As SAHCO Ends Four-Year IPO Drought, What Are The Worries?


Thursday, November 15, 2018 / 10:00 AM / Proshare Research        


Skyway Aviation Handling Company (SAHCO)’s Initial Public Offering (IPO) by way of an offer for sale of 406,074,000 ordinary shares of 50 kobo each at N4.65 per share, which commenced on Monday, November 12, 2018, put an end to four-year drought of IPO listing at the Nigerian Stock Exchange (NSE).

The long break of IPO listing at the local bourse followed the 2008 global financial crisis which wiped out N8.02 trillion, representing 64.14 percent, from NSE market capitalisation between February 2008 and March 2009.

Proshare Nigeria Pvt. Ltd.

Source: NSE, Proshare Research

But in 2014, an oil and gas company, Seplat Petroleum Development Company Plc. (SEPLAT) splashed some water to wet the grounds with its dual listing at the NSE and London Stock Exchange (LSE) through IPO.

Since then, it became challenging for companies to list their shares at the exchange through IPO as investors still struggles to recover from the financial turmoil.

MTN Group, a Johannesburg-based telecommunication firm operating in the country as MTN Nigeria, and Nigerian Reinsurance Corporation had battled SAHCO to take Nigeria’s first IPO listing since 2014, but the protracted dispute between the telco and the Nigerian authorities delayed the planned listing.

By over 406 million units of shares of SAHCO at N4.65 per share, the aviation ground handling firm will lift NSE market capitalisation to about N13 trillion.

SAHCO, which was privatised in 2009 and wholly owned by SIFAX Group, was incorporated as an Aviation Ground Handling Service Provider under the Nigerian Company & Allied Matters Act of 1990.

This implies SAHCO would be listed in Transport-Related Services subsector which already has Newrest Airline Services & Logistics Plc (AIRSERVICE) and the firm’s major competitor in ground handling industry in Nigeria, Nigerian Aviation Handling Company Plc (NAHCO).

Meanwhile, while AIRSERVICE continued to record impressive performance on the floor of NSE, NAHCO’s performance at the bourse has been bearish lately, a development which is most likely to be triggered by the weakened investors sentiment at the market and over the management of the company, no thanks to the recent resignation of its board Chairman and a Non-Executive Director which prompted immediate appointment of new directors to occupy the seats.

A review of performance of the two existing firms in the sub-sector showed that the year-to-date return of AIRSERVICE stood at +17.65 percent, while its 1-month and 1-year change was 16.67 percent and 13.82 percent respectively as at Wednesday, November 14, 2018.

However, NAHCO year-to-date loss worsened to 10.80 percent at the close of trading on Wednesday, while its 1-month and 1-year change settle at 8.56 percent and -4.57 percent respectively.


1 Month Change


1 Year Change













Source: NSE, Proshare Research

With mixed performance report of existing firms rendering similar services like SAHCO, some worries may arise on the performance direction of SAHCO in the short-to-medium term. But being a major success story of federal government’s assets privatisation, this among other achievements of the company may likely impact positively on the stock when trading in its shares begins.

Vetiva Capital believes that an increase in the company’s client base coupled with the expected growth in its cargo business and improvements in the sector will translate to a long-term growth for SAHCO.

According to the National Bureau of Statistics (NBS), the total passenger traffic in Nigeria dropped by 4 percent to 13.4 million passengers in 2017. This reflects that the nation’s aviation sector is still performing below optimal level when compared with its pairs in the world and even in the African continent.

SAHCO can however mitigate this with its investment in modern infrastructures, human capital development programmes and acquisition of relevant certificates of operation which gave it a competitive advantage over NAHCO in aviation ground handling services.

Both NAHCO and SAHCO were owned by the federal government before they were privatised in 2005 and 2009 respectively, even though NAHCO has been operating independently in the industry for two decades before SAHCO was granted operational autonomy in 1999.

Despite this, the two companies, holding close to 100 percent market share in the country’s aviation ground handling space, still battle for leadership in the industry. NAHCO got listed on the Nigerian Stock Exchange in 2006, a year after it was privatized by the federal government, while SAHCO has been operating as a limited company for close to two decades.

The long history of NAHCO in the industry has not directly impacted its growth lately, when its performance in the last five years is compared with that of SAHCO; NAHCO is still struggling to catch up. While NAHCO’s compounded annual growth rate from 2013 to 2017 fell by 0.5 percent, SAHCO grew by 4.4 percent within the same period.

The annual reports of both companies for the 2017 fiscal year show that the operating environment of the country’s ground handling service was hardly hit last year, just as the two leading operators recorded a decline in revenues, SAHCO’s revenue fell by 0.82 percent to N4.86 billion in 2017, while NAHCO’s income dropped by 0.38 percent to N7.93 billion in the same period. However, SAHCO was able to record an average gross margin of 50 percent between 2013 and 2017, while NAHCO only recorded 36 percent within the same period.


Proshare Nigeria Pvt. Ltd.

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