.

Cowry Research analysts discovered that the increased investment by the Pesnion Fund Administrators (PFA) in bank placements was mainly to take advantage of the relatively high yields in the short term without gaining much exposure to the risk that is inherent in the money market.

The Cowry analysts stated that the increased activities of pension managers in the equities market throughout Q3 2021 was on the platform of an improvement in the performance of corporate organizations as the Nigerian economy continues its recovery from the COVID-19 pandemic.

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Verdant Capital Advises WIOCC on USD80 Million Equity Capital Raise

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Edmund Higenbottam, MD of Verdant Capital - Investorsking.com

Verdant Capital has advised WIOCC Holding Company Limited (or “WIOCC”) on an USD 80 million equity capital raise.  USD 75 million of equity was invested by CAPE IV, a fund managed by leading African private equity fund manager African Capital Alliance.  The balance was invested by management and an existing shareholder.

The equity raised has been supplemented by a debt capital raise.  The total capital raise of USD 200 million will be used to expand its connectivity within Africa and internationally, and through Open Access Data Centres (or “OADC”) – a newly created WIOCC Group company – to launch a network of pan-African data centres optimised to serve the needs of the cloud provider and wholesale community.

As well as introducing a strong new investor into the company, the capital will be used to support WIOCC’s expansion strategy across Africa and accelerate its investment in enhancing the continent’s digital infrastructure. Strategic investments in the new Equiano and 2Africa international subsea systems will augment and complement WIOCC’s existing core network infrastructure, cost-effectively adding multi-Terabits (Tbps) of capacity and significantly increasing its options for delivering the high-availability solutions demanded in markets across Africa. WIOCC’s terrestrial strategy, which includes deployment of metro and national networks in key locations, will be extended to include new countries and metropolitan areas, increasing its portfolio of end-to-end solutions for clients across Africa.

Part of the capital raise will be used in funding OADC, which is creating a transformational interconnected pan-African network of open-access, carrier-neutral data centres. First-phase locations will house key submarine cable landings in Lagos, Durban and Mogadishu, supporting the drive to land international submarine capacity directly into carrier-neutral data centres. Each will provide clients with bespoke colocation facilities and ultra-reliable, seamless connectivity directly into new international subsea systems, eliminating the costs and risks traditionally associated with terrestrial backhauling. Construction and fit-out is underway in Lagos and Durban, with both to be launched early in 2022, whilst the Mogadishu data centre will be ready before the end of 2022. Further phases of deployment will deliver more than 20 new data centres in strategic locations throughout the continent, focusing on major connectivity hubs in each country.

African Capital Alliance was attracted to the investment by the clear vision to develop high quality and synergistic assets and solutions to support its long-term client partnerships. The investments will further position WIOCC to take advantage of the accelerating migration of infrastructure and services into the cloud, driving demand for data transmission, storage and processing in wholesale, enterprise and consumer end-markets in Africa, and bringing forward realisation of WIOCC’s vision to make an enduring contribution to Africa’s communications.

The successful capital raise further strengthens Verdant Capital’s track record as a leading advisor on transactions for or involving pre-eminent private equity firms in Africa.

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