Flour Mills of Nigeria Plc Rights Issue which opened on Monday January 15, 2018 will close on Wednesday February 21, 2018. The Rights Issue is being undertaken to enable Flour Mills deleverage its balance sheet, support working capital needs, and position the company to exploit value-accretive opportunities.
The shareholders of Flour Mills Nigeria Plc who do not wish to take up their Rights should take a cue from the wide upside potential in trading their Rights to interested investors. It is worth noting that the Rights is offered at 17.18percent discount to the stock’s current market price of N32.60.
“Our most recent research report values the company’s stock at N38.89 and the theoretical market price of the stock after the Rights is estimated at N30.58,” said analysts at Lagos-based Cordros Capital.
The analysts said in all three cases above, the upside potential on the Rights price ranges between 13.27percent and 44.04percent.
Flour Mills of Nigeria Plc targets to raise about N40billion from existing shareholders by offering 1,476,142,418 Ordinary Shares of 50 kobo each at N27 per share. The ratio of provisional allotment is 9 new Ordinary Shares for every 16 Ordinary Shares of 50 kobo each held as at the close of business on December 8, 2017. Stanbic IBTC Capital Limited is the lead issuing house to the Rights Issue.
The unaudited financials of Flour Mills of Nigeria Plc for the nine months period ended December 31, 2017 show the group earned N427.5billion, up from N389.9billion in the same period of 2016. The Group reported operating profit of N44.19billion as against N27.26billion in 2016.
The group profit before taxation (PBT) increased in the period under review to N19.5billion against N10.29billion in same period of 2016. In the nine-month period to December 2017, the group’s profit after taxation (PAT) increased to N13.27billion from a low of N7.4billion in nine month period of 2016.
Flour Mills is currently the largest integrated food business listed on the Nigerian Stock Exchange. It is the largest food basket offering of any Nigerian FMCG company- over 28 consumer products.
On completion of the Rights Issue, if all shareholders take up their rights in full, the company’s paid-up share capital should increase to N2.05billion comprising 4,100,395,606 ordinary shares of 50kobo each to be beneficially held as follows: Excelsior Shipping Company Limited (2,139,586,427 units or 52.18percent); and other shareholders (1,960,809,179 units or 47.82percent).
Out of the net issue proceeds estimated at N39.171billion after deducting issue costs of about N684.499million (1.72percent of the issue) the group plans to immediately repay overdraft facilities valued at N11.90billion or 30percent of the net issue proceeds; immediately repay short term loans of N17.53billion or 45percent of the issue proceeds; while 25percent (N9.74billion) will be channeled to ongoing working capital.
Iheanyi Nwachukwu
