First Bank's Hybrid Offer is here at last

[realmike]

Parties to the N100 billion hybrids offer of First Bank of Nigeria Plc met yesterday to endorse the documents relating to the offer, while shareholders unanimously approved the directors' proposition to raise the additional fund.

The bank is offering for subscription 1.624 billion ordinary shares of 50 kobo each at N33 per share, and a rights issue of 1.497 billion ordinary shares of 50 kobo at N31 per share.

Application for the hybrid offer opens on Monday May 14 and closes on Thursday 21, 2007.

Packaged by FBN Capital and IBTC Chartered Bank Plc as joint issuing houses, the offer is being undertaken to enable the bank enhance its branch network and working capital, while also enhancing the bank's competitive edge.

Specifically, according to the prospectus, the proceeds of the offer would be used to deepen the bank's retail infrastructure in the country through the expansion of branch network, strengthen subsidiaries' capital base to support business growth, expand First Bank's capital resources to selectively exploit value creation opportunities in the regional markets and elsewhere (particularly Africa, Middle East and Asia).

Besides, part of the proceeds would be used to support enlarged operations and broaden its relationship management capabilities.

Specifically, increase in working capital would get 28.3 per cent or N27.14 billion, while expansion of branch network gulps 22.8 per cent or N21.93 billion, and mordenisation of branch network gets 12.7 per cent or N12.22 billion.

Increase in equity investment in subsidiaries like FBN Bank (UK) Limited, and FBN Mortgages Limited gets N11 billion or 11.5 per cent among others.

Already, an application has been made to the Nigerian Stock Exchange for the admission to its Daily Official List, the offer of 3.12 billion ordinary shares representing the offer for subscription of 1.62 billion ordinary shares and offer by way of rights to existing shareholders of 1.496 billion ordinary shares of 50 kobo each.

According to the prospectus, a maximum of 649.7 million shares representing 40 per cent of the offer size shall be preferentially allotted to high networth individuals and institutional investors.  - Guardian

[realmike]

BACKGROUND
First Bank was founded in 1894 and was incorporated as a private limited liability company in Nigeria and was converted to a public company in 1970. As one of the “big three” banks it has historically dominated the industry in terms of its contribution to banking activity and its earnings capacity.

PERFORMANCE
First Bank is clearly the number one bank in terms of profitability, they have continued to be a dominant player in the Nigerian Banking sector. Over the last 5 years, the bank has grown its gross earnings on an average of 17% while net earnings grew by an average of 21% with the highest growth recorded in 2002.

Other perfomance indices are also favourable as First Bank led the pack for the financial ended 2006 with a pretax profit of 32.37%. Its stock has also enjoyed a tremendous surge on the back of its sale of half of its 20% stake in V-Mobile/ Cel-Tel Nigeria and envisioned merger with ETI, which it originally forecasted to complete by September 2006.


MANAGEMENT & BOARD
The management of the bank led by Jacobs M. Ajekigbe is supported by Board of fifteen Directors, who are highly experienced professionals with unwavering commitment to the highest ideals of service delivery.

ACHIEVEMENTS
The Bank has received numerous awards from reputable organizations, which include the “Banker of the Year 2003” award from The Banker Magazine, the Euromoney Award as the Best Bank in Nigeria in 2004; the Global Finance award as Nigeria’s best bank, the best foreign exchange bank award 3 times consecutively in 2004, 2005 and 2006 and the overall best bank in real sector financing in 2006

[Netpreneur]

@ realmike This is a real race to make investors rich! First bank know that UBA have well past them in this biz so they sent their elephant to the market...anyway those that have money would be the only ones to buy such..u know why? their growth span...other banks that are starting to show signs of double digit growth are like access bank, bank PHB, Eco bank. etc..or what do you think?

[Oyeleke Toye]

@netpreneur
In summary are you sayn we are better off investing our funds
in access, phb, eco etc? Or are you simply saying that we will
need to invest heavy sums in First Bank to have enjoy good
returns?? Please I need your response.

[enolase]

My subscribers at http://www.nairastocks.com have already been informed of what to do with this investment. My subscription service sifts out the facts in simple language they can understand from all the mumbo jumbo contained in the prospectus.

However for the benefit of members of this forum who want to purchase this offer, I want to state here some investment facts.

First Bank gave a one for one bonus last year, increasing  the number of outstanding shares in circulation by 100%. This increased the supply in the market, and is responsible for the slow growth in share prices the year after such a massive bonus was given. From Economics, this is a question of plenty of supply against demand.

To combat the negative effect that an even greater supply of shares from a hybrid offer will have on the share price, the bank has decided to give an offer that will increase the no. of outstanding shares by only 30%.

It is very likely that the price of First bank will fall a little from the current secondary market price of =N=40.40 in the short term. That is why the price was realistically set at a whooping discount of =N=7.40 for the public offer and =N=9.40 for the rights issue, to accommodate the short term drop.

Another Fact:
Growth in post-tax profit for this current year has not kept pace with the increase in share volume, therefore the Earnings Per Share (post-tax profit/2 X share capital) is expected to drop to the lowest level in five years.

This will mean that this year, First Bank may not be able to pay a reasonable dividend (rumuors of dividend and bonus drives share prices in the NSE).

To be able to achieve a robust share price increase, First bank will have to work very hard to drive its profits after tax this year up, so that it can achieve a reasonable Earnings Per Share.

What does all this translate to? First Bank is a stock for medium to long term appreciation.

If you are buying, do not expect to make so much money from it like DANGSUGAR.

In another post, I will analyse Access bank and what its public offer (coming after that of First Bank) holds for investors.

[Netpreneur]

@ Oga Toye
What i mean is that if u invest in first bank now, u must have at least N33,000 right? now think about u putting that same amount in other banks shares that are priced at 16NGN, think how much u can make? what am driving at is that the lower the price of the shares in the market, the more potential it has to grow faster to meet up with the big time shares....take 4 example, those that invested in UBA when it was 2NGN would now be millionaires abi? bottom line is that u have to invest large sums in first bank to make it big and investing iin other bank shares that are little will have the potential of becoming big time shares in the near future! Hope u have a great day Oga Toye...

[realmike]

Hey! how are you doing this morning, just to remind you that time is ruuning out fast on this wonderful investment opportunity and procrastination can be dangerous.

Remember, "too much analysis leads to paralysis, and if you wait...you waste"

With less than N17,000 you can buy 500units, and if you have more please invest, so that tomorrow you don't say, 'how i wish'

What is good is good, and i think and believe that this is a good offer..

Please get it if you can and get as much as you can, for me and my family its nothing less than 10000units

See ya at the top! and do have a lovely day.

[Oyeleke Toye]

@netpreneur
Well i think I understand your analysis. Pennystocks principle
abi.

@realmike
thanks for prodding us on. you know the one thing about stocks
is that one always gets to regret not investing if the stock does
well or not investing enough.

And when the stock does not do well, its regrets as well. I wish
I could have the courage like you to go for 10,000 units or more.

Much as I want to do that, I want to obey another law of investment.
Diversification of portfolio. Am going for about 5000 units but
am also going to commit a lot more funds into more risky trading.

Pray for me.

[realmike]

An achiever is not the person who takes risks neither the one that does not take risks but the one that does positive critical analysis of every risk before he takes them.

Over time i've come to learn one lesson from hyip owners and it's the statement that, 'invest only what you can afford to loose'

Every endeavour of life is laced with some elements of risk but brave minds will always win.

I was taught to always take only TOLERABLE RISKS.

I need prayers too bcos i'm about to indulge in one very risky trading as well.

God dey sha! Take care!