CapitalSage Technology Limited has leveraged the Commercial Paper (CP) market to raise N7.50billion through issuance of series 7 and 8 commercial papers under its N15billion Commercial Paper programme.
The Commercial Papers offer which opened on January 30, 2024 closed on February 8, 2024.
Capitalsage is an integrated digital financial services group that provides people-driven empowerment and inclusive solutions for individuals and businesses for sustainable value and wealth creation in Africa.
The series 7 of the Naira-denominated Commercial Paper (CP) was issued for a tenor of 182 days and discounted rate of 17.7763percent, while the series 8 CP is tenored for 270 days with discounted rate of 18.1831percent.
The firm indicated that the proceeds will finance short-term working capital requirements for its digital banking business. Agusto &Co rated Capitalsage Bbb+ (short-term) while GCR rated the company Bbb (Short-term).
The company has a unique vision to be the leading fintech partner in Africa, facilitating financial inclusion and entrepreneurial development via innovative technology.
Capitalsage derives circa 90percent of its revenue from transaction fees from its network of more than 50,000 POS agents across Nigeria. It provides payment services to Nigerians in areas under-served by commercial banking infrastructure under the Kolomoni brand.
As part of its strategy to carve a niche in the digital payments and collections space, Capitalsage acquired a microfinance bank, Cintrust Microfinance Bank, in 2021 and Ercas Integrated Payment Solutions, a CBN-licensed Payment Solution Service Provider (PSSP) that specialises in business process automation and e-collection solutions, in 2022. The company also launched its Gambian subsidiary, Kolomoni Microfinance Company Gambia, in May 2023.
“We conclude that the company’s liquidity position is relatively stable. We opine that the company’s use of leverage is moderate,” said Meristem Wealth Management Limited in the Commercial Paper recommendation note.
Capitalsage recorded steady revenue growth over the last five years at a compound annual growth rate (CAGR) of 213.66percent, settling at N30.36billion in full year 2023.
“This growth was driven majorly by expansion in its POS transaction income (+4.38percent YoY). Also, the firm has displayed prudence in managing its operating cost as its cost-to-sales ratio moderated steadily to 47.76percent in 2023FY (from 80percent in 2019FY). Furthermore, the company’s profit after tax (PAT) advanced by 52.17percent to N6.65billion in 2023FY (versus N4.37billion in 2022FY). Thus, its net margin improved to 21.90percent from 15.86percent in 2022FY. This indicates that the company is in a favourable profitability position,” Meristem noted.
Meristem Wealth Management further noted that in 2023FY, Capitalsage had a total balance sheet size of N26.52billion, of which circa 29percent was held in short-term assets. “The company’s working capital has remained positive for the past four years, with its current and quick ratios improving to 5.09x and 1.33x from 3.03x and 0.41x in 2022FY, respectively. However, the firm’s cash ratio fell to 0.09x from 0.29x in 2022FY.
“Meanwhile, the company has maintained a positive net operating cash flow for the past five years – settling at N8.04billion in 2023FY. This is, however, lower than N15.35billion recorded in 2022FY. This decline can be attributed to lower receivables and higher prepayments and payables. Thus, the firm’s earnings quality fell to 1.21x from 3.53x in 2022FY.
“The firm’s debt-to-equity and financial leverage ratios reduced to 0.28x and 1.44x in 2023FY (vs 1.11x and 2.42x in 2022FY). This was due to a significant decline in its private note and term loan facilities (N550million and N350million versus N6.80billion and N700million in 202FY, respectively) as the company paid down on its debt during the year.
“Thus, the company’s interest coverage ratio reduced to 5.61x from 6.73x in 2022FY. However, the company can cover interest payments with its operating profit. In the near term, we expect an uptick in the company’s leverage metrics based on the expected issuance of up to N30billion in commercial paper to fund the acquisition of additional POS terminals and working capital,” Meristem Wealth Management further said in the CP recommendation note.