Caverton: Attractive prospects despite hasty move to sell

The recent hasty move to dump shares of Caverton Offshore Support Group plc by most investors who had taken part in the company’s private placement prior to its listing late last month on the Nigerian Stock Exchange (NSE) is now a source of concern to INVESTOR.

Though, most of such investors may have waited so long for an exit window which the listing offered, but our enquiry from most analysts within the stock market shows that there is still attractive prospect for investors who hold the shares.

On the company’s side, the analysts were also quick to note the need for the management and board to work hard in keeping to their assuring to existing shareholders of positive future performance, particularly their earnings.

Barely two weeks ago (May 20, 2014) Caverton Offshore Support Group plc listed 3.35 billion of its shares by introduction at N9.50 kobo, a development market community welcomed.

The listing of the company’s share at the NSE was seen as a major plus for the Federal Government policy of encouraging local capacity and ownership in the oil and gas sector, and it allows the company access to a pool of liquidity as well as offer investors the opportunity to diversify their investment to include this new sector in the market.

In what appears as a hasty move to sell the shares of the company, particularly by investors who had held its shares for so long since the private placement, the stock recently suffered from poor market sentiment which out of sheer panic by other shareholders contributed to a drag in its price that closed last week at N5.41 kobo.

Caverton is a leading provider of marine, aviation and logistics services to local and international oil and gas companies in Nigeria.

“Given the fact that Caverton is a company that is servicing the oil companies, the prospects are attractive for investors,” said Sewa Wusu, market analyst at Sterling Capital.

Wusu stated: “There is attractive prospect for the company in the long term. The company has just got a contract extension with Total Exploration and Production Nigeria Limited.”

He went further to noted that “the only current risk is that investors who bought its private placement and had waited for long time before now are using the opportunity of the company’s listing by introduction to exit and free up their holdings. The company’s growth earnings will give investors the needed reassurance. Then the future market sentiment will begin to favour the company.”

Aderemi Makanjuola, chairman, Caverton Offshore Support Group plc, had on the floor of the Exchange said: “Being listed comes with a great responsibility which we promise to keep.”

Femi Ademola, head research and intelligence, BGL plc, who noted that Caverton recent listing gave a good breath to the market, said “he expects that they would get contract renewals and new contracts too.”

On the heels of its recent listing on the NSE, Caverton has won a two-year contract extension with Total Exploration and Production Nigeria Limited and is expecting a brand new AW139 helicopter, which will be devoted to its long-term contract with Shell Petroleum Development Company.

Olabode Makanjuola, CEO, Caverton Offshore Support Group plc, said: “We are pleased to continue rendering offshore and onshore oil field logistics to Total. This contract extension demonstrates Caverton’s service reliability and our commitment to provide safe and efficient services to our clientele. We are confident that this will positively impact our revenue over the next few years.”

Caverton Offshore Support Group (Caverton) is the holding company of Caverton Helicopters and Caverton Marine Limited, two Nigerian companies that have within a short period grown dramatically to become industry leaders in the oil and gas aviation and marine sub-sectors, two highly technical and capital intensive areas previously dominated by foreign firms.

The company has an impressive oil and gas client base which includes Shell, Total, ExxonMobil, Addax Petroleum and Subsea 7, among others.

The Caverton Group was formed to acquire Caverton Helicopters Limited and Caverton Marine Limited, both of which were already operating in the Nigerian offshore oil and gas logistics industry.

Since inception, the Caverton Group has positioned itself as one of the leading indigenous oilfield services companies in Nigeria, and following the passage of the Nigerian government’s “Local Content Policy,” which is aimed at substantially increasing indigenous participation in the local and gas industry, is very well positioned to leverage the opportunities this represents.

In the 2012 financial year, the company’s turnover rose 47.6 percent to N16.132 billion, from N10.928 billion in 2011. Profit after tax and exceptional items jumped to N1.035 billion from N60.373 million in the previous year, an increase of 1,625 percent.

Caverton’s turnover rose from N7 billion in 2010, to about N17 billion in 2012, an increase of 142 percent within two years. Another indicator of the dramatic growth is that its staff strength rose from 160 personnel in 2009, to 650 in 2013, an increase of 306 percent.

Iheanyi Nwachukwu