unlocking intrinsic value · 2014-08-04 · session on listing with the nse - unlocking intrinsic...

UNLOCKING INTRINSIC VALUETHROUGH

THE NIGERIAN STOCK EXCHANGEPresented by

Oscar Onyema

CEO, The Nigerian Stock Exchange

at a

Breakfast Forum

ASAA Pyramid Hotel, Kaduna

December 22, 2011

22/12/2011 1The Nigerian Stock Exchange

SESSION ON LISTING WITH THE NSE -

UNLOCKING

INTRINSIC VALUE

THROUGH

THE NIGERIAN

STOCK

EXCHANGE!!!

OUTLINE

• Introduction: Functions of the

Capital Market

• Listing Benefits/ Concerns

• Snapshot of Nigeria's Capital

Market

• The NSE: Positioning For The

Future

• Rejuvenating Listings

• Steps to Actualization: Pre IPO

Activities


Introduction

Ensuring business capital adequacy


To position the Nigerian

Stock Exchange as the

preferred partner of the

organised private sector in

raising long term capital.

Objective


Capital

Opportunity to fund development and growth through tradable securities

Price Discovery

Determination of prices of tradable securities

Access

Facilitation of buyer and seller interaction

Liquidity

Mechanism for issuers and investors to convert securities to cash

Risk Transfer

Risks borne by those willing to bear them

Wealth Creation

Vehicle for generating wealth

Basic Functions of a Capital Market

22/12/2011 The Nigerian Stock Exchange 5

Improved Brand Equity

Visibility --Inclusion in

indices, portfolios

Growth –Access to capital ; lower cost

of borrowing

Transparency –Greater public

confidence through listing disciplines Continuity – A basis

for company valuation and

surviving beyond founders

Sustainability –Spreads risk of

long-term investment projects

Benefits of Listing


LISTING IS PART OF A COMPANY’S STRATEGIC BUSINESS PLAN

True Success Comes After Listing


DisciplineThe most important competency a listed company should possessEnables good corporate governance practices Ensures proper management of the business and a higher return on investment (ROI)

DisclosureWith proper corporate governance, disclosure is easyRequired for maintaining “street” credibility--investor and market interest and confidenceKey to liquidity

Market AnalystsPossibly the most important resource, post-listingResponsible for ‘buy-sell’ recommendationsRelied upon by institutional, and international investorsIndirectly market a company’s stock

Public Relations ConsultantsAdvertise and market companies and their brandsEnforce the brand/image a company wants to projectAugment the value of the company’s market performance

Strategic PlanningNo plan, no successAccountability is a stipulation of raising money from the public

Stock ExchangeDelivers information about company’s performance to local and international investors and market operatorsRelies on timely submission of forecasts and quarterly/ yearly

performance (accounts)

Listed companies must work to maintain credibility using these resources

Fear of loss of control by entrepreneurs

Owners may retain up to 85% of total share holdings of the company; requirement is for at least 15% minimum public ownership

Common Concerns About Listing


Fear of sharing of profits

Discipline is king as profits are shared per share holdings at specific intervals; planning is key to growing business and profits

Fear of exposing trade secrets

Disclosure does not mean exposure of trade secrets—one person knows the formula for Coca Cola, six people, for Pimm’s

Fear of lack of market depth and liquidity

Market is being restructured; DFI is on a rise post-08/09 global crisis; national commitment to facilitating market development

Fear of associated cost of being listed

Benefits far outweigh cost. Total cost capped at 4.3% Responsive cost reduction by principal stakeholders NSE fees 0.3% of market capitalization for IPOs and 0.3% of nominal value of listing by introduction plus professional fees

“To be the leading Stock Exchange in the African region for capital formation, driven by transparency, innovation, effici

ency and liquidity.”

The NSE’s Vision

9The Nigerian Stock Exchange22/12/2011


2010

Volume of trades

93.33b shares

2010

Value of trades

N797.55bn

9.25% from 2009

16.3% from 2009

• Market Cap = N9.9tn

• 17.4% of GDP2010

Fixed Income

Market cap: N3.7tn

Two key indices

All Share Index (NSE ASI)

Bloomberg NSE 30 Index

(NGSE30:IND)

Equity Products

Market cap N6.3tn.

Approx 200 listed companies

Powered by over 200,000 Institutional Investors and

about 5 million retail investor accounts * CSCS Report 2010

DEC. 20, 2011

Snapshot of Nigeria’s Capital Market

Quantitative

• Over 200 listed companies numbering several global brands in diverse sectors

• Highly competitive tax regime for investors- zero capital gains tax; 10% withholding tax on dividends

• Nearly 5 million registered shareholders

• Widely tracked all share and sectoralindices

Qualitative

• Compliance standards that ensure listed companies conform to global best practices

• Fully electronic trading, clearing and settlement systems

• Current product bouquet of fixed income and equities is being expanded to include Exchange Traded Funds, Options, and Futures

• Best-in-class services and the expertise to assist companies to raise capital speedily and efficiently

The NSE Advantage


“21st” Century

Technology Strategies

Target-Based Business

Development Efforts

Strong Regulation

and Supporting Regulatory Programs

First-Rate Investor

Protection Strategies

Growth-Enabling Market

Structure

$1T Market Capitalization

NSE – Positioning for the Future


Agriculture0% Construction/Real

Estate2%

Consumer Goods29%

Financial Services41%

Healthcare1%

ICT1%

Industrial Goods19%

Natural Resources0%

Oil & Gas5%

Services2%

Conglomerates0%

Utilities0%

Construction/ Real Estate

1%

Consumer Goods

5% Healthcare0%

Industrial Goods

6%

Natural Resources

0%

Oil & Gas73%

Services15%

Our Markets Cover Blue Chip & Growth

Companies

Main Board• The Gateway to African markets for Blue Chip

issuers in search of capital in Africa

• 186 Quoted Companies spanning multiple

sectors of the economy

• N6.36tn market capitalisation as at 20/12/11

ASeM• Platform to drive growth and development of

SMEs through long term capital injection and

sound corporate governance

• 12 Quoted Companies spanning multiple

sectors of the economy

• N4.1bn market capitalisation as at 20/12/11


Aligned with the Nigerian economy which is growing at over 7% per year.

NSE – Home to First Rate Companies


http://www.ubagroup.com/web/homepage

http://www.pzcussons.com/pzc/

http://www.julius-berger.com/index.php

http://www.ng.total.com/index.htm

Transforming Company Listings


• Introducing quantitative elements for equities to make itflexible and competitive in line with global best practice

Listing Requirements

• Ensuring all our companies realize the value of listing on theExchange through value added services such as:

Value-Added Services

1. Corporate governance2. Investor relations3. Institutional services4. Analyst coverage5. Corporate access


• Consolidating from 33 industry classification to 12 sectors onour Daily Official List.

• Better reflect global standards and international industrialclassifications;

• Promote market capitalization and growth/incomesegmentation to give a more detailed understanding of ourcompanies;

• Provide input into investor education efforts regarding portfolioconstruction, asset allocation and risk diversification

Market Segmentation

• Creation of Listings, Sales and Retention department fortargeted business development efforts that prioritize keyindustry segments.

• Priority focus on under represented sectors which are drivers ofthe economy:

Sectoral Focus - Agriculture: 40% of GDP, N16bn / 0% of market cap*

- Oil & Gas: 15.9% of GDP, N322bn / 4% of market cap*- Power: 7.9%of GDP, N0 / 0% of market cap*- Telecoms: 4.5% of GDP, N9.6bn / 0% of market cap*

Rejuvenating Company Listings


• Advocating for listed companies in public policy formulationwith National Assembly, Federal and State Governments.

• Collaborating with government agencies such as CentralBank of Nigeria, Securities and ExchangeCommission, Federal Ministry of Finance, National PensionCommission, Debt Management Office, etc.

• Active in Financial Services Regulation CoordinatingCommittee.

Advocacy

• 13 branches to support business development and investoroutreach

• Providing easy access to information and mobilizing forproactive investor outreach

• Bringing the market to the grass roots.

Branch Network

Accelerating Company Listings

Subject Current Proposed

Pre Tax Profits NA Profit of at least N300mn for the last 3 years, with a

pre-tax profit of at least N100mn in the most recent

year. N600 million for the latest 1 or 2yrs

Market Cap NA 4bn - option 3 for main board at the time of the initial

public offering, based on the issue price and issued

share capital.

Operating Record The company must submit financial statements/

business records for the 5 years prior

0 – 3yrs operating track record of company and/ or

core investor.

Financials 5 years financials and the date of the company’s last

audited accounts must not exceed 9 months

3 years financials and the date of last audited

accounts must not be more than 9 months

Public Float At least 25% of share capital must be offered to the

public.

20% of share capital must be offered to the public.

Public Shareholders The number of shareholders must not be less than

300

300 for equity shares

Continuing Obligations After listing, the company must submit quarterly, half-

yearly and annual accounts (financial statements)

Promoters to retain 50% of shares held at IPO for first

12 months. Submission of quarterly, semi – annual

and annual statements.

Listing Requirements Summary – Main Board


Subject ASeM Previous Proposal ASeM New Proposal

Pre-Tax Profits NA Medium term (at least 2 years) comprehensive

business plan

Market Cap NA NA

Operating Record The company must submit financial

statements/business records for the 3 years prior

2 years

Financials The date of the company’s last audited accounts

must not exceed 9 months.

Short term forecast (1 year) and date of last audited

accounts must not be more than 9 months

Public Float There is are no restrictions (minimum) on the amount

of share capital that must be offered to the public.

Minimum of 15% to public

Public Shareholders There are no restrictions on the number of

shareholders

at least 51 shareholders

Continuing Obligations After listing, the company must submit half-yearly and

annual accounts (financial statements).

Securities must be fully paid up at the time of

allotment and un-allotted securities must be sold on

the trading floor

Promoters to retain 50% of shares held at IPO for first

12 months. Submission of quarterly, semi – annual

and annual statements. Companies must retain a

Designated Adviser to assist with regulatory

compliance.

Listing Requirements Summary – ASeM


Corporate Governance Investor Relations Institutional Services

Analyst Coverage Corporate Access

Partnering for Value-Added Services


Increasing Product Offerings

• Govt. Bonds-Federal

• Govt. Bonds--State & Local

• Corporate Bonds/Debentures

Bond Market

• Main Board

• Alternative Securities Market (ASeM)

Equities Market

• ETFsETF

Market (2011)

• Stock Options

• Bond Options

• Index Options

Options Market (2013)

• Currency Futures

• Interest Rate Futures

Futures Market (2016)


Classification GROWTH VS INCOME No. of Listed Companies

Income 5 year Average Dividend Payout Ratio >= 30% 47

Growth 5 year Average Dividend Payout Ratio < 30% 151

Market Classifications


Classification Market Capitalization No. of Listed Companies

Large Above $1 Billion 9

Medium Between $150m and $1.00 Billion 26

Small Below $150m 163

As at December 12, 2011

Issuing House

Overall co-ordination of IPO process

Co-ordination of due diligence and application document

Ensure compliance with applicable rules

Develop investment case, valuation and offer structure

Manage communication with SEC

Stock Broker

Prepare company for roadshow

Facilitate research

Build the book pre-float

Manage communication with NSE

Marketing and distribution

Pricing and allocation/advice

Reporting Accountant

Review financials –assess company’s readiness for IPO

Tax structuring

Financial due diligence -long term, short term and working capital reports

Solicitors

Legal due diligence

Draft and verification of application document

Corporate restructuring

Provide legal opinions

Other Advisers

Registrars

Receiving Bank/s

Trustees/ Underwriter

Investor Relations


Pre-IPO Guide – Parties & Responsibilities

The NSE Listings Sales & Retention Department is available to provide guidance through the whole process

QUOTATION


1. Consultation & Discussion

2.

Preparation & Reorganization

3.

Phase I Marketing (Analysts)

4.

Packaging of Offer &

Application

5.

Phase II Marketing

(Fund Managers)

6.

NSE Approval &

SEC Registration

7.

Investor Education

8.

Phase III Marketing &

Book building 9.

Listing

Steps to Actualization – Summary

The NSE Listings Sales & Retention Department is available to provide guidance through the whole process

The listing process requires adequate preparation and consultation by the issuer.

Below is a snapshot of the activities within the issuing company that makes up the

process.

Outlook: The Future is Bright


• Markets are cyclical

• Periods of volatility are

natural

• Opportunities exist in the

current marketplace

CLOSING THE GAP

• Fair and transparent marketplace

• Enhanced investor confidence

• Foundation for market depth and

breadth

o Efficient market

o New products

o New company listings

Choose NSE!!!


Our compliance standards ensure that

listed companies conform to global best

practices in the area of corporate

governance, thereby creating value for all

stakeholders

The open-door policy of the

Exchange ensures there is

regular feedback for all

stakeholders.

We offer value added services

to our listed companies

Ask or comment


The Nigerian Stock ExchangeStock Exchange House

2-4 Customs Street

P.O. Box 2457, Marina

Lagos Island

Lagos, Nigeria

[email protected]

www.nigerianstockexchange.com

UNLOCKING INTRINSIC VALUE THROUGH THE

NIGERIAN STOCK EXCHANGE


Thank You

mailto:[email protected]

unlocking intrinsic value · 2014-08-04 · session on listing with the nse - unlocking intrinsic...

Documents