Growing Investor Confidence

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The decision of Abraaj to convert $10 million loan in C & I Leasing to equity is a show of confidence in the company and Nigerian economy, writes Goddy Egene

Last year foreign investors withdrew over N606 billion from the equities market because of shift to higher yielding assets with lower risks in developed countries, coupled with concerns of political risks in Nigeria, due to the upcoming general elections.

As the elections draw closer, there are apprehensions that more foreign investors may pull out from the market.
Although the apprehensions are not misplaced, some foreign investors are increasing their stakes in companies in which they have seen good prospects.

Abraaj, managers of Aureos Africa Fund, is among investors who have seen value in Nigerian stock market and are consolidating their investment instead of withdrawing. Consequently, Abraaj has decided to convert $10 million (N3.6 billion).

The Aureos Africa Fund had advanced the $10 million unsecured, redeemable, convertible loans stock to C & I Leasing. The loan matured at the end of 2018. However, instead of asking for the repayment of the loan stock, Abraaj said it would be converted to equity in the C & I Leasing, a development financial analysts said is a show of confidence in the company and Nigerian economy.

Commenting decision by convert the loan to equity, the Managing Director/CEO of C & I Leasing, Mr. Andrew Otike-Odibi said: “This development is positive for our business as it improves the capital structure of the company and helps position it favorably for additional capital raise from the market in first quarter of 2019.”
Market analysts said the foreign investors must have seen the positive trend the company has recorded in the recent times and bright future prospects.

Corporate background
C& I Leasing Plc was listed on the Nigerian Stock exchange (NSE) in 1996 and it has evolved from being a simple consumer finance leasing company to a diversified, operating lease company with presence in six states in Nigeria, investments in Ghana and Dubai and has a staff strength in excess of 5,000.

Following the Nigerian Local Content Act in 2010, C & I Leasing diversified into the maritime sector offering offshore marine services to upstream oil and gas companies.

The company commenced its marine business with four patrol boats which have increased over the years to a fleet size of 22 vessels consisting of crew boats, patrol boats, pilot boats, platform support vessels and tug boats tied in mid to long term contracts for diverse offshore services. These range from security to handling, fire-fighting and elevation among other services. This diversification has significantly improved the performance of the business with cumulative average annual growth rate in its gross earnings of 38 per cent over the past 5 years. C&I Leasing recently signed a 10 year contract for the provision of two harbour tugs with NLNG.

Boosting marine business
In an apparent move to boost its marine business, C & I Leasing bought out the 27.5 per cent stake in C & I Petrotech Marine Limited (CPML). As a result of the transaction CMPL became fully owned subsidiary of C & I Leasing Plc.

Otike-Odibi, had said the firm’s journey into marine sector as a service provider for the oil and gas sector actually started through CPML joint venture in 2010 and has over the years culminated in the ownership of over 20 vessels consisting of crew boats, pilot boats, patrol boats, and platform support vessels for providing services such as line and hose handling, berthing and escort services, mooring support, fire-fighting, pollution control, security and floating and self-elevating platforms.

“This is clearly reiterating our commitment to growing our marine services business and gaining leadership in the field. It is hoped that this buyout will further the company’s drive to restructuring and repositioning our marine business for enhanced profitability,” he added.
Following the increase in stake in CPML, the company acquired two new Tugboats to its fleet. They are: ‘MV Chidiebube’ and ‘MV Folashade’, both vessels are owned by the company in joint venture agreement with SIFAX Marine Limited and are to be deployed immediately for a long term assignment with Nigerian Liquefied Natural Gas (NLNG).

According to the company, it is committed to becoming the most preferred marine partner for the international oil companies (IOCs) in Nigeria.
“We will continue to follow through on all that needs to be done to meet their needs. These new vessels have been built to specification for the assignment ahead and we are confident they will deliver even beyond expectation. With every new contract and acquisition, we are careful to take the learnings from the past and improve continuously to serve our clients better. We are sure they will be very pleased with MV Chidiebube and MV Folashade, “it said.

Future prospects
The company successfully raised N7 billion bond earlier in 2018 as part of activities aimed at enhancing its overall competitive positioning. The positioning is to take advantage of the growth the leasing industry is expected to witness.

As a popular financing tool, leasing provides an important leverage in modern business. Its flexible nature allows it to compete favourably against traditional finance sources such as bank loans, bonds among others. And the leasing industry is still expected to blossom further owing to various Government initiatives aimed at re-inflating the economy and the increasing relevance of leasing to capital formation.

Also the increasing relevance of leasing to capital formation and focus on agriculture will create an extensive market for the leasing business, as a whole range of equipment would be required across the Agric value chain, from planting, harvesting, processing and storage to distribution.

Analysts said an experienced company such as C & I Leasing will benefit significantly from these business opportunities. According to them, focus on agriculture will create an extensive market for the leasing business, as a whole range of equipment would be required across the “Agric value chain, from planting, harvesting, processing and storage to distribution. Special focus on infrastructure will unlock business opportunities for the leasing industry as specialised and general equipment would be needed to support the massive construction expected to take place in the rail, roads, power, housing among others. The manufacturing sector including the micro, small and medium enterprises (MSMEs) presents significant opportunities for leasing, as the demand for assets for productive ventures is expected to continue to increase,” they said.

Another emerging business opportunity lies in the healthcare and education sectors with appreciable inroads already being made at C & I Leasing with contracts to provide school buses as well as ambulance services for clients in education and health sectors.

Meanwhile, C & I Leasing has said for the outsourcing business there is a drive to leverage technology to maximize efficiency, improve speed and ease of delivery to clients on all range of requests from recruitment to payroll and other business processes for Human capital management.

“This automation of processes will allow for growth and capacity to serve even more clients without compromising on quality service and efficiency. The company’s Ghanaian subsidiary, Leasafric Ghana, is the largest provider of both outsourcing and fleet management services in Ghana. With a fleet size of over 1,000 vehicles providing service to all the major businesses in Ghana, the company is poised to continue to deliver good returns to shareholders,” it said.