BusinessDay 14 Feb 2018

Wednesday 14 February 2018
COMPANIES
& MARKETS
Company news analysis and insight
BUSINESS
DAY
Commerzbank remains
optimistic about doing
business in Nigeria
13
Pg. 14
Could NEXIM N5bn loan
facility salvage Multi Trex?
BALA AUGIE
Investors are asking themselves
whether Nigerian
Export-Import Bank (NEX-
IM) financial lifeline of N5
billion to Multi Trex Plc will
resurrect the Cocoa processing
firm from the dead.
This is not a rhetorical question
as readers are allowed to express
their opinion if the company is
financially viable or not.
For those that believe in miracles,
the only story of a resurrection
as told by the book of Matthew was
when Jesus Christ resurrected a
certain man called Lazarus.
But in the corporate world
spiritualism is not the antidote for
a company at the brink of collapse
but money or capital injection
could be a solution, depending
on the level on how the funds are
strategically utilized.
Let get straight to the game of
numbers and leave Theology to
philosophers and pastors.
Multi Trex is sick, and to start
with the company is grappling with
huge debt and its gearing ratios are
stratospheric, which exposes it to
bankruptcy.
In the financial parlance, gearing
ratios measure the level of
indebtedness of a firm. It shows the
level of debt in the capital structure
while a high ratio means the company
is highly indebted.
The Cocoa processing firm has
a total debt of N11.55 billion as at
December 2013, the last time it
posted its financial statement on
the website of the Nigerian Stock
Exchange (NSE).
Gearing ratios increased to
361.10 percent as at December
2013 as against 174.18 percent the
previous year. Finance costs or
interest expenses of N1.43 billion
are 1 time sales. In other words,
interests on bank loans are equal
to sales.
In 2013, Skye Bank Plc decided
to sell to Asset Management Corporation
of Nigeria (AMCOM)
N8.50 billion of Multi Trex’s owing
to the bank.
That same year, AMCON yielded
to the company’s proposal and
considered restructuring the loans
bought by them.
“Under the loan restructuring
exercise, AMCON converted N1.5
billion of the amount of the loans
bought to Equity. Also, the Corporation
transferred N4.5 billion to
Preference Shares while retaining
the balance of N2.5 billion as a
nine-year Term loan,” said the
company in note 5 of its consoli-
SEC yet to receive application from
MTN on Initial Public Offering
The Securities and Exchange
Commission
(SEC) on Monday said that
it was yet to be notified by
the MTN Group on plans to raise
about 500 million dollars from the
Nigeria’s capital market.
A source who pleaded anonymity
told the News Agency of the
Nigeria (NAN) in Lagos that the
commission was yet to receive any
application from MTN on Initial
Public Offering (IPO).
“As of today, we are yet to receive
any application or notification
from MTN on the proposed
IPO,’’ he said.
The source said that the commission
would remain committed
to investors’ protection and development
of the Nigerian capital
market.
NAN reports that there were
reports recently that MTN Group
Ltd. was perfecting plans to raise
about 500 million dollars from the
sale of shares in its Nigerian business
in the first half of 2018.
Standard Bank Group Ltd. and
Citigroup Inc. had been advising
Africa’s largest mobile-phone company
on the disposal of as much as
30 per cent of the Lagos-based unit
on the Nigerian Stock Exchange
(NSE).
NAN also recalls that MTN had
agreed to list the Nigerian unit as
part of June 2016 agreement to pay
one billion dollars fine for missing
a deadline to disconnect unregistered
subscribers amid a security
crackdown.
Speaking on the implications
of MTN listing, Dr Uche Uwaleke,
the Head of Banking and Finance
Department, Nasarawa State University
Keffi, said that the deal if
perfected would boost market
capitalisation.
Uwaleke told NAN that the
eventual listing of MTN would
increase stock market contributions
to the economy as well as
encourage other multinational to
seek listing, thereby increase confidence
in the NSE.
According to him, it will help
to de-risk the Nigerian stock
market from the dominance of a
few companies in terms of market
capitalisation such as Dangote
Cement.
Uwaleke said that the deal if
perfected would enhance present
demutualisation effort of the
exchange and its success rate fol-
dated financial statement.
Multi Trex recorded a loss
after tax of N3.02 billion in 2013,
which is 2.10 times sales as cost
of sales or production costs of
N2.30 billion swallowed the
whole of revenue.
Sales slumped by 56.13 percent
to N1.43 billion in the period under
review as the company grappled
with low capacity utilization
brought on by its inability to access
working capital.
The company’s business was
severely hampered by its inability
to access working capital as a
result of a Central Bank directive
that, soon after the loan restructuring,
prohibited all Deposit Money
Banks (DMBs) from extending new
credit facilities to all companies
who owe an initial debt of N5b or
above to AMCON, according to the
Multi Trex.
lowing improved confidence by
investors and the general public.
He added that it would increase
wealth opportunity for
Nigerians that would eventually
become shareholders as well as
increased tax revenue for the
government.
Sheriffdeen Tella, a Professor of
Economics, Olabisi Onabanjo University
Ago-Iwoye, Ogun said that
the entry of MTN or any of the big
telecom firms into the stock market
would strengthen the market
and bring confidence to local and
international investors.
“The more of such participation
by firms with huge financial
strength and reputation, the better
for the growth of the stock market
and the capital market generally,’’
Tella said.
Financial experts
give reasons for a
week loss
Some financial experts on
Monday attributed the persistent
downward trend on
the Nigerian Stock Exchange
(NSE) to bandwagon effect from decline
in global stock markets.
The financial experts said this in
an interview with the News Agency
of Nigeria (NAN) in Lagos, while
reacting to bearish trend posted by
the market last week.
They said that decline in global
stock markets, especially in the U.S.
and Europe contributed to the bearish
trend in the market.
Dr Uche Uwaleke, the Head of
Banking and Finance Department,
Nasarawa State University Keffi,
said that investors reactions to the
global stock market trend led to sell
pressure on the exchange.
Uwaleke said that the drop in
crude oil price following increased
supply and profit taking by investors
in respect of over-priced
stocks particularly those of tier
11 banks contributed to the development.
He added that relative uptick in
returns from money market securities
led to movement of funds from
capital market to the money market
securities.
Prof. Sheriffdeen Tella, Professor
of Economics, Olabisi
Onabanjo University Ago-Iwoye
, Ogun said the bearish trend
was expected because the stock
market usually react to economic
conditions.
“This is New Year and the budget
is yet to be passed, so money has not
been released and people need to
buy lots of things.
Fortunately, the market was
bullish recently such that the values
of shares went up making it possible
for profit taking,’’ Tella said.
He said that the bearish trend
would bring new opportunities for
new investors as well as old ones
who would want to adjust their
financial portfolio.
Tella said that these investors
would go to the market shortly to
take advantage of the lower prices
of shares.
“We will start seeing bullish
activities in the market again.
It is the nature of the market to
facilitate between bullish and bearish
swings as dictated by market
forces,’’ he said.
NAN reports that All-Share Index
dipped 1,512.07 points or 3.39 per
cent to close at 43,127.92 compared
to 44,639.99 achieved in the corresponding
week.
Also, the market capitalisation
depreciated by N142 billion or 3.39
per cent to close at N15.477 trillion
as against N16.019 trillion posted in
the previous week.
Similarly, all other indices finished
lower during the week with
exception of the NSE ASeM Index
that closed flat.