Transcorp: Coming out of the Woods

When former President Olusegun Obasanjo called some leading Nigerian business men to form a company that is similar to South Korean Chaebols, he meant well for the Nigerian economy. Apparently seeing the vast business opportunities in the Nigerian economy and other parts of Africa, Obasanjo foresaw a situation where those opportunities could elude Nigerian firms due to limited financial resources.
He, therefore, called on some successful businessmen to establish a mega company that would respond to market opportunities that required huge capital outlay.

Obasanjo then contacted the former Director-General of the Nigerian Stock Exchange (NSE) Ndi Okereke-Onyiuke. In 2004 Okereke-onyiuke therefore led some influential business people, who have been successfully running their various business organizations to float Transnational Corporation of Nigeria (Transcorp). But between 2004 and now, Transcorp has gone through its ups and downs before finally finding its current bearing.

Initial Business Strategy, Challenges

Following its successful entry into the Nigerian economy, the founders and management of Transcorp unfolded a business development strategy that included investment in the oil and gas sector, telecommunications, agriculture and the hotel and hospitality sectors of the economy.

In order to begin with a strong foundation, the company made some milestone acquisitions including Nigerian Telecommunications Limited (NITEL), Nicon Hilton, Abuja and oil concession – Oil Prospecting Lease 281.

Most of these acquisitions were made on borrowed funds. However, the firm embarked on a major capital raising exercise with an initial public offering of N60 billion.

Despite the massive and unprecedented promotion, the IPO fetched the company only N22 billion, a development analysts attributed to the wrong pricing of the offer and low investor confidence in company that had no track record and had not yet turned in profit in its first year of operation.

The undersubscribed IPO marked the beginning of the challenges for Transcorp as it struggled for funds to pay the debt used in buying NITEL, among other acquisitions. The only viable asset of the company then, Transcorp Hilton Hotel, constituted a serious financial drain as a result of the pressure to repay the debts.

Turning Point

However, shareholders in 2010 met and gave the board and management the authority to refocus the operations of the company. This led to Transcorp’s exit from the NITEL deal. But the real turning point that has helped to boost the fortunes of the company was the investment by Heirs Holding Limited.

Heirs Holdings, owned by former Group Managing Director of United Bank for Africa Plc, Mr. Tony Elumelu, acquired a significant stake in Transcorp last year to become the single largest investor in the company. As at December 31, 2011, Heirs Holding controlled a 22.2 per cent equity stake in the company.

Heirs Holdings, which has interests in the financial services, real estate and resources sectors, explained shortly after the acquisition that the investment in Transcorp was in pursuant of its strategy of creating value and catalyzing the economic growth of Africa through its long term investment approach. According to the new investor, Transcorp’s shareholders would benefit from its track record of value-creation.

New Vision and Strategy

With a vision to create sustainable value for its shareholders in its chosen markets, Transcorp is now a diversified conglomerate with strategic investments and core interests in the hospitality, agribusiness and energy sectors.

The company has three major subsidiaries that are driving its business strategy. They are Transnational Hotels and Tourism Limited (hospitality), Teragro Commodities Limited (agribusiness) and Transcorp Energy Limited, which will handle its energy businesses.

Transcorp’s business model is built on equity investments in assets with high recovery margins and quick-term-to-profit horizons that allow the group to exert strategic influence commensurate with its ownership. From Transcorp Hilton Hotel, Abuja, which used to be its flagship investment, Transcorp has added Transcorp Metropolitan Hotel, Calabar and Benfruit Processing Plant in Benue State to its assets.

To give its investment in the hospitality sector fillip, Hilton Worldwide recently disclosed its plans to further deepen its partnership with Transcorp to develop eight new luxury hotel facilities across Nigerian cities within seven years. The Benfruit processing plant, which is the first of its kind in juice concentrate production, was inaugurated by President Goodluck Jonathan on March 9, 2012.

In the energy sector, Transcorp has renegotiated an agreement with a joint venture partners to develop OPL 281 following the reward of the oil block to the company by the Federal government last year. Also, Transcorp has entered a partnership agreement with Symbion Power, a United States-based energy company.

The partnership agreement has put Transcorp in a vantage position to bid for and acquire controlling stakes in one or more power generation and distribution companies being privatised by the Federal Government. The management of Transcorp has also restructured it corporate centre to fully utilize the technical and commercial expertise of its core staff in its head office by providing targeted share services to the subsidiaries. Also, in order to fortify its business the board of the company renewed its focus on corporate governance last December by holding a retreat.

Future Prospects

Transcorp has bright prospects going by its first quarter (Q1) results ended March 31, 2012. The company reported a 62 per cent growth in profit after tax in Q1. Profit before tax rose from N399 million in Q1 of 2011 to N610 million in 2012, an increase of 52.9 per cent, while profit after tax rose by 62 per cent from N319 million to N518 million.

Analysts said if the trend is maintained throughout the remaining three quarters, Transcorp, would end the financial year with a net profit above N2 billion, compared with N1.257 billion in 2010.

Ufudo was very excited about the Q1 performance and also hopeful that this would be improved upon going forward, said: “We are excited by this early and positive indication that our turnaround and transformation initiatives are already taking root and yielding results.”

The CEO has promised that shareholders of the company would receive dividends at the end of the current financial year. “Transcorp is undergoing a transformation, driven principally on two fronts. We have fully embraced and enthroned the highest level of global best practices and governance standards in our operations and businesses.

Notore Chemical Industries Eyes NSE Listing

The Nigerian Stock Exchange (NSE) is to record another new listing, as Notore Chemical Industries Limited, is preparing to list in the agricultural sector of the Nigerian Stock Exchange (NSE). Notore, which is an agro-allied and chemical company owned by a consortium of private and foreign institutional investors, is currently championing the African green revolution by supporting local food production on the continent.
The company has also received commendation from the Minister of Agriculture, Dr. Akinwumi Adesina, for its major role in the Federal Government’s efforts to transform the agric sector and become the mainstay of the nation’s economy.

THISDAY checks revealed the company is planning to list on the NSE as part of its strategies to remain a dominant player in the agric sector and widen its investor base. Market operators applauded this development, saying it is good for the market. 

“The market did not record any new listing between 2009 and 2011. Only this year the market has recorded two new listings so far. If Notore is planning to list, it is good because it would enhance investor’s choice of investment in the agric sector of the exchange where we currently have only five companies,” a stock dealer, Mr. Ayo Oguntayo, said.

Sources close to Notore confirmed that preparations towards the listing are already on, noting, however, that the whole exercise would be concluded next year.

Adesina had, at a recent forum organised by the NSE for chief executive officers of agric firms, urged companies in the agric sector that were yet to list on the exchange to do so and enjoy the numerous benefits of  being listed.

It is believed that the listing of Notore would give investors opportunity to diversify their investment in another area of agric business. The company was established in 2005 after the acquisition of the liquidated assets of National Fertiliser Company of Nigeria (NAFCON) by the Bureau of Public Enterprises (BPE).

Notore fertiliser plant is said to be the only urea fertiliser plant in sub-Saharan Africa, thus making the firm perfectly positioned to become Africa’s major fertiliser supplier.

The company has successful penetrated into the Nigerian fertiliser market by establishing an efficient nationwide distribution and sales network that is supplying fertiliser directly to Nigerian farmers.

Notore recently signed a joint venture agreement with Mitsubishi Corporation to develop an ammonia, urea and other petrochemicals project at its existing facility at Onne, Rivers State, Nigeria.

 

Ten stockbroking firms control 53.6% trade in NSE

Ten stockbroking firms accounted for 53.58 percent of the total traded volume at the Nigerian Stock Exchange (NSE) within the period January- June 2012, figures obtained by Business Day have shown. The stockbroking firms are Chapelhill Denham Securities Limited, RenCap Securities (Nigeria) Limited, Stanbic IBTC Stockbrokers Limited, BGL Securities Limited, Skye Stockbrokers Limited, CSL Stockbrokers Limited, ARM Securities Limited, Cordros Capital Limited, EDC Securities Limited, and Dominion Trust Limited.

In the 6-month period, these 10 stockbroking firms traded 49.2billion shares at the Nigerian Stock Exchange, which currently houses about 327 dealing member firms, out of which 234 are active. Details of the transactions at the Nigerian bourse showed that Chapelhill Denham Securities Limited traded 11,073,241,244 shares representing 12 percent of the 49.2billion shares traded; RenCap Securities (Nigeria) Limited traded 11,056,964,744 shares or 11.99 percent.

Stanbic IBTC Stockbrokers Limited traded 9,389,934,873 shares or 10.18 percent; BGL Securities Limited traded 3,962,305,881 shares or 4.3 percent; and Skye Stockbrokers Limited traded 2,729,619,956 shares or 2.96 percent.

Others are CSL Stockbrokers Limited, which traded 2,609,423,918 or 2.83 percent; ARM Securities Limited traded 2,608,888,446 shares, amounting to 2.83 percent; Cordros Capital Limited traded 2,143,871,912 shares or 2.32 percent; EDC Securities Limited traded 1,933,182,302 shares, or 2.10 percent; and Dominion Trust Limited traded 1,917,958,738 or 2.08 percent.

In another development, another ten stockbrokers (including RenCap Securities, Stanbic IBTC Stockbrokers, Chapelhill Denham Securities, CSL Stockbrokers, ARM Securities Limited, Cordros Capital, and BGL Securities) accounted for 67.01 percent of the total value traded within the same period (January –June 2012). Others within this pack are GTB Securities Limited, Vetiva Securities Limited, and Meristem Securities Limited. These 10 stockbroking firms traded stock worth N424.98billion in six months.

RenCap Securities traded shares valued at N125, 449,899,578.43 or 19.76 percent of N424.98billion; Stanbic IBTC Stockbrokers (N114,893,331,512.06) or 18.10 percent; Chapelhill Denham Securities (N53,646,198,685.84) or 8.45 percent; CSL Stockbrokers (N30,572,675,947.55) or 4.82 percent; ARM Securities Limited (N25,564,539,322.78) or 4.03 percent; Cordros Capital (N 16,914,387,066.75) or 2.66 percent.

Others are GTB Securities Limited (N16,804,515,467.97) or 2.65 percent; Vetiva Securities Limited (N15,525,127,367.92) or 2.45 percent; Meristem Securities Limited (N13,000,804,755.63) or 2.05 percent; and BGL Securities (N12,987,486,929.17) or 2.05 percent of the total value of stocks traded in the six-month period.

According to Albert Okumagba, Group Managing Director/Chief Executive Officer, BGL, as investor confidence is low, evidenced by a virtual wiping out of the retail segment of the market, “the handful of stockbroking firms which have a catchment of institutional clientele, virtually run the market as the oligopoly.”

Index Summary
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