Patrick ONOJA investadvocate

Lagos (INVESTADVOCATE)-Operators and investors have advised against overpricing of the shares of Oando Marketing Limited (OML), affirming the last Rights Issue should serve as a guide in the sale of the subsidiary.

On Tuesday March 01 2011, the Council of the Nigerian Stock Exchange (NSE) made public through a Press Release the approval of Oando Petroleum Marketing Plc’s offer for Sale of 171.500 million ordinary Shares of 50 kobo each at a price to be determined through Book Building.

The Nigeria’s Exchange affirmed that a total of 137.200 million Ordinary Shares of 50 kobo each (representing 80 per cent) of the total will be offered to Qualified Institutional and High Networth Investors, while 34.300 million shares (representing 20 per cent) Ordinary Shares of 50 kobo each will be offered to retail investors at the price determined by the Book Building.

The plan is that Oando Marketing Limited, which is  a subsidiary of Oando Group Plc, would be listed as on the Exchange as a separate company.

While the sale process is building up, some operators and investors have said the offer price should not be overpriced and disenfranchise low networth   individuals and existing investors of the Company.

According to the leader of a Shareholders’ Association, who pleaded for anonymity,   the Directors of Oando Plc and Financial Advisers to the offer should ensure that what happened during 2010 Rights Issue of the Parent Company is not repeated.

The shareholder said that since the shares of Oando Plc were sold to investors last year at N70 per share, those who bought the shares have not reaped any Capital Appreciation.

“Instead of gaining, investors who paid N70 per share are now counting their losses. The value   of the shares has depreciated below the purchase price.

Although, there is a general lull in the Market, the performance of Oando shares after the Rights Issue indicates that the offer was overpriced. That is why we are raising the alarm now so that the same should not happen to the marketing arm that is being offered for sale now,” the shareholder said.

An analysis of the share price of Oando Plc after last year’s Rights Issue showed that   immediately after the offer closed, it rose from N93. 99 (the price it was put on technical suspension) to N98.39 on April 8, 2010. It peaked at N128.50 on May 18 before crashing back to N53 on September 2010.

Oando on 25 January, 2010 opened a Rights Issue offer of 301,694,876 Ordinary Shares of 50 kobo each at N70.00 per Share on the basis of one (1) new ordinary share for every three (3) ordinary shares of 50 kobo.

However, the stock closed 2010 at N66 per share, indicating a capital depreciation of about 29 per cent for the year. Among its contemporary in the subsector, only African Petroleum performed negatively just like Oando Plc last year.

Total Nigeria Plc ended 2010 with a capital growth of 57 per cent, Mobil Oil Plc 43 per cent, while Conoil Plc went up by 32 per cent.
Operators contended that the over pricing of Oando during the Rights Issue is not allowing the prospects in the company to reflect in the current price of the equity.

This year so far, Oando shares have suffered a decline of 5.1 per cent, while   those of Mobil have appreciated by 10.2 per cent, African Petroleum 8.2 per cent and Conoil Plc 4.2 per cent.

“Oando Plc has oil blocs, it is involved in gas and energy and other sources of income that should be very attractive yet its price keeps declining. This   should tell you that something is wrong with the pricing and this should be corrected this time around,” a stockbroker said.

As at the time of filling in this report, Wednesday March 09 2011, Oando is second among the top five losers on the Market statistics made available to investadvocate by the NSE.

The Petroleum Marketing Firm opened at N65.95 and closed at N62.66, indicating a drop in price of 4.99 per cent in the review period.

Watch out for our Analyst opinion of the Company regarding the offer for sale as events unfolds.