Analysis: BUA Food Gains N13.20 After Listing By Introduction
BUA Foods sent a bullish signal to investors as the company share price spiked significantly in its first trading week. Market valuation of BUA Foods nearing N1 trillion mark after the company share price rallied last week when it was listed by way of introduction on the Nigerian Exchange.
Reacting to question over what is driving momentum in a newly listed company; analysts pointed at demand for the company’s shares as a key factor plus expectation of robust earnings performance.
Based on trading data, BUA Foods share price increased N13.20 on the absolute term, a 33% jump from its listed price of N40, thus lifting valuation to N957.6 billion from N720 billion in four trading sessions.
Nonetheless, there are downsides which include liquidity and lack of traction on the local bourse in the short to medium term. Analysts also speak to uncertainty around dividend policy and rising competition.
Aside, some investment analysts see value in the company based on solid fundamentals. BUA Sugar Refinery has been a direct competitor with Dangote Sugar Refineries Plc.
But who says what in BUA Foods board meeting?
According to a document obtained by Daily Global Newspaper, total shareholdings is heavily concentrated in a few members of the billionaire Abdulsamadu Rabiu’s family hands. Thus, there appears to be a key-man risk in the company stock.
The ownership structure shows that more than 99% of BUA Foods outstanding shares are owned by father, son and relative, according to the listing memorandum.
CardinalStone shareholding is very minimal – in what looks like compensation for professional services rendered. Last week, BUA Foods drove momentum on the Nigerian Exchange as investors scramble to take positions.
Is ownership dilution likely in the short to medium term?
A breakdown shows that of the 18 billion shares listed, BUA Group Chairman, Abdulsamadu Isyaku Rabiu owns a whopping 89.849%, while his son, owns 9.956%, translating to combine holdings of 99.805%.
Also, Kabiru Isyaku Rabiu, another family member, owns 0.006% of the foods company while BUA group limited owns 0.005% of the outstanding shares.
Document submitted to the Nigerian Exchange hinted that further to the Restructuring, as at the date of this Memorandum, the Company had bank facilities in the ordinary course of business amounting to ₦113. 682 billion.
BUA Foods Plc was formed in November 2021 following a restructuring by way of a scheme under Section 711 of CAMA, the company said in a statement.
The enlarged company subsumed BUA Sugar Refinery Limited, IRS Flour Mills Limited, IRS Pasta Limited, BUA Rice Limited, BUA Oil Mills Limited, and BUA Foods Limited, further to which BUA Sugar Refinery emerged as the surviving entity.
Document from the NGX reads that as part of the restructuring, the name of the enlarged entity was changed to BUA Foods with its operations reorganised into five business divisions: Sugar, Flour, Pasta, Rice and Edible Oils.
According to the listing memorandum, BUA Foods owns the second-largest sugar refinery in West Africa, with a total sugar refining capacity of 1.5 million MT per annum.
According to BUA Foods, its sugar refining capacity has earned the Company a market share of 35% in Q3 2021, representing a 9% increase from its 2020 position of 26% market share.
It said this was achieved by the addition of 750,000 MT per annum capacity to the Company’s sugar refinery in Port Harcourt.
In 2020, the company’s audited report submitted to the Nigerian Exchange as part of the listing requirements shows that profit after tax settled at N16.264 billion.
In the first half of 2021, the company also hinted at its profit after tax printed at N9.302 billion. The company’s total assets ended the financial year 2021 at N327.612 billion. #BUA Foods Gains N13.20 After Listing By Introduction
