Investment Outlook

July 22, 2007 @ 6.20p.m – Written by January

Categories: Investing, Stock Portfolio

Last week, I received a mail from Michael of regarding the article on FCMB & Fidelity Bank’s aim of raising funds from the domestic and international capital market. His comment is stated below:

I like the entries in your blog and your approach to investment analysis.
About 7 more Nigerian banks will be raising funds through the capital market this year. What are your thoughts on their outlooks? I would not think First Bank has the best outlook in the short term even though it’s probably the least risk.

What do you think? FCMB? Fidelity? Access? PHB? Skye? Wema? and possibly Union bank. Diversifying in all of them will not bring the best returns, diversifying in the 2 or 3 best prospects however just might be invaluable.

I would like to know what are your thoughts?

I usually advise prospective investors that investing in the capital market is for the long-term or medium term depending on your reasons for investing in the first place. I’m against short-term investment because tax and commissions will erode capital gains from your investments. From my research and findings, I understand that First Bank stock is scarce on the floor of the NSE, investors will benefit from the likely price appreciation, as the technical suspension will be lifted in a months time. The audited result of the bank is expected to hit the market this month or latest next month. It is likely that the audited result be released towards the lifting of the technical suspension if it is an impressive result; otherwise, it may be released after the technical suspension has been lifted. It is also being speculated that the bank is likely to give a bonus issue of 1 for 6, which will invariably increase the share capital of the company. I think First Bank has a positive outlook both in the short and long term.

Market hearsay is high on a probable bonus issue of 1 for 4 from Union Bank’s audited result expected to hit the market any moment from now. If the bonus issue is eventually given and is of a sizeable quantum, the market price of the stock will rise higher than it’s current price. Union Bank raised additional funds in 2005. The possibility of the bank coming to the market to raise additional funds this year is very slim. At the beginning of this year, Fidelity Bank was selling at N2.17, which implies a 458.3% appreciation in the price of the stock since trading opened this year. The bank’s stock will continue to be attractive if the development that’s being rumored in the market place is true.

The bank will be holding an Extraordinary General Meeting later this month and top on the agenda of the meeting is the possibility of share reconstruction in the bank. If this happens and the bank’s stock follows the trend of others like Access Bank and Bank PHB, it means the stock will be attractive in the long run. 

5 thoughts on “Investment Outlook

  1. Michael says:

    Thanks for the comment which was very informative and enlightening. I did buy FBN shares in supplement to some i had before the offer. Thing is i left some cash to diversify in other plc’s
    I do agree with you that investment should be long term. So i have two parts to my funds. 80% is towards long term, 20% is for short term or what you would call speculation.
    Its not fail safe, but in a boom such as the NSE showed in the first 6 months of this year, it can be a real money spinner.
    Thanks for the analysis, i’ll be holding Fidelity then. And it seems we’ll definitely be smiling on FBN come august.

    p.s. what are your thots on stanbic/ibtc merger.? Sounds like a farce esp with the mgmt and BOD trying so hard to pressure investors into selling their shares when they were begging investors to buy their ipo a few months ago. its worrying coming from probably the most intellectual investment bank in Nigeria

  2. January says:

    Hello Michael, I was reading the daily papers today, when I came across the ad placed by Standard Bank regarding the merger with IBTC. The ad urged existing shareholders to sell off some of their shares at a premium price of N16. Standard Bank has to acquire 51% shareholding stake in IBTC for the merger to be successful. Why they had to place that ad in the papers for ordinary shareholders, I do not know.

    I would imagine that they would approach instituional investors to divest some of their shareholdngs at a much higher price than N16.

    However from my findings, IBTC is currently under pressure to de-list tis shares from the NSE cos Standard Bank is not interested in being quoted on the Stock Exchange. I think it would be quite difficult to delist IBTC from the league of quoted stocks on the exchange. The bank having played a major role in recent times and is currently one of the major issuing houses in several successful public offers, cannot afford to discourage new entrants into the market.
    It would be quite diificult for the bank to accept removal except the benefits of being outside the capital market outweigh the benfits of being quoted. I hope this answers your question.

  3. florence oladipo says:

    i bought the fbn share 2007 at associated match indutries nigeria limited with first bank plc have not receiec any letter from the bank plz may i know wht is happening to my account . 500units

    • January says:

      Hello Florence, if you are yet to receive your share certificate and dividend warrant, i’d suggest you pay a visit to First Bank Registrar at Iganmu…it’s on the same road as Nigerian Breweries…once you get to Iganmu, just take a bike to First Bank on that same road. Alight and ask for First Registrars..they’ll be able to attend to any isses regarding your investment. Hope this answers your question.

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