The ordinary shares of the Nigerian Exchange Group Plc (NGX) have made a strong start on its bourse.
Following the listing by the introduction of the group’s shares on its subsidiary, the Nigerian Exchange Limited, the stock has seen strong demand, rallying 20.8 per cent from the listing price of N17.75 per share on Friday, October 15, 2021 to N21.45 per share at the close of trading on Wednesday, October 20, 2021.
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In barely two trading sessions, the stock recorded full limit up gains of 10 per cent each, reflecting the strong demand for the shares, which are still closely held mainly by its dealing members, many of whom would seek to hold unto the shares for varying reasons.
Closing at N21.45 per share, a total of 40.8 million units, representing 2.1 per cent of the total capital of NGX have thus far been traded within three trading sessions in which the NGX shares debut on its own bourse.
While it is yet to fully recover to the N25.00 on which it was quoted on the NASD Exchange on April 13, 2021, market analysts remain bullish on the shares, in the expectation that the new structure of the NGX Group should reinforce its agility and usher in new offerings and participation, including a possible increase in the scope of the group’s operations, as indicated by the Group CEO, Oscar Onyema, at the Fact Behind the Figure held in commemoration of the listing by introduction on Friday, October 15, 2021.
Speaking at the listing by introduction event, Onyema had hinted that, “NGX Group’s listing allows us to expand in key capital market infrastructure verticals and look beyond Nigeria’s borders, as we deliver on our growth plans to become Africa’s leading capital market infrastructure group.”
Market watchers hope the NGX Group may be interested in expanding its operation through acquisitions and new businesses, especially as Oscar noted the group’s investment in three technology entities.
It disclosed NGX owns 7.5% each in Requid and Teslys Network Services Limited and 15% of Eastwall Solutions Limited. In addition, the NGX owns 10% and 6.5% of NASD Exchange and FMDQ Group, respectively.
Commenting on the rally on the shares, Yadinma Onwu, the Executive Vice Chairman of Funds Matrix & Assets Management Limited, noted that “the NGX Main Board has the capacity to attract more investors.”
“I believe the rally is justified and reflects the market access that the NGX commands, as both retail and institutional investors seek exposure to the 61-year-old exchange, which portends strong and compelling fundamentals to grow, especially with its current structure which is obviously nimbler, compared to its hitherto member-owned arrangement that limits its possibilities.”
Also commenting on the performance of the NGX shares, Funke Okoya, the Executive Director, Nova Merchant Bank Limited said, “NGX is a public-interest entity and its normal for both institutional and retail investors to seek ownership exposure in it, given the opportunity presented by the demutualization.”
Okoya noted that the shares are still largely closely held by dealing members, who may hesitate to sell at this time. Hence, she said, the float (the percentage of the shares held by the investing public) would naturally evolve, especially as the NGX Group may also consider deepening its capitalization in diversifying the scope and scale of the operations in the near to medium term.
“Still trading at N21.45 per share, the counter is priced at 1.4x price-to-book ratio, which is still at a notable discount to its South African peer, the Johannesburg Stock Exchange, which is priced above twice the book value of its equity,” she said.
While the shares of NGX also had a bull run on the NASD Exchange, the over-the-counter market, where it debuted for trading after demutualization before its listing on the NGX, subsequent sell-pressure on the shares on NASD raised concern on the appetite of the dealing members for the shares.
Notably, the NGX shares, which started off on the NASD on April 13, 2021 at N25.00 per share, rallied to N30.26 per share within three weeks, only to plunge to N14.00 subsequently, the price at which it was suspended for trading on the NASD, in preparation for NGX listing.
So, the questions now are; what has changed between last week and now? Is this new rally a repeat of the initial surge seen on the NASD or could it be a reflection of the relative liquidity that NGX attracts? No doubt, NGX, being a full exchange, affords more access to investors, hence the rally may be a reflection of the increased penetration of the NGX, relative to the NASD over-the-counter platform.
NGX has 2.004 billion units of shares outstanding, although it only listed 1.96 billion units of the shares outstanding, as the balance is held in custody in the event of any claim from any dealing member who may have been inadvertently missed out in the allotment of shares, following demutualisation.
Therefore, the current market capitalization stood at N42.13 billion at the close of trading on Wednesday, October 20, 2021. However, it would be adding additional 10% shares in issue in the next few months, on the back of the employee share scheme recently approved by the shareholders at the Annual General Meeting, a corporate action which would increase the market capitalization but dilute the holdings of current shareholders.
Prior to its demutualization, its closed the 2020 financial year with an operating surplus of N1.84 billion, a performance that analysts use in pricing the counter now at 22.9x price-to-earnings multiple, as it is yet to make public any of its 2021 quarterly results. The NGX Group had an equity base of N31.3 billion and total assets of N31.5 billion.
