The market capitalisation of the Nigerian Stock Exchange (NSE) reached a record high, Thursday, following the listing of BUA Cement plc on the Lagos bourse and investors’ increased interest in shares of bellwethers Dangote Cement plc, Lafarge Africa and MTNN plc.
Total market capitalisation hit N15.16 trillion, the highest since around March 2018, as BUA’s debut capitalisation of N1.3 trillion coupled with gains in blue-chips helped the market sustain a record bull run after a disappointing 2019.
The new entity, BUA Cement, will be the second-largest producer of cement in Nigeria by volume with factories in Sokoto State, North-East Nigeria (2 million mtpa) and Okpella Edo State, South South Nigeria (6 million mtpa). A new 3 million mtpa plant currently being constructed is scheduled to be operational in 2020 in Sokoto State.
BUA Cement also has the benefit of market leadership positions in its key regional markets of the North West, South South and South-East Nigeria due to its location and proximity to those markets. It also has a huge export market in Western Africa.
“We’ve always clamoured for companies that can attract investors to the bourse,” said Gbolahan Ologunro, equity analyst at Lagos-based CSL Stockbrokers Ltd. “BUA’s listing, as well as MTN and Airtel’s last year, has helped improve liquidity.”
With 33.9 billion shares listed on NSE at N35 per share, BUA Cement plc has become the third-largest company after Dangote Cement and MTN Nigeria.
The indigenous cement maker’s listing followed the just-concluded merger between Cement Company of Northern Nigeria (CCNN) and Obu Cement.
Exchange ratio is 1:1 representing the number of CCNN ordinary shares to be exchanged for OBU shares.
The date of transaction voting was December 4, 2019 with 99.93 percent of minority shareholders voting in favour of the merger.
MTN Nigeria listed by introduction 20.35 billion shares at N90 per share in May 2019 while Airtel Africa joined NSE in a cross-border secondary listing of 3.76bn ordinary shares at N363 per share in July 2019.
Yusuf Binji, managing director/CEO, BUA Cement plc, said it was a major fulfilment for the group to have its shares listed after a merger of two companies that control significant markets in southern and northern parts of the country.
“BUA Cement is poised to add even more value to the Nigerian economy as a whole through this listing,” Binji said.
“Over the past few years, we have significantly ramped up capacity and currently boast the most efficient and integrated operations in the Nigerian cement industry. This new publicly listed company will continue to deliver exceptional value to all stakeholders in the foreseeable future,” he said.
Oscar Onyema, CEO, Nigerian Stock Exchange, lauded Abdul Samad Rabiu, founder of BUA Group and chairman of BUA Cement, for bringing BUA’s expanded cement business to the NSE, describing it as a “show of confidence in the value the NSE offers”.
“It is exciting for the Exchange to record such a major listing at the beginning of the year,” Onyema said, noting that it was another opportunity for investors to have access to a company with a good track record. He said the company plans to move to the Premium Board of the NSE in a very short period.
While CCNN was the listed company before now, its merger with Obu Cement, both members of the BUA Group, gave birth to BUA Cement plc, an enlarged firm with a total installed capacity of 8 million mtpa.
With the listing, the shareholders should expect better returns because the company will be one of the top best dividend-paying companies, Binji said, adding that its installed capacity would be increased to 11 million mtpa.
In addition to meeting the demand from customers in its core regions in the country, BUA said the enlarged company would be positioned to distribute its products in new geographical markets, creating the potential for additional shareholder value creation.
“We expect the benefits accruing from greater economies of scale to accrue to many stakeholders,” Binji said.
BUA listed by way of offer for sale, which means that existing shareholders have to sell for new investors to be able to buy into the company.
The NSE puts the free float of mainboard listed stocks at 20 percent of the total issued shares, or N40 billion, whichever is higher. BUA Cement is expected to meet this in future.
The management of BUA was honoured with a closing gong ceremony by 2:30 pm in Lagos.
Meanwhile, Dangote Cement plc recently disclosed plans to buy back 10 percent (1.17 billion) of its shares in issue from shareholders. The aim of the share buyback which will be completed in 12 months is to improve the company’s return on equity (RoE).
The share repurchase programme serves as a means for firms to return cash to their shareholders. It also impacts positively the per share profitability of the firm, most notably the Earnings Per Share (EPS) due to the reduction in issued shares.
BUA Cement’s listing comes as the bullish run on the NSE extends to a record ninth trading session, driven by investors’ interest in value counters and positioning ahead of dividend yield amid full-year financials coming soon.
The market is also expected to profit from declining real yield in short-term government bonds. However, the outlook for 2020 relies significantly on macroeconomic outcomes, said Ologunro.
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