Q. Heirs Holdings last week made a strategic acquisition of a stake in Transcorp. Is there anything unethical and illegal in the transaction?

Of course not, Transcorp shares are publicly listed and can be bought by any one who wants to buy. They were traded at the Stock Market by known Brokers and on behalf of a known investor. I believe Heirs holdings and its promoter Mr.Tony Elumelu is well known to the Market and has a history of creating value. We hope he will be able to create value for the thousands of investors who invested in this very well publicised Company that to date is yet to live to up to it’s potential. If the new investor is able to focus the company to realise this potential, so be it.

Q. Did the Nigerian Stock Exchange err in allowing the transaction?

No. The Nigerian Stock Exchange did not err in any way, the monitoring department would have noticed the huge trade and demand from the Broker the identity and circumstances of such a huge trade, once it is established that nothing untoward happened it will be allowed. The only requirement is for the investor to inform the Securities and Exchange Commission once the threshold of 5% has been reached.

Q. This seems to be good news for the market. In fact some see this as a healthy sign of Market recovery. Do you agree?

Yes. It is good news for the Market because it has moved the Market positively. In fact the transaction has already created value for Transcorp investors who have seen a steep jump in the price of their Transcorp shares. Many similar transactions will follow once the elections are over. The uncertainty weighing down the Market is essentially as a result of the wait and see attitude of investors.  While this singular transaction is not sufficient to say the Market is now in a recovery, there is no doubt that recovery is near. The troubled banks are been acquired and recapitalised by AMCON and the new investors.

Liquidity is gradually returning to the Market. This transaction is a signal that many similar transactions are in the wings. The crash of the Stock Market in the last 3years has created value of a different sort, shares trading at discounts that will encourage investors to jump into the market once the economy starts to recover and the political environment is conducive for Business. The game changer will be how well the elections turn out.

Q. Given the share price of Transcorp do you see the stock as a good buy at this rate?

While I will not want to outrightly say whether the stock is a good buy or not, I will say that for investors who bought the stock at offering for N7.50k, any rise above its recent price will be considered good. For new investors any price below the offer price will also be considered a good entry price. I think the long term prospect and the ability of the new core investor to refocus the company will be important in whether the stock will move up or down. One thing is obvious, the potential is there, and the new investor has a history of creating value.

Q. From an analyst point of view, could this be speculation or a long term investment?

I will be surprised if this is a speculative play. I think the new core investor has already declared that they are looking to refocus the Company and create value. You also have to look at the track record of the investor, he took over a tiny distressed Bank in 1994, essentially using it’s deposits to finance a large part of the required financing by asking depositors who were going to lose their deposits at the time any way to believe in him and invest in the equity of the bank. This was a very innovative financing at the time. This will later translate into acquiring Crystal Bank and cumulate into Standard Trust Bank and merged into the UBA of today.

We can see from this, that this competent investor that knows how to run things. My take is that he wants to build this into a major institution that will create value. The large share holder base and the assets it already has, which unfortunately has not been properly harnessed will be major attraction to anyone.

Q. Why do you think this particular transaction is generating so much concern?

I don’t think it has created any concern among the suffering shareholders who were powerless to do anything with their investment. The only people who are concerned are those who are losing power sitting on other peoples investments. There was a need for a core investor who will bring focus and create value. With over 300,000 shareholders, the small investor will not get value for a long time to come if this did not happen. Can you imagine what will happen if the new Core investor was to focus on the tourism industry sell off those assets it does not need to finance the expansion into this new industry that is waiting to be explored? The tiny country of Gambia gets $1 billion from a tourist industry that occupies the space not more than half of Victoria Island. It is not rocket science that Transcorp has not had any clear vision since its initial conception. It has dabbled in everything from oil and gas where it has no competence to the disaster called Nitel.

Q. As a market dealer what would be your advice to potential investors and shareholders of transcorp?

As I said before, the potential is there and the possibility that it will grow can be imputed from what the track record of the new core investor is. Our assumption is that he is making a long-term investment. For investors already in the Stock they have nothing to lose, the price has just doubled from its recent lows and the general recovery of the market will also help the stock. I hope the new core investor will quickly unveil the agenda and communicate what vision he has for the company to the Market.

Q. Finally what impact has AMCON and other related initiatives, including new regulations made for the Market?

AMCON as a Bad Bank had specific purpose for which it was created. I think it is already on the way to achieving those goals. The triple issues arising from the Stock Market crash is already been addressed. The debt overhang on the economy where everyone owed somebody, the devalued shares that no one wanted and the resulting illiquidity were the 3 major issues that had to be addressed. The illiquidity in the banks for instance, is easing with the acquisition of the impaired and bad debts in the books of the Banks. Taking out these bad loans also means room will be created for new loans. The oversupply of Securities in the Stock Market is the next issue that needs to be addressed. Once these Securities are acquired and put into a long term portfolio of AMCON, the resulting tightening will push up the value of Stocks and this will enable those who owe, to have sufficient recovery to pay their debts eventually. The AMCON Bonds being created, will boost the overall Bond Market. We also hope the resulting Securities lending market that will follow from AMCON activities will all have the potential to positively affect the Financial Markets here. These are early days, the outlook is good if only we can get the politics right.

 

End

 

Source: Partnership Investment Company Limited