Afribank Share Offer Finally Opens at Naira 25 Per Share
Acceler8now.com, 1 November, 2007
If you read our recent report on the imminent Afribank share offer, you probably have been counting off the days, waiting for it to hit the market. Now, you need wait no more, because that offer has finally gone live. The Afribank Offer for Subscription of 4,000,000,000 ordinary shares of 50 kobo each at N25 per share, was declared open Thursday, 1st November, 2007. The N100 billion offer, expected to generate a net sum of just over N94 billion, closes Monday, December 10th, 2007. The bank's market capitalisation is expected to jump to N253.2 billion, at the conclusion of the offer.
The offer is backed by a powerful team of joint issuing houses and underwriters. Union Capital Markets Limited and Afribank Capital Markets Limited are the leading issuing houses. Other joint issuing houses and underwriters are Falcon Securities, FBN Capital Limited, FSDH Securities Limited, IBTC Chartered Bank, Fidelity Finance Company Limited, Lead Capital, Greenwich Trust Limited, Profund Securities Limited, Spring Capital Markets Limited, Tiddo Securities Limited, Northbridge Investment Trust Limited are and Union Bank of Nigeria PLC as underwriter only. They provide 80% underwriting, on a firm basis, to the offer.
A breakdown of the proposed application of the funds shows that a significant 27% (N26 billion) is earmarked for branch network expansion, including the upgrade of existing locations, over the next three years. A healthy 10% (N9.5 billion) of the expected funds is being channeled into ICT infrastructure upgrade, while the additional sum N7.6 billion (8%) is for related capacity expansion in technology-driven banking services: ATM rollout, electronic banking, etc. Roughly N6 billion (6%) is targeted at business expansion through subsidiaries. The major chunk of 49% (N45.3 billion) is being reserved for working capital deployment. The management of Afribank has already expressed its plan to apply that enhanced funding capacity to big ticket transactions, among others. Staff training and human capacity building are also identified as a priority objective.
Investors can only by a minimum of 1000 units of Afribank's shares in this offer, and in multiples of 100 units thereafter. Most banks and stockbrokers are receiving agents and would also readily provide the application forms to intending investors. Forms, as well as the abridged prospectus to the offer, can alternatively be accessed online by downloading from the Afribank website.
The Afribank offer has been launched with fanfare, just like most banks' offers. Evidently, the bank's team is determined to drive the offer to success and this can be seen from the huge publicity it is already receiving. Given the substantially improved operational performance of the bank under its current leadership, that effort is sure to yield the expected results. Afribank has posted very impressive results with a healthy growth trend in the last two financial years. For the financial year ended March 31st, 2007, group gross earnings grew by a sizeable 76% from N15.60 billion to N27.50 billion. Profit Before Exceptional Items and Tax was even a better showing, surging 129% from N3.98 billion in 2006 to N9.13 billion. Fairly strong growth was also recorded in total deposits base: 54.82% growth from N91.89billion in 2006 to N142.27billion in 2007. The bank currently has over 250 branch outlets, spread across Nigeria.
With the proposed huge investment in expansion and capacity building, the bank should, all things being equal, reposition effectively for a more robust market presence in the coming years. That should translate into significant growth in earnings and other key performance indices as well as good returns to investors. The safety index of this investment is considered good and the potential long-term investment value is viewed as high.
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