Equity Note. 19 August 2015 CENTRAL SECURITIES CLEARING SYSTEM (CSCS) PLC BUY

Transcription

1 Equity Note 19 August 2015 CENTRAL SECURITIES CLEARING SYSTEM (CSCS) PLC BUY

2 19 August 2015 SUMMARY AND INVESTMENT CASE RECOMMENDATION BUY FAIR VALUE (N) Bloomberg code NASD Code SDCSCSPLC:NL SDCSCSPLC Price (ordinary, N) 5.80 Potential upside (%) ADR ratio (x) SHARE DATA N/A No. of ordinary shares (m) 5,000 Av. Daily turnover (Nm) 1.39 Free float (%) Market capitalisation (Nm) 29,000 MAJOR SHAREHOLDERS Nigerian Stock Exchange 27.20% Access Bank Plc 7.50% EcoBank Plc 7.50% Sterling Bank Plc 5.58% United Bank for Africa Plc 5.37% FINANCIALS (N bn) E 2016E Net Operating Income Operating expenses Interest Income Pre-tax profit Net Earnings EPS (N) Equity Assets VALUATION E 2017E P/E (x) Earnings growth (%) EPS growth (%) P/B (x) RoA (%) RoE (%) SHARE PRICE MOVEMENT Absolute Relative 1M (%) M (%) M (%) Source: Bloomberg, Company s Report 2014, BGL estimates A FINANCIAL MARKET INFRASTRUCTURE COMPANY The Central Securities Clearing System (CSCS) Plc was incorporated on July 29, 1992 as a Financial Market Infrastructure (FMI) for the Nigerian Capital Market. It was commissioned in April, 1997 and commenced operations in April 14, On the 16th of May 2012, CSCS became a Public Liability Company (PLC) by a special resolution. Thereafter, the Securities and Exchange Commission (SEC) issued the company a license as an Agent for Central Depository, Clearing and Settlement of transactions in the Nigerian Capital Market. BUSINESS OF DATA AND SECURITY AND MANAGEMENT The business of CSCS revolves around Data Security and Management. The company are poised to drive our deliverables both for current and future products and services to the various markets considering our core values while diversifying into new areas that would replicate our successes in the Nigeria capital market in other sectors of the economy. CONTINUOUS IMPROVEMENT IN EARNINGS The CSCS continues with its impressive growth in earnings since 2011 and reflected in the performance for the year ended December 2014 which saw net operating income grow by 23.69% to N5.82 billion from N4.70 billion in the corresponding period of The increase in operating income was evenly contributed by the two income sources. Fees income grew by 23.56% to N5.20 billion in December 2014 from N4.21 billion in December 2013 while Other income increased by 24.47% to N620.28m from N498.32m over the period. BUY RECOMMENDATION Using the Discounted Cashflow (DCF) valuation method with a calculated weighted average cost of capital (WACC) of 20.66% (see table 2 & 3 below) and a long term nominal growth rate of 6.26%, we arrive at an intrinsic value of N11.74 for each share of CSCS Plc; implying a potential upside of % over the next 12 months. We therefore place a BUY recommendation on the Central Securities Clearing System Plc. BGL PLC +234 (1) info@bglgroupng.com This publication has been produced by BGL Research to provide information on all issues which form the subject matter of the document. BGL Research hereby certifies that all the views expressed in this document accurately reflect its views based on information from various sources that it believes are reliable; however, no representation is made that it is accurate or complete. The views expressed in the document are solely for users who are expected to make their own investment decision without undue reliance on any information or opinions contained herein. The document does not constitute any offer or solicitation to any person to enter into any transaction. >> 2

3 CENTRAL SECURITIES CLEARING SYSTEM PLC The Central Securities Clearing System (CSCS) Plc was incorporated on July 29, 1992 as a Financial Market Infrastructure (FMI) for the Nigerian Capital Market. It was commissioned in April, 1997 and commenced operations in April 14, On the 16th of May 2012, CSCS became a Public Liability Company (PLC) by a special resolution. The Securities and Exchange Commission (SEC) licensed as an Agent for Central Depository, Clearing and Settlement of transactions in the Nigerian Capital Market. It operates a computerized depository, clearing, settlement and delivery system for transactions in securities in the Nigerian Capital Market. CSCS facilitates the delivery (transfer of securities from seller to buyer) and settlement (payment of bought shares) of securities transacted on the approved Nigerian Exchanges. It enables securities to be processed in an electronic book-entry form thereby substantially reducing the period it takes a transaction to commence and end. CSCS has made visible strides in the Nigerian Capital Market and will continue to respond to the needs of the securities and commodities market to further enhance transparency and speedy settlement of transactions. CSCS also acts as sub-registry for Federal Government of Nigeria (FGN) Bonds, State and Corporate Debt instruments. It is equally a dependable facilitator of the clearing and settlement of Bonds and money market instruments traded Over-The-Counter (OTC) markets (on NASD Plc. and FMDQ) and on the floor of NSE. In 2007 and 2009, Central Bank of Nigeria (CBN) appointed CSCS as the clearing and settlement agent for OTC transactions in Nigerian Treasury Bills (NTBs) and Commercial Papers (CPs) and Bankers Acceptances (BAs) respectively. The business of CSCS revolves around Data Security and Management. The company are poised to drive our deliverables both for current and future products and services to the various markets considering our core values while diversifying into new areas that would replicate our successes in the Nigeria capital market in other sectors of the economy. Although the CSCS operates in a highly regulated environment, which could pose challenges to high innovation, it has been recognized that flexibility/agility and a certain level of innovativeness are essential in some areas of the business for the Company to sustainably grow its core business as well as venture into other opportunities when identified. To this end, the company has adopted the Water/Wind strategy posture for which it will build capacity to rapidly obtain required resources to take on the fire posture. This is a flexible posture with incremental innovation whose features include quick response to changes in environment, and to be a long-term player. This posture wins through speed, agility and flexibility in recognizing and capturing opportunities in existing markets. Despite the fact that in reality, the future is often uncertain and the state of the market forces is difficult, if not impossible, to predict, the company will continue to align to its vision and mission in order to deliver on her promises and goals for the good and benefit of the shareholders. The company s shares are traded on the equities OTC exchange, NASD Plc. >> 3

4 BUSINESS STRUCTURE CSCS has made visible strides in the Nigerian Capital Market and will continue to respond to the needs of the securities and commodities market to further enhance transparency and speedy settlement of transactions. CSCS facilitates the delivery (transfer of securities from seller to buyer) and settlement (payment of bought shares) of securities transacted on the approved Nigerian Exchanges. It enables securities to be processed in an electronic book-entry form thereby substantially reducing the period it takes a transaction to commence and end. To achieve the objectives, the company structured its operating activities as follows: DEPOSITS OF SHARE CERTIFICATES: The procedure for depositing shares certificates with the CSCS has been modified to eliminate incidence of forged certificates and verification of registrar's signatures. Stockbrokers now submit documents to the registrars for verification after which the registrars send the documents directly to CSCS. This procedure has wiped out the black market. TRADING ACCOUNTS: The CSCS operation requires stock broking firms to fund their Trading Accounts in anyone of the designated banks before going to the trading floor. This also ensures that a seller of shares is assured that money for payment has been kept in the Trading Account. This is a departure from the pre-cscs era where some brokers sold stocks they could not deliver or bought stocks without the funds to pay for them. CLEARING OF TRADES: The CSCS is the agent of The Nigerian Stock Exchange for clearing and settlement of Trades. After transaction on the floor, the Back Office of The Exchange sends the data information of trades done to CSCS before 4 p.m. This is processed ready for settlement by the settlement banks. SETTLEMENT OF TRADES: The CSCS sends data of Cleared Trades in diskettes to the settlement banks on or before 5 p.m. every working day. The settlement banks are required to process the data information from CSCS by debiting and crediting the accounts of the stockbrokers and effect settlement through the Nigerian Inter-Bank Settlement System (NIBSS). FIGURE 1: CSCS FLOW OF ACTIVITIES Source: CSCS >> 4

5 ACHIEVEMENTS ISSUANCE OF LEGAL ENTITY IDENTIFIER: In 2014, the company was appointed by Global Regulatory Oversight committee as a pre local operating unit through the Nigerian Securities and Exchange Commission for the issuance of Legal Entity identifier. The global initiative aims to allow for the identification of financial counterparties to securities and derivatives transactions. CSCS has commenced the sensitization of stakeholders and developed a portal for the registration of Legal entities. The CSCS has introduced biometrics enrolment and verification system to mitigate incidence of identity theft. The company offers Legal Entity Identifiers (LEI), a 20-digit, alpha-numeric code, which is a global reference data system that uniquely identifies every legal entity or structure, in any jurisdiction, that is party to a financial transaction. Currently, only Nigeria and South Africa offers LEI within Africa. The LEI allows for consistent identification of parties to financial transactions, facilitating a consistent and integrated view of exposures. The CSCS also developed biometric enrolment and verification system (CEVS), which was presented to stockbroking firms and registrars on October 23, 2014 and November 6, 2014 respectively after the which the pilot test was concluded. The system had been presented to the Securities and Exchange Commission (SEC). The CEVS has gone live and optimism has been building up that the initiative would boost investors confidence in the area of security of investor s identity. PARTNERSHIP WITH CDSC, ALTREE FINANCIAL AND AFDB: The CSCS has entered into a partnership with the Central Depository & Settlement Corporation Limited (CDSC) Kenya, Altree Financial Group and the African Development Bank (AfDB) to explore business opportunities across African capital markets. Africlear Global is the result of this partnership with the aim of improving African securities market infrastructure by providing central securities depositories with the ability to offer value added services which encourage the use of best practices whilst reducing the underlying costs associated with system acquisition and maintenance. CLEARING AGENT FOR FMDQ TRANSACTIONS: The CSCS has been engaged to act as clearing agent for secondary market transactions in commercial papers (CPs) or FMDQ OTC. This will bring liquidity to the CP market and income to CSCS. Collaboration with CBN has successfully implemented the movement of cash settlement to morning session to achieve delivery versus payment. By this initiative, the asset commitment period was shortened, thereby reducing risk, increasing efficiency in the settlement process in the market and impact positively on CSCS rating from global benchmarks and apply to central securities depositors. ADMITTED TO TRADE ON THE NASD OTC PLATFORM: The company s securities were admitted to the equities over the market exchange, National Association of Securities Dealers (NASD) Plc in 2014 having been introduced by Greenwich Securities Limited, a registers broker on the NASD. >> 5

6 CONTINUOUS IMPROVEMENT IN EARNINGS The CSCS continues with its impressive growth in earnings since 2011 and reflected in the performance for the year ended December 2014 which saw net operating income grow by 23.69% to N5.82 billion from N4.70 billion in the corresponding period of The increase in operating income was evenly contributed by the two income sources. Fees income grew by 23.56% to N5.20 billion in December 2014 from N4.21 billion in December 2013 while Other income increased by 24.47% to N620.28m from N498.32m over the period. Although operating expenses; comprising of staff cost of N1.52 billion (2013: N1.07 billion), Administrative expenses of N828.63m (2013: N789.54m), Depreciation and amortization of N107.85m (2013: N142.31m) and other expenses of N22.30m (2013: N118.87m) grew by 17% to N2.48 billion in December 2014 from N2.12 billion in December 2013, it was not enough to have any significant effect on the company s earnings before interest and taxes (EBIT) which grew by 29.10% to N3.34 billion from N2.58 billion over the period. INCREASE IN INTEREST INCOME BOOSTS GROWTH IN PRE-TAX PROFIT For the year ended December 2014, interest income from investing activities of the company grew by 8.19% to N2.42 billion from N2.24 billion in the corresponding period of The increase in interest income resulted in an increase of 19.5% to N5.76 billion in 2014 from N4.82 billion in Provision for taxation increased by only 4.7% to N1.14 billion in December 2014 from N1.09 billion in 2013 helping the company s net income to growth by 23.53% to N4.62 billion from N3.74 billion over the period.. FIG.2: COMPANY PROFITABILITY (NM) 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 Gross Earnings Net Operating income EBIT 2,000, E 2016E Source: Company s Annual Report 2014; BGL Research Estimates >> 6

7 STRONG IMPROVEMENT IN ASSETS QUALITY The company s total non-current assets which comprises of intangible assets, property, plant and equipment and investments increased by 22% to N13.8 billion in December 2014 from N11.3 billion in the corresponding period of 2013, while total current assets increased by 14% to N9.2 billion from N8.06 billion; resulting in an increase of 19% in total assets to N23.1 billion from N19.43 billion over the period. In-depth financial analysis shows that other assets of the company include Western Textile Mills Plc and withholding tax recoverable, both increasing impressively over the period. The company was entrusted with the liquidation proceeds of the textile company after a meeting with the company. On the flip side, total non-current liabilities grew by 42.44% to N46.78m in December 2014 from N32.84m in Current tax liabilities (Current tax, deferred tax) also increased but by only 5.2% to N2.45 billion from N2.33 billion; resulting in a growth of about 5% in total liabilities to N2.5 billion from N2.4 billion over the period. Finally, equity which is made up of share capital and retained earnings also increased, due principally to significant increase in retained earnings from N12.05 billion to N15.5 billion; thus bringing about an increase of 21% in total equity. FIG.3: BALANCE SHEET (NM) 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 Total Assets Total Liabilities Equity 5,000, E 2016E Source: Company s Annual Report 2014, BGL Research Estimates >> 7

8 BUY RECOMMENDATION Relying on the historical performance and the liquidity position of the company, the CSCS is expected to continue to very well into the foreseeable future. This is reflected in the strong growth in fees income and investment income over the years, despite the lull in investing activities in the country since the financial crisis of In addition, the monopolistic position of the company domestically in providing clearing house services for all the registered trading platform in Nigeria guarantees the company of continuous patronage and growth in fee income over the medium term. The strong business development strategy of the company which is reflected in the appointment as reflected in the company s appointment as clearing agent for domestic over the counter trades (OTC) in both debts (FMDQ) and equities (NASD) and the appointment by Global Regulatory Oversight committee as a pre local operating unit through the Nigerian Securities and Exchange Commission for the issuance of Legal Entity identifier show the company's impressive capacity in expanding capacity and business over time. There we have used the Discounted Cashflow (DCF) valuation method to determine the appropriate valuation for each share of the company. With a calculated weighted average cost of capital (WACC) of 20.66% (see table 1 & 2 below) and a long term nominal growth rate of 6.26%, we arrive at an intrinsic value of N11.74 for each share of CSCS Plc; implying a potential upside of % over the next 12 months. We therefore place a BUY recommendation on the Central Securities Clearing System Plc. TABLE 1: CALCULATION OF WEIGHTED AVERAGE COST OF CAPITAL Weighted Average Cost of Capital Ke = Rf + beta(rm - Rf) 20.66% Rf = Risk free rate 13.94% Rm = Return on market 20.66% Rm - Rf = market risk premium 6.72% Beta = risk index or beta coefficient 1.00 Kd 0.00% Effective Tax Rate 19.76% After Tax Kd 0.00% WACC 20.66% Terminal (Sustainable) Growth Rate (g) 6.26% Source: Financial Times, Company s Annual Report 2014, BGL Research >> 8

9 TABLE 2: VALUATION USING DISCOUNTED CASHFLOW METHOD Free Cash Flow (Nm) E 2016E 2017E 2018E 2019E Terminal Net Operating Income 5,760 7,444 9,181 10,725 12,446 14,108 Depreciation ,168 1,927 2,878 Tax (1,138) (1,471) (1,814) (2,119) (2,459) (2,787) Capital Expenditure (56) (46) (999) (1,370) (1,728) (2,166) Changes in working Capital (1,027) (382) (15) (21) Free Cashflow to the Firm 3,647 6,081 7,208 8,022 10,171 12,012 12,764 Discounted Free Cash Flow 3,647 5,040 4,951 4,567 4,799 4,697 88,645 Enterprise Value 58,713 Market Value for Debt 0 Value of Equity 58,713 Outstanding Shares 5,000 Value per share (N) Source: Company s Annual Report 2015, BGL Research Estimates As a confirmation of the inherent value in the company, its share price has gained over 60% over the last 12 months; one of the highest returns for any admitted securities on the NASD. From the listing price of N3.60 which was kept unchanged until the beginning of 2015, the company s share price has rallied to a high of N6.26 in July 2015 before settling down to N5.80 on August 19, With the company s historical financial performance and expectation of better future performance, the price could rally by more than 100% in the next 12 months. FIGURE 4: 12 MONTHS PRICE MOVEMENT % % % % % CSCS 90.00% 70.00% Source: NASD >> 9

10 FINANCIAL HISTORY & FORECAST Ratio Analysis Profitability E 2017E Margin Earnings Growth 18.69% 20.49% 18.64% 14.26% Pre-tax Profit Margin 69.89% 74.96% 77.93% 79.67% Net income margin 56.08% 60.15% 62.53% 63.93% EPS Growth 23.64% 29.23% 23.34% 16.81% Retention Ratio 76.20% 72.38% 66.40% 56.86% Sustainable Growth Rate 17.11% 17.36% 16.42% 14.11% Returns Return on Assets 20.03% 21.55% 22.18% 22.38% Return on Equity 22.46% 23.98% 24.72% 24.81% Per Share Data Earnings Per Share (N) Dividend Per Share (N) Book value per Share (N) PE Ratio P/Bv Efficiency E 2017E Debtors Turnover Average Collection days Total Assets Turnover Liquidity E 2017E Current Ratio Quick Ratio Net Working Capital (Nm) 6,749 6,724 6,451 6,833 Leverage E 2017E Debt/Equity Ratio Debt/Total Assets DuPont Analysis E 2017E Total Asset Turnover Net Margin 56.08% 60.15% 62.53% 63.93% Equity Multiplier ROE 22.46% 23.98% 24.72% 24.81% Profit & Loss (Nm) Profit & Loss E 2016E 2017E Net Operating Income 5, , , , Depreciation expenses , Staff costs -1, , , , Administration expenses , , Other expenses Total operating expenses -2, , , , EBIT 3, , , , Interest income 2, , , , Profit before tax 5, , , , Tax expense Profit after tax 4, , , , Dividend payable -1, , Retained Earnings 3, , , , Balance Sheet (Nm) Assets E 2017E Intangible assets PP&E Financial assets 13, , , , Total non current assets 13, , , , Trade and other receivables Financial assets 6, , , , Cash and cash equivalents 2, , , , Sundry stock Other assets Total current assets 9, , , , Total assets 23, , , , Liabilities E 2017E Deferred tax liabilities Total non-current liabilities Payables, provisions and accuruals 1, , , , Current tax liabilities 1, , , , Other liabilities Total current liabilities 2, , , , Total liabilities 2, , , , Total Equity 20, , , , Total Liabilities & Equity 23, , , , >> 10

11 PROFILE OF BOARD OF DIRECTORS & MANAGEMENT STAFF MR. OSCAR ONYEMA- CHAIRMAN Oscar Onyema is the Chief Executive Officer of The Nigerian Stock Exchange, a position he assumed in April Prior to this role, he served for over 20 years in United States financial markets and the Nigerian information technology sector. He is also a Council member of the Chartered Institute of Stockbrokers of Nigeria (CIS). Mr. Onyema holds an MBA in Finance and Investments from Baruch College, New York. He holds a Bachelor's degree in Computer Engineering from Obafemi Awolowo University, Ile-Ife, Nigeria. MR. KYARI ABBA BUKAR- MANAGING DIRECTOR/CEO Mr. Kyari Abba Bukar is the Managing Director and Chief Executive Officer of the Central Securities Clearing System (CSCS) Plc. He holds a B.Sc. degree in Physics from Ahmadu Bello University, Nigeria; M.Sc. in Nuclear Engineering from Oregon State University, USA. He is an Alumni of Lagos Business School (LBS), Wharton Business School and Harvard Business School. ALHAJI KWAIRANGA, UMARU B.SC. (HONS), MBA, MSC, FCS- DIRECTOR Alhaji Umaru Kwairanga is the Managing Director/CEO of Finmal Financial Services Limited. He had his First School Leaving Certificate after his primary education at the Central Primary School, Kumo in He further studied at the prestigious University of Maiduguri from 1986 to 1991 when he bagged his Bachelor's degree (B.Sc. Honours) in Business Administration. Three years later, he went to the Edo State University in Ekpoma and there after the Liverpool John Moore University in the United Kingdom where he got his Masters in Finance and Corporate Governance in MR. CHIDI AGBAPU (B. SC, MBF) - DIRECTOR Chidi Agbapu provides strategic leadership in our public sector advisory. He was a cofounder and the Chief Executive Officer of Emerging Capital Limited, a stock brokerage firm and member of the Nigerian Stock Exchange. Chidi holds a Bachelor's Degree in Economics from the University of Nigeria, Nsukka; Master's Degree in Banking and Finance and Masters in International Law and Diplomacy both from University of Lagos. MR. BAYO OLUGBEMI- DIRECTOR Bayo Olugbemi is currently the Managing Director and Chief Executive Officer of First Registrars Limited. He holds a B.Sc. degree in Accounting from the University of Lagos and a Master's Degree in Business Administration (MBA) from Lagos State University, specializing in International Business Management. MRS IFUEKO OMOIGUI OKAURU, MFR- DIRECTOR Mrs. Omoigui Okauru is the current Managing Partner of Compliance Professionals Plc. and also a part-time member of the United Nations (UN) Committee of Experts on International >> 11

12 Cooperation in Tax Matters as well as a member of the Board of Trustees of DAGOMO Foundation Nigeria (Limited by Guarantee) - a family based Non-Governmental Organization geared towards community development. MR. SOLA ADEEYO- DIRECTOR Mr. Sola Adeeyo is the Chairman/CEO Astral Waters Limited. He is also a Director and the owner of Protea Hotel, Oakwood Park, Lekki/Epe Way; a 65-room 4 Star international hotel brand managed by Protea Hotel Group of South Africa. Mr. Adeeyo attended State University of New York, USA where he obtained a Bachelor of Arts. He acquired a Masters of Arts in International Relations from the North-eastern University, Boston, USA in MR. HARUNA WAZIRI- DIRECTOR Mr. Haruna Jalo-Waziri is an economist with over 18 years of Capital Market and Investment Management experience covering Regulation, Deal Origination, Execution as well as Fund Management. He has been involved in various successful ground breaking deals such as Heineken Euro Bond, and British American Tobacco M&A, among others. MR. OBINNA NWOSU-DIRECTOR Mr. Obinna Nwosu is presently the Group Deputy Managing Director and Chief Operating Officer (COO) of Access Bank Plc. He possesses over two decades of banking experience garnered from Access Bank and Guaranty Trust Bank. Mr. Nwosu joined Access Bank in A seasoned banker, Obinna has held several position including Head, Retail Banking Division of the Bank until December 2012 when he took a study leave for a Master s Degree in Public Policy at Columbia University, New York. His experience spans both banking operations and relationship management. MR. KENNEDY UZOKA- DIRECTOR Kennedy Uzoka, Deputy Managing Director/CEO Africa at UBA Plc holds a B.Sc. in Mechanical Engineering from the University of Benin and an MBA from the University of Lagos. A multiple awards winner, Mr. Uzoka has over 2 decades experience covering core banking, corporate marketing, and strategic business advisory services and resources management. MR. MUDATHIR OMOKAYODE LAWAL- DIRECTOR Mr. Mudathir Kayode Lawal started his career with NBM Bank where he worked from 1987 to During this period, he excelled in various marketing roles and was subsequently appointed as the bank's Treasurer. Kayode is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and has professional qualifications from the Chartered Institute of Taxation of Nigeria (CITN) and Chartered Institute of Bankers of Nigeria (CIBN). He is also an alumnus of the Lagos Business School, Columbia University Graduate School of Business and University of Oxford. >> 12

13 REQUIRED DISCLOSURES This report has been prepared by BGL Plc. BGL Plc. does and seeks to do business with companies covered in its research reports. As a result, the firm may have a conflict of interest that could affect the objectivity of this report. Investors should use this report as one of many other factors in making their investment decisions. BGL Rating Overvalued Neutral Undervalued BGL RESEARCH: INVESTMENT RATINGS AND RECOMMENDATIONS Definition Target Stock Price is more than 20% below Current Stock Price. Target Stock Price is within 20% below/above Current Stock Price Target Stock Price is more than 20% above Current Stock Price Recommendation Sell Hold Buy DEFINITION OF RATINGS Overvalued (O): A stock is deemed to be overvalued if the forecast return is more than a negative 20%. A SELL recommendation is therefore placed on the stock. Neutral (N): A stock is rated neutral if the forecast return ranges within +/- 20%. A HOLD recommendation is therefore placed on the stock. Undervalued (U): A stock is said to be undervalued if the forecast return more than 20%. A BUY recommendation is therefore placed on the stock. ANALYSTS COMPENSATION The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Investment Banking. BGL RESEARCH CERTIFICATION/ DISCLAIMER This publication has been produced by BGL Research to provide information on all issues which form the subject matter of the document. BGL Research hereby certifies that all the views expressed in this document accurately reflect its views based on information from various sources that it believes are reliable; however, no representation is made that it is accurate or complete. The views expressed in the document are solely for users who are expected to make their own investment decision without undue reliance on any information or opinions contained herein. The document does not constitute any offer or solicitation to any person to enter into any transaction. Whilst reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors or fact or for any views expressed herein by any member of the BGL Group for actions taken as a result of information provided in this publication. Any ratings, forecasts, estimates, opinions or views herein constitute a judgment as at the date of this document. If the date of this document is not current, the views and contents may not reflect the BGL Research s current thinking. >> 13

14 BGL PLC 12a Catholic Mission Street Lagos Nigeria Bloomberg: <BGLN > GO HEAD, CORPORATE STRATEGY Joseph Ashley T: +234 (0) HEAD, COPORATE FINANCE Femi Ademola, CFA T: femi.ademola@bglgroupng.com MD, BGL SECURITIES LIMITED Nkechi Azubuike M: +234 (0) nkechi.azubuike@bglgroupng.com >> 14