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Rufybaba Profile picture
Rufybaba
@Rufyb
Investment Management | Economics | Finance | Strategy
Jul 30 • 31 tweets • 6 min read
I see that pension fund guys are loading up Okomu in a pair trade kinda form. In their heads, 'Presco is ₦1k+, Okomu should also follow suit'.

Lol, I sense an 'anchor bias' here, because Okomu is now very pricy and significantly above historical multiples... Image A quick detour:

Business model overview
Presco
Presco is an integrated palm oil coy (the 'integrated' is not mere grammar). Its operations cover:

▪︎ oil palm cultivation
▪︎ palm oil milling
▪︎ refining of palm oil
▪︎ packaging and distribution of refined products
Jul 14 • 13 tweets • 3 min read
I smell an arbitrage opportunity.

UACN PLC has about seven (7) portfolio companies:

☞ Grand Cereals LTD
☞ Livestock Feeds PLC
☞ UAC Foods LTD
☞ CAP PLC
☞ MDS Logistics LTD
☞ UPDC PLC
☞ UAC Restaurants LTD Grand Cereals LTD and Livestock Feeds PLC are in the Animal Feeds and Edible Oil category.

UACN holds 71.4% stake in Grand Cereals, and a 72.3% stake in Livestock Feeds.

This segment accounts for half of UACN's revenue.Image
Image
Jul 9 • 39 tweets • 6 min read
I don't know of 'most undervalued', but I currently know of one very undervalued company - Nigerian Breweries PLC.

If my numbers add up, I expect the coy's stock price to nearly double from ₦63 (₦2trn) to ₦100 (₦3trn) levels..

🧵🧵🧵 Overview
Nigerian Breweries PLC (NB), established in 1946, is Nigeria’s oldest and largest brewing company. With 10 breweries nationwide and iconic brands like Star, Gulder, Maltina, Heineken, and Fayrouz, NB has a deep market reach that spans both urban and rural Nigeria.
Jul 8 • 25 tweets • 4 min read
Based on data, yes, Nigeria has a revenue problem. However, the substance is that a spending problem appears to be significantly more prevalent.

Although public finance accounting is a little different, I like to break down government accounting using the business lens... Balance Sheet (Assets and Liabilities)

▪︎ Assets: Infrastructure, government buildings, natural resources, foreign reserves, and tax receivables

▪︎ Liabilities: Public debt, pension obligations, payables, etc

▪︎ Net assets: The difference between assets and liabilities
Jul 3 • 11 tweets • 2 min read
The last time the exchange rate stabilised was in 2017 with the creation of the I&E (Investor & Exporter) window. Following its introduction, inflows surged, liquidity improved, and the FX market became stable after years of instability. Image However, that stability was bound to be temporary. The FX rate was poised to climb again simply because long-term stability is impossible when the inflation rates for the Naira (NGN) and the US Dollar (USD) are different.
Jun 27 • 10 tweets • 2 min read
Let us have a small gist.

How do the poor feel the impact? My sense is that it occurs when their income levels rise and when prices of goods and services are lower/stable.

Before those two things can happen, businesses need to be prosperous... By prosperity, we mean that coys have to be profitable (via sustainable sources) so that they decide to expand capacity. There must also be signs of corporate profitability so that new businesses are encouraged to enter the market.
Jun 26 • 4 tweets • 1 min read
Africa needs it.

If lenders have control over borrowers' cash flows, they will be willing to do more. Currently, that control is difficult to achieve, which is why banks only offer salary loans.

It is also why Credit Direct has been relatively successful... Their business model allows them to maintain asset quality because they have control over the cash flows of their type of client: Civil servants.

Asset quality is great, but the downside is that, in my opinion, there is a cap on how they can scale.
Jun 25 • 8 tweets • 2 min read
I think it may be time for me to take NGX seriously. Temi Popoola, CFA, the new Group CEO, has been doing quite a lot of work there (an excellent individual, by the way), and the operating environment has been quite friendly, too... Image On a YTD basis, total transactions are up by 60% from ₦2 trillion last year to ₦4 trillion this year -really strong. On a FY basis, the NGX facilitated ₦6 trillion worth of transactions (about 2% of GDP) and earned ₦8 billion in fee income.
Jun 23 • 11 tweets • 2 min read
These days, especially in Lagos, owning a car is no longer considered a luxury. It has now become a necessity, given all the hustle and bustle of Lagos.

@cowrywise has released another fantastic report: The Economics of Car Ownership, aimed at providing key information... Image ... to young professionals about the cost dynamics associated with owning a car, and the benefits of owning a car relative to alternative means of transport.
Jun 21 • 16 tweets • 3 min read
The reactions to this post have been very interesting. Thanks everyone. The common questions or comments I’ve been seeing from folks are:

☞ Why are PE funds not raising funds locally
☞ What is the solution?

I wish I had the answers, but sadly, I do not. But... ... we may need to understand a couple of things:

The underlying problem is the required return. For businesses operating in Africa, or, let’s say, Nigeria, the expected growth rate is high, and that's because of the risks or perceived risks.
Jun 20 • 11 tweets • 2 min read
Converting your Naira to buy USD and simply keeping it under your pillow should naturally deliver an average annual return of 12%–14%, thanks to consistent currency depreciation.

Now, if you invest that USD in the S&P 500, which has historically returned 11%–12% annually... ... your required return totals about 26% per year.

Over a 10-year period, this investment should yield 3x returns in USD. When you convert that back to Naira after 10 years, you’re looking at a 10x return in Naira.
Jun 18 • 10 tweets • 2 min read
Capital. A lot of it.

And they got lucky (but it was luck that they created or were prepared for).

Opay raised $500mm+ (or ₦200bn+) thus far to invest in their payments infrastructure. All the payment speed and functionalities we see today, owo lo pa. All the marketing done in prior years (which includes all the parallel trial and error businesses including oRide and the likes) were possible because of the significant capital they put behind it.
Jun 17 • 36 tweets • 5 min read
Cadbury is currently looking very good and attractive to me at its current price of ₦39 or ₦89bn market value. Image Cadbury Nigeria PLC is a player in Nigeria’s fast-moving consumer goods (FMCG) sector, best known for its iconic beverage brand, Bournvita, and confectionery products like Tom Tom, Butter Mint, and Eclairs. It is a subsidiary of global snack giant, Mondelez.
Jun 16 • 21 tweets • 3 min read
I like the CBN’s directive that banks with forbearances are suspended from paying dividends until they clear their ‘toxic’ assets.

Running a bad bank for a very long time is very easy... Image
Image ... If you have a deposit money bank, all you need daily is enough liquidity to pay customers who show up at your counter. The bank is good as long as customers get their money every day.
Jun 15 • 10 tweets • 2 min read
This scene really nudged me about something that I have always been telling my friends in the Nigerian pensions industry.

They often tell me how they are faced with limited investment opportunities in the Nigerian equities because of the poor liquidity... ... low market cap, and poor corporate governance of many listed coys. They are very correct. These fears are valid.
Apr 15 • 4 tweets • 2 min read
The Nigerian Sovereign Investment Authority is a sovereign wealth fund. SWFs are established for various purposes. We have:

☞ Budget stabilisation funds: set up to protect the budget and economy from commodity price and external shocks

☞ Development funds: set up to allocate funds to critical and priority infrastructure.

☞ Savings funds: set up to share wealth across generations.Image The NSIA was established in 2011 to manage excess funds from Nigeria’s sale of crude oil. The fund management is done through three funds, namely:

☞ Stabilisation Fund (investment managers include UBS Global Asset Management, Smith Graham & Co., Income Research + Management Lombard Ordier, Ninety One Global Strategy)

☞ Nigeria Infrastructure Fund (managed by In-house management team)

☞ Future Generation Fund (managed by a host of fund managers including Goldman Sachs, Helios, Alithea, Morgan Stanley, Vanguard, Actis, Africa Capital Alliance, Verod, Ingressive, CardinalStone, Ventures Platform, LoftyInc, Africa50)
Apr 2 • 4 tweets • 1 min read
As the global economy grows, and as the financial markets develop, creative solutions are implemented.

Even though the goods are public goods, we can still get the 'market' to provide them, but it has to happen under a very solid structure and partnership. Based on this, we have the PPP thingy which allows the free market and the government to partner. In this case, the government still needs to do a lot of heavylifting.
Mar 29 • 21 tweets • 4 min read
By now, everybody already knows about the superb FY 2024 results released by GTCO. The management demonstrated the strength of that performance by declaring a relatively high dividend. This was what investors wanted from Zenith but didn’t get. Image Over the years, the top two leading banks in terms of profitability, GTCO and Zenith, have always competed well, but GTCO edges out Zenith - which is reflected in the disparity of valuation multiples that investors are willing to pay for the two companies.
Mar 24 • 6 tweets • 1 min read
Since the president was sworn in nearly two years ago, the only two major policy moves I acknowledge are the FX harmonisation and fuel subsidy removal. Man is still living on that momentum. Meanwhile, we are still on the edge or somewhat very uncertain about the availability of FX and fuel and the stability of FX rates and fuel prices.

There is still nothing concrete about macro stability.
Mar 17 • 8 tweets • 2 min read
There are two types of goods: private goods and public goods. Private goods are based on exclusivity, which means if someone has not paid for them, they can be kept from using the good. Also, when one person uses a private good, it stops another person from using it at the same time. Examples include food, cars, and clothes.Image Public goods, in contrast, are not exclusive. You cannot stop anyone from using these goods, regardless of whether they’ve paid for them or not. Plus, one person’s use of a public good doesn’t stop others from using it too. Examples include national defence (which everyone benefits from whether they pay taxes or not), streetlights, roads, and bridges.
Feb 25 • 10 tweets • 2 min read
Financial Risk vs. Business Risk

Financial risk primarily deals with how you choose to fund your business, which essentially refers to your capital structure. This structure is the mix of debt and equity you use to finance your operations. While funding your business entirely with equity can seem appealing, it may present challenges when trying to scale or grow.