First Aluminum Nigeria Plc (FAN)
The main purpose of listing securities on any Exchange is to raise capital and generate wealth for companies and investors respectively.
Wealth is created when listed securities are recurrently traded by the investing public.
However, reverse has been the case for few companies whose stocks are listed on the Lagos bourse. Paltry or zero return is generated for shareholders of companies in this category basically because their stocks are not actively traded on the exchange.
When securities are not traded consistently overtime, which also refer to trading inactivity; it results in share price depreciation, according to market experts. It then follows that shareholders of companies with low share prices need to be worried for their investment.
Wealth is generated for companies when stock price advance. The appreciation in share price implies that there is high demand relative to supply because buyers compete against one other to have that stock added to their portfolio. Conversely, stock price lose value when demand is low relative to supply.
This is to let shareholders with interests in these entities know that companies whose securities experience trading inactivity cannot deliver mouth-watering returns and bumper dividends.
Checks by BusinessDay pointed out some companies with abysmal share prices trading on the Nigerian Exchange for long, and are not generating wealth for shareholders.
This Lagos-based ICT firm is one of the foremost listed companies in the technology industry. Its business model anchors on identity management and provision of electronic payment solutions.
Chams has been trading flat at 20 kobo since December 2018, the lowest since 2014. The company is struggling to grow revenue and profit over the years. However, a look into its financials for first nine months of 2018 showed that the company posted N53 million compared with losses of N180 million posted a year earlier.
The company has not paid dividends to shareholders in the previous three financial years.
Tripple Gee & Company Plc
Incorporated in 1980, the company specializes in the production of computer stationery, business forms, and office equipment. Share price of Tripple Gee remained dormant at 77 kobo for the past six months, the lowest in five years. This is reflects that investors’ lack of interest in the stock.
Going further, the stock is yet to deliver exciting dividends to shareholders as its highest per share dividend in five years is 4 kobo.
The company has struggled to achieve profitability in recent years. However, it grew revenue and profit margin by 10.41 percent to N546 million in the first nine months of 2018, while profit margin notched higher to 2.93 percent from 1.07 percent year-on-year. It has outstanding shares of 496 million and market capitalization settled at N381 million.
This company is one of first listed companies on the Nigerian Exchange. Its stock price traded flat at 50 kobo between April 2014 and May 2017, which is about three years.
The company’s shareholders have cause to worry on their investment as its share price is flat at 29 kobo, the lowest in five years. Since the start of the year, FAN lost 19.44 percent.
The company did not deliver dividends to shareholders in the previous five financial years. The management of FAN disclosed intention to delist from the local bourse so they could raise funds to boost operations.
According to its financial statements for the first nine months of 2018 revealed that the aluminum manufacturer reported weaker profitability evidenced by lower profit margin and earnings per share.
Its profit margin fell to 0.99 percent in the said period from 2.19 percent in the previous comparable period. This means that for every N100 the firm makes as revenue, it earned 99 kobo as profit in the first nine months of 2018. It has 2.11 billion shares outstanding and market capitalization of N612 million.
Rakunity Petroleum Plc
The company specializes in the marketing of petroleum products and has a share price of 40 kobo which has remained dormant for the past nine months, since July 13, 2018. The stock traded flat at 50 kobo for more than three years between March 2014 and July 2017.
The oil marketing company has not been inconsistent in paying dividends to shareholders in previous five financial years. The company generated no returns to shareholders with regards to dividends in 2014 and 2016. However, its highest dividend per share was 30 kobo in 2015.
A snapshot into its financial reports for nine months ended September 30, 2018 revealed that the firm’s revenue declined by 8 percent to N7.06 billion in the first nine months of 2018.
Moreover, the company had a significant decline in its operating profits from N83.6 million to N3.6 million at the end of September 2018. This drastically pared after-tax profit to N2.7 million in the said period compared with N57.7 million a year earlier, thereby making it one of the laggards among the listed oil firms on the domestic bourse.
Japaul Oil & Maritime Services Plc
Shareholders of this maritime offshore construction firm need to be concerned for their investment as share price plunged to 5-year low at 20 kobo at the close of trading Thursday March 7. This reflects investors’ disinterest in the stock as it lost 4.76 percent since the start of the year.
The company is presently going through hard times evidenced by its inability to pay dividends in the previous four financial years.
The maritime firm reported decline in revenue realized from degrading, offshore, quarrying and international services, and this compounded loss after taxation by 4.8 percent to N5.54 billion in the first nine months of 2018.
This company is the only listed fast food company on the Nigerian Exchange. Tantalizers have been trading flat at 20 kobo since July 2018, the lowest in five years. The company’s performance has been underwhelming considering the fact that it recorded losses between 2013 and 2016. The company posted N213 million losses in the first nine months of 2018, compared with a profit of N760 million realized in the previous corresponding period. Moreso, the company paid zero dividends to shareholders in the past five financial years.
This serves as a wakeup call for shareholders with stake in the entities listed above to know that these companies are no longer valuable to investors. Holding on to these stocks for appreciation in value might never come.
Worse still, there is high tendency for these securities to depreciate given their inactiveness on the Exchange. A “Sell” option means investors will be selling at a price significantly below the purchase value. Whichever way, it is expedient for affected investors to reach out to their brokers before making decision.