VFD Group becomes most influential shareholder of Nigerian Exchange
Following the demutualisation of the Nigerian Stock Exchange (now “Nigerian Exchange Group Plc” or “NGX”), the shares of Nigeria’s premier Bourse are now available to the public. Notably, NGX Group lists shares on its own operating subsidiary, the Nigerian Exchange Limited, where the 1.96 billion units of ordinary shares of the Group are actively traded.
While dealing members, who hitherto were the owners of the Exchange prior to demutualisation, continue to sell their allotted shares to either shore up capital positions or meet other financial obligations, investors like VFD Group, which is renowned for its “acquire and reform” investment philosophy, continue to amass the shares of the historic Bourse.
Consequently, the VFD Group has emerged as the single-largest shareholder on record, owning a significant equity interest of 5.17 percent in the Nigerian Exchange Group Plc.
According to sources, Cardinal Stone Partners and Alpha Morgan may be the second and third single-largest shareholders, even so both are said to have less than 5.0 percent each.
On February 23, 2022, the NGX announced to the market that the VFD Group had informed the management of the Bourse that its total shareholding on the nation’s oldest Exchange had risen to 5.17 percent as of 16 February 2022, a development that reinforces speculations that VFD Group may have also acquired a significant stake in NASD-OTC Exchange, the alternative over-the-counter securities market for trading unlisted shares of public limited companies.
Interestingly, the news of VFD’s interest in these financial market infrastructures comes as DataPro, the leading technologydriven credit rating agency, in its latest report, assigned a Long Term Issuer Default Rating of “A”, with a stable outlook, on VFD Group. “The “A” rating indicates low risk, and shows very good financial strength, operating performance, and business profile when compared to the standard established by DataPro. This Company, in our opinion, has a strong ability to meet its ongoing obligations,” DataPro rating agency said in an emailed statement.
In response to Daily Trust’s enquiry, Mr. Nonso Okpala, the Group Chief Executive Officer of VFD, noted, “We are diligent in our execution of an inorganic growth strategy, anchored on our “acquire and reform” philosophy. We need to modernize the way business is conducted in order to make it relevant to the needs of the younger generation and our investments are predicated on our interests in making impact across key growth poles of the Nigerian economy.”
“The sure way of doing it is to acquire and reform, reform our economy for the good of all. That is our purpose in VFD Group,” Mr Okpala added, as he declined to provide further details.
NGX Plc has published its 2021 financial year results, reporting 13.0 percent year-on-year growth in total income to N6.8bn, compared to N6bn in the 2020 financial year. Operating profit was barely N282m, given elevated costto-income ratio of 95.9 percent.
Notably, the NGX Group incurred total expenses of N6.52bn in 2021, translating to a 6.7 percent increase in cost. Nonetheless, with
N2.12bn share of profit from associate companies, mainly Central Securities Clearing System Plc (CSCS), the Group achieved N2.25bn profit after tax, implying 22.2 percent growth, compared to N1.84bn recorded in the 2020 financial year.
Mr. Yadinma Onwu, the Executive Vice-Chairman of Funds Matrix and Assets Management Limited, said, “NGX is a strategic national financial market infrastructure, so it is instructive to take advantage of the opportunity of the demutualisation to own shares in the entity. For us, we maintain our legacy shareholding of 6.01 milllion units or 0.31 percent of the NGX Group and even bought more, as we remain constructive on the prospect of the Exchange Group and broader capital market.”
“At the current price of N20.80 or N40.85bn market capitalisation, NGX is priced at 1.2x price-tobook value ratio, given its total equity base of N34.14bn. That’s an attractive valuation, considering that NGX owns over 30.0 percent and 6.0 percent of CSCS Plc and FMDQ Exchange Group, respectively, in addition to its stake in NASD-OTC Exchange and two nascent Fintechs. So, while it may not be operationally efficient and profitable at this time, it’s a great stock to hold at the current price and the prospect is compelling, especially as new management and Board should inject some efficiency initiatives into the business to drive operating profitability and overall returns to shareholders over the long run,” Mr. Yadinma added.