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Chinwendu Obienyi
The share price of newly listed stock, BUA Cement, fell by -12.20 per cent after proceedings at the floor of the Nigerian Stock Exchange (NSE) closed for the weekend.
The company had listed its ordinary shares of 50 kobo each at N35 per share together with the addition of N1.18 trillion to the market capitalisation, placing it as the third largest company on NSE.
Upon its listing, the firm also brought in about 13 billion shares from the defunct CCNN and 20 billion from Obu Cement, resulting into a total share capacity of about 33 billion shares. But investigations done by Daily Sun, reveal that at the close of transactions on Friday, the company’s share price declined to 12.20 per cent despite the market recording 0.69 per cent gain, leading to a sharp loss of 6.3 per cent in the Industrial Goods index.
Analysts who spoke to Daily Sun, noted that investors are yet to understand the intrinsic value of the company, while adding that the stock is over priced.
Head, Research, FSL Securities, Victor Chiazor, explained that sentiments towards the BUA stock is weak and noted that this similar situation played out when Airtel Africa got listed in 2019.
“This similar thing happened to Airtel when it was listed and after listing, dropped. This is to show that investors tend to look at the intrinisic value of a stock before they go for it because they compare it to available options in the market, so right now, people are looking at other options in the market in terms of returns, dividend and market share.
“So they have looked at it and do not believe the price is the true reflection of the company. They feel it is overpriced but I believe that, once the market feels it has gotten to right price, in which they know the true reflection of the company, investors will scramble for it”, he said.
Also speaking, Chief Executive Officer, Highcap Securities, David Adonri, attributed the sentiments towards the stock to high bids made on the day of the firm’s listing, culminating into shortage of supply.
His words, “You know when a stock is newly listed, a lot of hype that surrounds it. So a lot of investors can be influenced by the prevailing situation and could start bidding at high price. On the day it was listed, so, demand surpassed supply, so that may have accounted for why the sentiment towards it was a bit weak.
“But by and large, we expect to see much improved difference because we should not forget that they listed more than 33 billion units, thereby taking care of the shortage in supply”.
Managing Director, Crane Securities, Mike Eze, noted that investors are awaiting to see the performance of the company in terms of dividend, verstaility as well as return on investment.
“Investors look out for three basic things in a company; return on investments, dividend payout and verstaility of the company, these are the things that give investors the confidence to invest in a company. Hence i am not surprised its share price fell days after listing, it is a normal thing that happens in the market”, Eze explained.
According to him, “CCNN and BUA are situated in the same locality and have a competitor in Dangote Cement which are in the building material sector and BUA is relatively new and not popular. So for now, the market is just taking its toll to watch the company and see what their performance in terms of dividend is going to look like because the market is yet to see what their strength and weaknesses are like”.
For their part, Analysts at Cordros Capital, said, “we expect profit-taking to continue in the coming week, we still see significant legroom for a further rally as the elevated maturities from fixed income instruments hunt for investment vehicles. Nonetheless, we advise investors to cherry-pick fundamentally sound stocks”.
