News flash

Investors Gain N31.76bn as NGXASI Inches Up by 0.14% to Open the Week Positive

Equities market closed on a positive note, as NGXASI appreciated by +0.14% to close at 43,260.13 basis points as against -0.20%  depreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at +7.42%.     

Market breadth closed positive as HONYFLOUR led 18 Gainers as against 13 Losers topped by FTNCOCOA at the end of today’s session – an improved performance when compared with previous outlook.       

Market turnover closes positive as volume moved up by +1,103.94% as against -5.24% downtick recorded in the previous session. OANDO, MBENEFIT and FBNH were the most active to boost market turnover.  OANDO and GUARANTY  topped market value list.

OANDO leads the list of active stocks that recorded impressive volume spike at the end of today’s session.

MTN, Airtel to face stiff mobile money competition in Nigeria

Since the Central Bank of Nigeria (CBN) granted MTN Nigeria and Airtel Africa approval in principle for the operation of Payment Service Banks (PSBs), a lot of competitive realignment has been taking place.

NBS’s October inflation figure: A bitter pill to swallow

Recently, the National Bureau of Statistics (NBS) released an inflation figure for the month of October, showing a deceleration of 15.99 percent (year-on-year) as against 16.63 percent recorded in September 2021

Flour Mills, Honeywell to combine operations in N80bn shares transfer deal

Flour Mills of Nigeria Plc (FMN) and Honeywell Group Limited on Monday announced that they have signed an agreement for the proposed combination of FMN through its affiliates and Honeywell Flour Mills Plc (HFMP)

Nigeria’s agric growth slows to lowest in 3yrs

Despite efforts targeted at boosting food production, Nigeria’s agricultural growth has slowed to 1.22 percent in the third quarter of 2021 – the lowest since second quarter of 2018, according to data from the country’s GDP report

Intra-African Trade Fair records $36bn deals– Afreximbank

The African Import and Export Bank (Afreximbank) on Sunday announced that the seven-day, 2021 Intra-African Trade Fair (IATF), which commenced in Durban, South Africa on November 15, 2021, has come to an en

Blinken’s visit to Nigeria comes amid shrinking civic spac

Antony Blinken’s, the US Secretary of State, visit to Nigeria came days after a leaked government panel report indicted the country’s military of killing defenceless protesters in Lagos and when social micro blogging site Twitter is under ban and lawmakers considering a bill to gag the media

AMCON MD Submits List of Top 1,000 Bank Debtors Owing N4.4trn to National Assembly

In another deft strategy to intensify its debt recovery drive in the country, the Asset Management Corporation of Nigeria (AMCON) has submitted a list containing its top 1,000 obligors to the National Assembly. AMCON made the expose to members of the House of Representatives Committee on Banking and Currency at the just concluded retreat of the committee in Lagos. 

AMCON handed the list over just a few hours after President Muhammadu Buhari also signed into law the Asset Management Corporation of Nigeria (Amendment) Act, amending the AMCON Act No.4, 2010. The AMCON Act provides for the extension of the tenor of the Resolution Cost Fund (RCF) and grants access to the Special Tribunal established by the Banks and other Financial Institutions Act 2020, which confers on AMCON the power to among others… “to take possession, manage, foreclose or sell, transfer, assign or otherwise deal with the asset or property used as security for Eligible Bank Assets (EBAs), and related matters.”

Implications of Proposed Acquisition of Honeywell Flour Mills by Flour Mills of Nigeria

Event: Flour Mills of Nigeria Plc (FMN) has notified the Nigerian Exchange Group (NGX) of its plan to acquire a controlling stake in Honeywell Flour Mills Plc – HFM (not covered). The company disclosed that it plans to acquire Honeywell Group’s 71.69% stake in HFM and FBN Holdings’ 5.06% stake in HFM. On completion, FMN’s controlling stake in HFM will reach 76.75%.

 Implications: Plant capacity is a significant indicator of a company’s market share in the milling sector. Therefore, using industry capacity as a proxy, the combined entity will be the second largest miller in Nigeria, with an estimated capacity of 9,600 MT/d, behind Olam’s 11,140 MT/d. Since it entered the Nigerian (and West African) market in 2012, Olam has preferred acquisitions as a strategy to increase its competitive position, emerging as the largest miller after it acquired Dangote Flour Mills (DFM) in 2019.

 Based on estimates, Olam has an industry market share of 44%, ahead of FMN’s current estimate of 32%. With the completion of the acquisition, FMN’s market share will rise to c.42%.Note that BUA Flour Mills (1,600MT/d) is currently constructing an additional 2,600 MT/d milling capacity which was to come on stream in 2021, but is now unlikely (will bring its total capacity to 4,000 MT/d). While we believe the transaction has long-term competitive benefits for FMN, we also believe this deal is likely to be earnings accretive as long as FMN can sweat the assets better and derive synergies which are unquantified currently. On an annualized basis, FMN’s PBT margin is around 3% compared with just under 1% for HFM.

The final equity price payable will be determined by HFM’s “adjusted net debt and net working capital” on the date of completion. Based on HFM’s H1’22 numbers, we would expect the acquisition price to be well above Friday’s price of NGN3.39, perhaps above NGN5.00/per share. We believe that FMN can comfortably finance the deal, using its robust cash balance of NGN52.7bn (as at H1’22) and would not have to use new debt.

Current industry capacity (MT/d)                                                             
https://rx33.mjt.lu/img/rx33/b/mixhj/g8mqm.png
Post-acquisition of HFM (MT/d)                                                 
https://rx33.mjt.lu/img/rx33/b/mixhj/g8mq2.png

Nigeria’s Inflation Drops to 15.99%, the Largest Decline in Seven Months 

 Year-on-year food inflation moderated by 1.23 percentage points from 19.57% in September to settle at 18.34% in October, suggesting that the price paid by Nigerians for food in October 2021 is on average 18.34% higher than the price paid in the corresponding period of last year.

Nigerian States’ Ratings Challenged by Own Revenue Generation

  Nigerian states’ framework of fiscal rules is evolving, due to their limited own-revenue-generation capacity and developing debt and liquidity-management regulations and practices amid the devolution of a wide set of responsibilities to the states, Fitch Ratings says in a new framework report.  

Oil and Gas Companies 9M 2021 Results: Riding a Post-COVID Reversal 

 Nigerian oil and gas companies reported modest growth in the first nine months of 2021. The latest results of selected NGX-listed companies show an increase in earnings and balance sheet growth despite the lingering COVID-19 pandemic and uncertainty in the outlook for fossil fuels.  

FG To Begin Disbursement Of N655bn Bridge Financing 

 The Minister of Finance, Budget and National Planning, Zainab Ahmed, informed the National Economic Council on Thursday, that the Bridge Facility is now being processed by the Central Bank of Nigeria. 

 NASD OTC NSI Decreased by -1.52% WoW to Close at 745.65 Basis Points 

 NASD OTC Securities Exchange Index closed the week on a Negative return on NSI. The NSI return decreased by 1.52% to close the week at 745.65 points against 757.16 on Friday November 12, 2021.  

 PenCom Clarifies Leadway Pensure Investment in First Bank Holdco, Whittles Odukale’s Influence 

 The Commission’s attention has been drawn to several publications in the media alleging breach of its Regulation on investment of pension fund assets by Leadway Pensure Ltd, a licensed Pension Fund Administrator (PFA), in the equities of FBN Holdings Plc.

TCN Begins Rehabilitation Of Old Circuit Breakers Nationwide 

 The Transmission Company of Nigeria (TCN) said it has commenced the rehabilitation and replacement of old circuit breakers in the nation’s transmission network.  

Nigeria, Others Lose $5b Annually On Currency Convertibility Cost 

 African countries are losing $5 billion annually as costs of currency convertibility, Secretary General, African Continental Free Trade Area (AfCFTA) Wamkele Mene has said.  

Low Transparency May Hamper Debt Restructuring, World Bank Warns 

 Limited transparency will delay critical debt reconciliation and restructuring of the poorest countries, the World Bank Group President, David Malpass, has warned. 

External Reserves Resume Decline, Lose $410m In 17 Days

 After rising by a record $5.05bn last month, Nigeria’s external reserves dropped by $410m in the past 17 weeks, the latest data from the Central Bank of Nigeria have shown. The CBN data revealed that the reserves dropped to $41.50bn on November 14 from $41.79bn on November 1. 

About the Author

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First Ideas Limited is an investment and financial advisory company established in 1994 to provide advisory services to high net worth individuals, trust funds, financial institutions and medium sized companies in growth sectors.

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