BusinessDay 28 Feb 2018

Wednesday 28 February 2018
COMPANIES
& MARKETS
Company news analysis and insight
BUSINESS
DAY
13
Banks credit to private
sector to grow in 2018- FSDH
Pg. 14
Consolidated Hallmark Insurance sustains
investor confidence despite market lull
Modestus Anaesoronye
Following the recent
removal of the price
cap by the Nigerian
Stock Exchange
(NSE), and the consequent
fall in the share price
of some stocks, especially in
the Insurance industry, it is
expected that some shareholders
may begin to dump
their shares for fear of losing
value; but this has not been
so for Consolidated Hallmark
Insurance (CHI) Plc.
The reason is not farfetched.
The company has
demonstrated consistent ability
to deliver returns to its
shareholders over the years,
and an analysis of its financials
shows strong positive
fundamentals.
Majority of the shareholders
of company, have therefore
continued to hold on
tightly to their stocks, not
willing to sell, while others are
beginning to take positions
now that the cap has been
lifted, thereby providing more
liquidity for the stocks.
The confidence of CHI’s
shareholders in the company’s
performance was
further reaffirmed during
the first phase of its capital
raising exercise, in which
it offered N500million in
the form of one new share
for every six held by its existing
shareholders in a
1,000,000,000 unit’s rights
issue, which was oversubscribed.
An analysis of the
deals on the trading floor of
the Nigerian Stock Exchange
in the past few weeks indicates
improved activities on
the stock of the company,
with increasing transaction
volumes, but only 32 million
units (a paltry 1%), out of the
7billion shares outstanding
have been made available
for purchase on the floor of
the Exchange, showing a low
unwillingness by investors to
sell off their stock.
A quick glance at the company’s
fundamentals, show
why investors may want to
hold on to CHI stocks, or why
new investors may want to
take position.
Firstly, the company is
trading at a 12-month price
to earnings (PE) ratio of 8.9X,
price to book ratio of 0.39x and
a dividend yield of 6.9 percent.
In addition, the company’s
9-month financials as at 2017
shows a profitable insurance
business, with an underwriting
profit of N836million and
Eddie Efekoha, managing director, CHI Plc
retained earnings of N114million.
The company has also
grown its total assets value to
N8.14 billion from N4.6 billion
in 2007.CHI is one of the few
insurance businesses that
delivers value to its sharehold-
ers in the Nigerian insurance
market.
Commenting on the recent
developments at the
NSE, Eddie Efekoha, managing
director/CEO of the company
who is also the Chairman
of the Nigerian Insurers
Association, expressed confidence
that discerning investors
would rather scramble
to take position on the stock,
at a bargain price now rather
than sell their valuable stock
that has consistently made
returns for them via growth in
assets and dividend payments
over the years. He said the intrinsic
book value of the stock
is presently over 70 kobo, and
with its current liquidity levels
in the market, more market
players are now gearing up to
take position while expecting
an upside in price especially
against the backdrop of the
expected 2017 Year End Financials.
Efekoha therefore assured
shareholders of the
company to expect more
returns in the nearest future
as recent capacity expansion
and growth initiatives
such as the establishment of
new subsidiaries such as its
Health Management Organisation
(HMO), to focus on
identified growth markets,
launching of a revamped
website with retail customer
and broker interphase, reinvigoration
of the retail
network and deployment of
latest technology will help to
further grow revenue.
Efekoha explained further
that strategies have been put
in place to improve on the
bottom line through costcutting
initiatives in management
expenses.
Consolidated Hallmark
Insurance (CHI Plc) has consistently
grown revenue since
the 2007 merger of three legacy
companies – from N1.506
billion in 2007 to N5billion
and has paid dividends to
shareholders 7 out of 10 years
post-merger.
The company is known
for very high professional and
ethical standards, with excellent
customer service and
prompt claims settlement as
its key selling points. Claims
incurred rose from N197 million
during the 2007 Financial
Year to N1.185 billion for the
nine months ended September,
2017 an attestation that
the company is “a financial
institution with satisfactory
financial condition and adequate
capacity to meet its
obligations as and when they
fall due“, as stated by foremost
rating agency Agusto & Company,
during its rating of the
company in 2016.
Low investor response: SEC moves to
extend free e-dividend registration
Naira in UK pre-approved currencies will
enhance financial position of SMEs
Strong indications
emerged on Monday
that the Securities
and Exchange Commission
(SEC) would likely
extend its free e-dividend
registration for the third time.
This is due to low investor
response as the Feb. 28
deadline draws close.
A source who pleaded
anonymity told the News
Agency of the Nigeria (NAN)
in Lagos that the commission
would likely extend the free
registration deadline to give
room for enrolment of more
investors.
The source said that all
indication points to extension
due to low response of investors
going by the available
statistics.
NAN reports that e-
dividend simply refers to
an online system of paying
dividends to investors
when companies declare
dividends.
The dividends, which are
the profits meant for investors,
are wired to the investor’s
bank account, instead of
sending it by post as was the
old practice.
The advantage of the e-
dividend is not only to enable
investors collect subsequent
dividends electronically but
it allows all accrued dividends
to be credited to investors’
bank accounts.
This will stem the rising
unclaimed dividends in the
capital market.
The source said that
the free registration may be
extended for about three
months, noting that the decision
underscores SEC’s
strong focus on market development
and enhancement of
investor confidence.
NAN reports that SEC
in June 2017, extended the
underwriting cost of investors’
e-dividend registration
to Dec. 31, 2017, against the
earlier underwriting deadline
of June 30, 2017.
It also on Jan. 18, extended
the period for the free e-
dividend registration to Feb.
28, 2018, to encourage more
shareholders participation in
the initiative.
SEC said in a statement
that the extension became
necessary to encourage more
shareholders mandate their
bank accounts.
The statement said that
in reviewing the progress
of the e-dividend registration
after the Dec. 31, 2017
deadline, there was still a
great influx of shareholders
desirous of mandating their
bank accounts for payment
of dividends electronically.
“In light of the foregoing,
the SEC, as part of its developmental
role, has extended
the period for the free e-
dividend registration till Feb.
28, 2018, to encourage more
shareholders mandate their
bank accounts.
Accordingly, shareholders
that are yet to register
should continue to approach
their banks or registrars
to mandate their bank
accounts for the collection
of their dividends electronically,
including unclaimed
dividends, not exceeding 12
years of issue.
NAN recalls that the SEC
had announced that the e-
dividend registration would
continue seamlessly in spite
of the expiration of the initial
Dec. 31, 2017 free registration
deadline.
The UK Export Finance
Agency preapproved
status for
the naira as a medium
of exchange will enhance
the financial position of small
and medium enterprises, a
financial expert has said.
Uche Uwaleke, the Head
of Banking and Finance Department,
Nasarawa State
University Keffi, expressed
the view in an interview
with the News Agency of
Nigeria (NAN) in Abuja on
Monday.
Uwaleke said that with
such development, the naira
had joined other 62 pre-approved
currencies directly
accepted for trade by the UK
Government.
The UK Export Finance
Agency (UKEF) recently
stated that it had concluded
plans to include the naira in
its list of “pre-approved currencies”.
The granting of a ‘’preapproved
currency’’ status
by UKEF gives exporters from
the UK the opportunity to offer
their overseas customers
UKEF-backed finance in local
currency of the importers.
‘‘It will enhance the financial
position of small and
medium enterprises as foreign
exchange risk associated
with international trade is
minimised thus eliminating
a major source of uncertainty
over debt servicing cost of
credit facilities.
‘‘Therefore, business enterprises
are in a stronger
position to negotiate better
terms with their banks in
Nigeria and avoid variable
debt service costs linked to
fluctuations in exchange
rate,’’ Uwaleke said.
According to him, the
bank in Nigeria will receive
a guarantee for full repayment
of the loan, it will help
to improve the quality of risk
assets of Nigerian banks and
enhance financial systems
stability.
Uwaleke said that the
expected increase in Foreign
Direct Investments could
bring about transfer of technology
to small businesses
in Nigeria.
‘‘The UKEF flexible financing
solutions have
been described as the “next
best thing to concessionary
financing’’ due to their
relatively cheap and flexible
nature which is particularly
healthy for small business
enterprises,’’ he said.