THURSDAY, 29 APRIL 2010 01:14 ABDUL IMOYO
News of Oando plc’s success in the capital market following 127 percent subscription that was recorded by its recent rights issue has boosted the stock outlook among investors.
On January 25, 2010, the company launched an offer to raise N20 billion through the issuance of 301,694,876 ordinary shares of 50kobo each to existing shareholders in Nigeria and South Africa at a ratio of 1 new share for every three already held at N70 per share. The issue was highly successful according to the offer announcement which, indeed had been approved by the Securities and Exchange Commission (SEC).
“It is a bad time for companies with weak fundamentals and a good time for companies that do things properly. We do things properly and had actually grown our profit by 50 percent,” managing director, Wale Tinubu had said about the timing of the rights issue.Oando is not only relishing the success of the offer, the company also dished out a dividend of N3.00 per share and a bonus of 1 for 2 for the year ended December 31, 2009. The company had commenced the execution of its long-term strategy that will drive the its business forward, ensuring that in the years to come, Oando remains a dominant player in the integrated energy sector with a diversified revenue base.
Oando commenced operations in 1956 as a petroleum marketing company in Nigeria under the name ESSO West Africa Incorporated, then a subsidiary of ExxonCorporation of the USA. In 2004, Oando consolidated its affiliate and subsidiary companies into an integrated energy group and was declared the Quoted Company of the Year for the 2003 and 2004 financial year by the NSE. Now the nation’s largest indigenous integrated energy solutions provider, the company intends to broaden capacity by investing in information technology, processes, and people to enhance upstream operating competencies and execution.
Oando reported a relatively flat turnover of N336.9 billion for the year ended 2009 when compared with N339.4 billion reported in the previous year. Pre-tax profit and pre-tax margins went up by 25.8 percent and 4.0 percent respectively.Analysts at Afrinvest West Africa Limited noted that the pre-tax margin of 4.0 percent was the company’s best in the last five years, an indication of improved efficiency amidst an increasingly challenging operating environment.
FY’10 Outlook Afrinvest posited: “We are positive about the company’s outlook as we expect it to leverage on the high margin potential of producing upstream assets to deliver additional top-line growth.We also expect that proceeds from its recent capital raising exercise will be used to pay down on some existing debt.” It is believed that the robustness of the company’s diversified business model, with multiple income streams across the entire energy value chain, would enable it to maintain steady profitability with an assurance to investors of guaranteed returns in the short, medium and long term.
The net proceeds of the rights issue would be applied as follows: The sum of N14.919 billion (73 percent) would be used for upstream asset refinancing, operational capital development and upstream business development would require N3.883 billion or 19 percent over 24-month period. The sum of N1.634 billion would used as working capital.
Meanwhile, Afrinvest has upgraded its recommendation on Oando to a ‘Buy’ at current valuation, even as the analysts forecast the ex-divividend price to settle within a N97.50 – N102.50 range over the next 12 months.