Following their weak corporate earnings, investors have shunned listed companies on the Nigerian Exchange Limited’s Alternative Securities Market Board.
A total of four companies comprising Capital Oil Plc, Rak Unity Petroleum Company Plc, Juli Plc, and Smart Products Nigeria Plc are listed on the ASeM with severe economic headwinds playing a critical impact on earnings of the companies on the Board declared on the NGX.
The ASeM is a specialised board for emerging businesses: small and mid-sized companies with high growth potential seeking to access the capital market.
In the 10 months of 2022, the stock price of three companies on the ASeM board traded flat while Juli Plc’s stock price depreciated. As Capita Oil’s price traded flat at N0.20 between January and October of 2022, the price of Rak Unity Petroleum Company also remained at N0.30.
For Juli, its stock price depreciated to N0.79 as of October 31, 2022, from N0.91 per share it opened for trading in 2022, while Smart Products Nigeria traded flat at N0.20 per share in 10 months of 2022.
Our correspondent gathered that Capital Oil failed to submit between 2018 and 2020 financial year results and accounts to the investing public, while Rak Unity Petroleum Company has not remitted the second quarter (Q2) and third quarter (Q3) 2021 financial statements.
For not submitting between 2015 and Q2 2021 results and accounts, the Exchange imposed a whopping sum of N91.6 million fine on Juli Plc.
Smart Products Nigeria has also not remitted 2018 to 2021 quarterly financial statements.
Rak Unity Petroleum Company is an oil and gas company that has been operating in Nigeria for 37 years and has one major investor who controls the company’s shareholdings.
According to information obtained from Rak Unity Petroleum’s full-year 2020 financial year result, Toparte Nigeria Limited owns a total of 48,131,159 units of shares which amount to about 85 per cent of the total shareholding. This leaves other investors — including the investing public — with just 8,493,734 units of shares amounting to 15 per cent.
Consequently, the company’s stock lacks liquidity. The absence of free float, therefore, makes it impossible to trade these stocks on the NGX.
The Exchange in 2021 placed Rak Unity Petroleum on suspension sequel to the ongoing winding up of the company as approved by its shareholders.
Capital market analysts have said the challenging economic factors and corporate governance structure have contributed to the worst performance of these companies’ stocks on the bourse.
The CEO of Wyoming Capital and Partners, Mr. Tajudeen Olayinka, said companies in the ASeM were yet to take their rightful place in the capital market.
According to him, “The attraction of public companies to any market for listing, especially small and medium-sized enterprises, is dependent on liquidity and capacity of the market to provide access to companies to raise long-term capital at a lower cost of capital.
“This is presently not the case in Nigeria. Many of the listed companies, which are doing well and very profitable, are currently trading at a deep discount to their book values.
“This is unacceptable, as no board of a company would approve capital raising at those ridiculous prices.
“I think we should allow that segment of the market to grow.”
Speaking on whether the Board should be scrapped, David Adonri of HIGHCAP said the scrapping of the Board might erode the inclusivity of small businesses on the NGX, noting that it remained for the SMEs.
“ASeM Board is for incubation of SMEs. It should not be scrapped,” Adonri said