Tag: Art

4 reasons to get life insurance policy this 2019

The topic of getting life insurance is one you may not want to talk about. But because it is important that you ensure the financial security of people that depend on you, it is worth dealing with.

First, let us break down why you need one.

If you’re a breadwinner, you need a life insurance

Let’s be real, if you are the main financial backbone in your family and anything happens to you, your partner, children and anybody else that depends on you, will probably suffer financially. This is one of the major reasons people get life cover; to ensure a safety net for their loved ones in the face of unforeseen circumstances. With the rising cost of education, you can ensure that your kids will still be able to get the education they deserve should the worst happen.

It is not anticipating bad omen. It is simply facing reality and planning for it.

Got loans?

This is one that you might not have thought about. What becomes of your family if you have taken a loan or got a mortgage and something happens to you and there is no one to pay it off? Proceeds from your life insurance policy can be used to settle these loans ensuring that if the worst happens, your family doesn’t have an additional debt to deal with.

Single but responsible

Now, being single doesn’t mean you don’t have anyone that depends on you financially. It could be an elderly parent, sibling or relative. Having a life cover will make sure that these people you care about will be taken care of regardless of your presence, giving you and them peace of mind.

If you need to take care of future medical expenses

If you can’t predict the future, then you never know what may happen. A life protection plan comes in handy in the event of injuries, accidents or terminal illnesses which may prevent you from working. It saves you and your loved ones from unplanned and expensive medical bills.

While life insurance protects your family in the event of uncertainty, there are also lots of other benefits to getting one. Haven’t already taken out a life insurance? It’s not late.

Get in touch with us today via [email protected] to discuss your options.

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Access Bank Plc and Diamond Bank Plc Merger: A Lofty Deal or Damp Squib?

Nigerian Banks

A Lofty Deal or a Damp Squib?
• A switch to National Banking License… In our recently published equity commentary on Diamond Bank (See report: Overblown fright or Justified concerns), we had stated three options the bank’s management will adopt to keep the bank operational and meet its obligation to lenders. While we had considered the possible acquisition by a bigger bank, the management of both banks in separate press releases refuted the claim. Consequently, as with one of our options, Diamond Bank got approval from the CBN to operate as a national bank following the sale of its UK business, a development that was perceived to have saved the bank from capitalization needs and continue operations on a better footing.

• …and then a Scheme of Merger. To our surprise, news broke over the weekend of a possible merger between both banks, with the management of Access Bank Plc and Diamond Bank Plc yesterday separately issued releases on the Nigerian Stock Exchange (NSE) stating the planned acquisition of Diamond by Access with a consideration price of N3.13/share. This is on the consideration of N1.00 in cash for one share of Diamond bank held and 2 new shares of Access for every 7 shares of Diamond. Accordingly, we estimate total cash consideration of N23 billion and new allotted shares of 6.6 billion units in Access Bank. We note that the consideration price is 213% above the closing market price of N1.0 per share of Diamond yesterday.

• Estimating the transaction multiples. As at 9M 2018, Diamond bank’s book value stood at N217.1 billion with a book value per share (BVPS) of N9.37, we estimate a transaction price to book multiple (P/B) of 0.3x compared with the market valuation of 0.1x P/B. Given our thought that the transaction is strictly equity based, we assume a situation wherein the un-provisioned part of the non-performing loan is adjusted for through equity to leave the books with performing assets. As such, based on current NPL of N99 billion and total credit charge loss of N54 billion, we estimate an equity charge of N45 billion by Diamond bank over Q4 18 to leave the book value at N172.1 billion and BVPS of N7.4 with implied transaction price to book multiple of 0.4x.

• How they Stack up Post Consolidation. The notice by Access indicated that the bank will issue additional shares of 6.6 billion shares to accommodate the shareholders of Diamond bank. Assessing the impact on current outstanding shares of Access bank of 28.9 billion, we estimate increase in total shares post consolidation to 35.5 billion. Accordingly, we estimate that the potential dilution from the merger of 19%. Furthermore, post-merger, Carlyle Group, Kunoch Holdings and Diamond Partners will own 3.3%, 1.7% and 1.1% of the enlarge Access bank respectively.

• Expected Moderation in Cost of Funds. During our engagement with the management of Access Bank in November, they guided to the bank’s plan to gradually close out on expensive borrowings. Specifically, the CFO stated that the bank could refinance its expensive Eurobonds if presented with the opportunity and any other available opportunity that could result in a significant moderation in its funding costs. Notably, as at 9M 18, Access cost of funds stood at 5.6% compared to Tier 1 average of 4.0%, following contraction in cheaper deposit (current and savings account) mix by 195bps to 45% which resulted in 18.5% YoY jumps in interest on customers deposits, 1.0x YoY growth in interbank placements, and 73.8% YoY increase in borrowing cost. However, Diamond cost of funds remains the lowest among peers at 4% (coverage Tier 2 average of 5.4%) despite a 260bps YoY contraction in CASA composition to 78.3% over 9M 18. Accordingly, we see some benefit to Access in terms of moderation in funding cost from the acquisition of Diamond and estimate that Access’s cost of funds could moderate to ~5.1% with a CASA mix of ~55.3% post consolidation.

• However, given the reaction to the bank in recent months, we are cautious on the level of cheaper deposits composition being inherited by Access bank. For context, over the last five quarters, Diamond bank has lost CASA deposits of N247.6 billion, reflecting a 22.8% decline YoY to N836.7 billion in Q3 18 from N1.1 trillion in Q3 17. Also, given the lower credit rating of Diamond bank, in terms of corporate deposits, we do not rule out the possibility of erosion in Access bank’s credit rating.

• What’s the immediate Impact? In summary, while this acquisition appears positive for shareholders of Diamond Bank, we are of the view that the transaction will be undesirable for Access Bank in the near term, giving bottlenecks in terms of collapsing of structures as well as dilution impact on profitability metrics. That said, we await meeting with Management of Access Bank tomorrow (Click here for conference detail) for further details and discussion on this acquisition and would communicate our views in due course.

• Any benefit for the core investors in Diamond? Following the exit of Actis in August 2014 and the need for recapitalization of the bank in November 2014 via a rights issue, Carlyle Group, became the largest single shareholder in Diamond with transaction valued at $147 million (N7.38 per share). Accordingly, we estimate that on current price of N1.07, the Group is taking a bad hit on the investment to the tune of N20 billion. Accordingly, we believe that the consideration price of N3.13 could reduce Carlyle loss in the venture to ~ N11.4 billion in the short term. However, post consolidation and integration of the shareholders into the enlarged Access bank, we believe the change in the fortune of Carlyle in the venture will be determined by the gains from the integration.

Download full report below

Access Bank Plc and Diamond Bank Plc Merger – A Lofty Deal or Damp Squib

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ARM Research – Stock Recommendation for the Week , December 17

Activities in the Nigeria equities market was bearish in the past week, with the NSE ASI declining by 0.60% WoW to 30,681.50 points and market capitalization shedding about N61.8 billion over the week. The loss was driven by declines in bellwether stocks in the banking (FBNH: -1.97%, STANBIC: -2.34% and ZENITH: -2.34%), Breweries (NB: -0.63%) and Food (NESTLE: -6.39%) sectors. Top decliners during the week were MOBIL (-10.41%), CONOIL (-10.00%) and CUTIZ (-9.64%).

 Fidelity Bank Plc – BUY (FVE: N2.92). We are more optimistic on our earnings expectation over 2018 largely on the back of lower loan-loss provisioning. We have revised our FY 18E EPS higher to N0.82 (previously N0.76) which is 25% higher YoY. Our FVE of N2.92 (previously N2.82) translates to a BUY rating on the stock. Based on Friday’s closing price, our dividend expectation translates to a dividend yield of 8%.

 Nigerian Breweries Plc – SELL (FVE: N76.58): Reflecting the industry competition and further declines in volumes into Q4 18, we forecast FY 18E revenue to decline by 6.8% YoY to N321 billion. However, we envisage cost pressures due to rising barley prices. Thus, we forecast FY 18E gross margin at 40.8% (FY 17: 41.7%) and EBIT margin of 12.6% (FY 17: 17%). Having rolled forward our model, we cut our FVE on NB to N76.58, translating to a SELL.

 Unilever Nigeria Plc – STRONG BUY (FVE: N47.58). Unilever is our top pick in the consumer space with FY 18E EPS expectation of N2.11 (+18.2% YoY), based on revenue growth (+9.7% YoY) and significant moderation in interest expense (-90.1% YoY) – following the sizeable deleveraging of its balance sheet.

 Dangote Cement Plc – STRONG BUY (FVE: N253.03): We have lowered our FVE on DANGCEM to N253.03 largely due to a downward revision of 2018 and 2019 volume growths. The revision reflects the impact of the prolonged rainy season and electioneering concerns which has now slowed ongoing infrastructure projects. However, we believe DANGCEM presents an attractive entry point in the cement sector in Nigeria given its strong and diversified margins and balanced funding structure.

 Lafarge Africa Plc – SPECULATIVE BUY (FVE: N18.07). We have lowered our FVE on Lafarge to N18.07 as we now expect a more significant dilution from the N89 billion Rights Issue and a downward revision to our 2019 volumes growth. Based on current price, our FVE translates to a BUY. However, we are highly cautious on Lafarge and thus rate the stock a SPECULATIVE BUY.

Kindly, visit ARM Research Portal for full stock reports.

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Fixed Income Report: Is STAB the new normal?

• CBN moves the needle. Last week Thursday, for the first time this year, CBN conducted a special OMO auction where it sold Stabilization securities (STAB) worth N287.7 billion. This came after subscription levels (N403 billion) at Thursday’s auction were 42% and 41% shy of planned offer (N700 billion) and OMO maturity on the same day (N684 billion) respectively. In addition to OMO issuances earlier in the week, CBN net issued N248.7 billion in the first week of December alone.

• The Elephant in the room. It all started in November, where CBN grappled with pent up liquidity in the system following higher OMO maturities (N1.89 trillion) and higher FAAC distribution (+13% MoM to N788.1 billion) and its reverberating effect at the Investors and Exporters Window.  As earlier posited, the repatriation of funds by offshore investors continued into November with a total outflow of $2.8 billion (vs. $2.0 billion in Oct). According to our analysis, of the $2.1 billion staged to mature in the month, a total of $1.6 billion was repatriated. This alongside demand from foreign Non-bank financial institutions and importers cascaded into widening of the demand-supply gap at the IEW to 49.3% MoM to $1.2 billion. Consequently, we saw depreciation of the NGN at the parallel market (N367.5/1$) and NAFEX (N364.1/1$) market which informed CBN’s decision to move the needle on naira liquidity (Total OMO sale last week: N932.7 billion).

• Scope for another STAB exist? Coming into December, with OMO maturities for the month at N2.3 trillion (vs N1.8 trillion in November), the Elephant in the room is pretty much around. In fact, we estimate FPI outflows to the tune of $1.6 billion (akin to November we assume that 83% of estimated offshore holdings for the month would be repatriated) which should leave the CBN with net outflow of $1.3 billion in December (vs $1.2 billion in November). In tackling this menace, we think CBN will remain fixated on keeping the currency stable at least pending when political uncertainties wane and crude oil inflow show signs of stamina. Consequently, we see scope for incessant liquidity mop up to wade off further attacks on the naira. However, in the event that CBN is unable to fill its coffers at subsequent OMO auctions—particularly on days where we have OMO maturities—we see room for further use of Stabilization securities to drive the apex bank’s quest of keeping the market illiquid.

• Room for higher Fixed income yields exist. Having laid the foundation for a tighter monetary policy in a bid to limit the outflow of offshore funds, we see room for higher fixed income yields in December. For us we think monetary influences will continue to trump downward pressure on yields emanating from expectation of thinner FG paper supply (ARM est. N28.2 billion in December vs N87.2 billion in November) after factoring the $2.8 billion and N100 billion Sukuk bond expected to come in Next week.

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ARM Research| Nigeria equity market booked another week of loss

The Nigeria equity market booked another week of loss, with the NSE ASI declining by 2.54% WoW to 30,874.17 pts and the market capitalization shedding N293.7 billion over the week. The loss was driven by declines in bellwether stocks in the banking (FBNH: -6.58%, GUARANTY: -5.63%, STANBIC: -2.04%, UBA: -3.85% and ZENITH: -3.33%), cement (DANGCEM: -4.15%, LAFARGE: -7.14%) and Oil & gas (SEPLAT: -9.68%) sectors. Top decliners during the week were DIAMONDBNK (-31.58%), PRESTIGE (-30.38%) and UNITYBNK (-18.82%).

• Fidelity Bank Plc – BUY (FVE: N92). We are now more optimistic on our earnings expectation over 2018 largely on the back of lower loan-loss provisioning. We have revised our FY 18E EPS higher to N0.82 (previously N0.76) which is 25% higher YoY. Our FVE of N2.92 (previously N2.82) translates to a BUY rating on the stock. Based on Friday’s closing price, our dividend expectation translates to a dividend yield of 8%.

• Nigerian Breweries Plc – SELL (FVE: N58): Reflecting the heated competition and further declines in volumes into Q4 18, we forecast FY 18E revenue to decline by 6.8% YoY to N321 billion. However,  we envisage cost pressures due to rising barley prices. Thus, we forecast FY 18E gross margin at 40.8% (FY 17: 41.7%) and EBIT margin of 12.6% (FY 17: 17%). Having rolled forward our model, we cut our FVE on NB to N76.58 (previous: N121.30), translating to a SELL.

• Guinness Nigeria Plc – UNDERWEIGHT (FVE: N96): As with NB, due to heated competition in the brewery sector, we foresee higher cost of sale over FY 19F due to rise in barley price and higher cost per unit due to loss of diseconomies of scale following weaker volumes. Having rolled forward our model, we cut our FVE on Guinness Nigeria to N73.96 (previous: N88.21), translating to an UNDERWEIGHT

• Okomu Oil Palm Plc – STRONG BUY (FVE: N75): Over our forecast period, we anticipate volumes growth emanating from the harvest of fresh fruit bunches from its extension 2 plantation. Based on our expectation for volumes growth, accompanied by margin expansion, we raise our FVE to N97.75.

• Seplat Petroleum Development Company Plc – STRONG BUY (FVE: N27). The case for Seplat remains higher crude oil prices and volumes, unrecognized capital allowance, reserve accretion, higher receipt from crude oil lifted in OML 55 as well as the company’s extended debt maturity profile which feeds into an improved cash position

Kindly, visit ARM Research Portal for full stock reports

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‘Poof’ went the money

Jane couldn’t believe what she was seeing. She was in shock.

All her plans for the Christmas just disappeared before her eyes and she couldn’t fathom what had happened.

For the past seven months, Jane had been saving towards Christmas. She was finally travelling home with her family after an 8-year break, and she wanted to storm her hometown in style. When she brought home the local piggy-bank she bought along the road to start her saving rendezvous, Edet her husband tried to dissuade her.

Edet tried to convince Jane to invest her money instead so that it could bring returns. Jane failed to listen because she always believed she had more control when she could feel and touch where her money was.

Today, as she stared unbelievably at the broken piggy-bank, she saw all her convictions shattered to pieces. Jane had consistently dropped one thousand naira everyday into the piggy-bank for seven months. Some days, she dropped more than that depending on the loose change she found herself with. She knew it was full because she had been forcing the currency notes into the small hole for the past month and planned to break it open in November ahead of December.

Her Christmas shopping list was ready. She had packed up her children’s old clothes to give away to relatives at her maternal home. She had given away her own old clothes to Iya Fatima who sold Moi Moi just down the street. Jane was ready for her and the children to slay in new clothes this Christmas. But when she broke open her local piggy-bank, all she saw were five and ten naira notes. She was weak, confused and angry.

She had been standing there staring for so long she didn’t hear her husband Edet walk in. When Edet saw her countenance and asked what the problem was, Jane told him a tale that sounded like it was enacted from a Nollywood movie. After recounting the ordeal to Edet, he burst out laughing.

Jane was infuriated “How can you laugh at something as mysterious and serious as this honey? Don’t you think someone has been stealing my money?”

Edet calmed himself down before responding “Dear, no one has been stealing your money. You just got ‘juju-duped’! Many people are falling victim to this now, that’s what I tried to tell you earlier. I know this is not the right time to say this, but I told you so. If only you had invested this money in a reliable investment vehicle, ‘juju’ wouldn’t have reached there and you’ll still have your money plus interest.”

Jane fell back into her chair and sighed bitterly “But why didn’t you tell me the part about juju” she quizzed but Edet had left the room leaving her alone. Alone with her thoughts, Jane vowed to be wiser next time. Never again will she make this kind of mistake.

Don’t take chances when it comes to your money. Explore investment options before the new year comes at www.arminvestmentcenter.com

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Things men don’t understand about women

They say men are from Mars and women from Venus, but that analogy doesn’t even make logical sense to most men. What do planets have to do with women being such mysteries?

Here are some things that baffle guys about the ladies:

Why women say one thing and mean another

Oh, don’t even go there. How can you ask a crying or angry lady if she’s fine and she says yes, then you go on your merry way? That’s just wrong in a woman’s book. She expects you to know she’s not fine. Be ‘smart’ like that.

Women’s fascination with shoes

Guys wonder why women need so much shoes. Most guys get on just fine with a black pair, a brown pair and some sneakers. It’s still a mystery to them but they accept it. What they don’t get is why women get mad at them when they fail to notice their new pair of stilettos…

Why women won’t say what’s bothering them

Men can’t wrap their heads around the reason for a woman being mad at them when they have no clue what they did. They can’t understand why women think they have psychic powers to just figure it out themselves.

Why women are so good at multitasking

Women hold the belt when it comes to multitasking. Men don’t even come close. The fact that a woman can be on the phone and at the same time be writing an email, watching something on television and somehow still monitor the kids in another room is talent to the average man. How do they even do that?

Why women ask questions they won’t like answers to

Most men dread the moment their wife looks them in the eye while dressing up and asks “Honey, do you think I’ve added weight?” “Wait up lady! I don’t want to start a war”, you think inwards trying your best to cushion your answer with love especially if she has really added weight.

Why women say they have nothing to wear

How is that even possible when your closet is overflowing with clothes? Men don’t understand this.

Why women spend hours on make-up

Men don’t understand all the time women spend just putting on make-up. “Are you painting a house?” They wonder.

Why women wear something that’s uncomfortable

A woman complains the heels hurt her feet, yet she’s okay because they make her legs look great. That bandage dress is choking, yet she wears them proudly because they accentuate her hips. Men don’t get this.

Why women have drama always

It’s either there’s something going on between a woman and her friends, or there’s that lady at work who’s out to destroy her. Oh, and the world will end if someone wears the exact same outfit as her… Men wonder why the female folk are not exhausted by this much drama.

But drama or no, the world will not be an interesting place without women. So, you keep doing your service to the world by putting money aside in an ARM Life Education Plan for your lovely daughters. More women being trained for the men to try understanding.

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Are you paid fairly

This is a thought-provoking question as we round off 2018.

For all the hard work you do, your commitment and more – are you paid the right wage? Whether your answer is yes or no, consider this – no amount of money you are paid today counts really, what counts is what you do with it. Let me explain.

Even if you earn a six-figure salary and mouth-watering bonuses every other month, if you don’t manage your finances well enough and invest a fraction, many years down the line, you may still stay stagnant financially or worse still, go under depending on the lifestyle you choose to adopt.

The question then shouldn’t stop at asking if you’re paid fairly. In fact, it’s at this point you should begin to evaluate how you spend what you earn. If all you ever do is spend as you earn, forget financial freedom, with the ever-increasing cost of living in Nigeria, you may soon find yourself in debt.

Back to the question

Now let’s get back to the question: how do you spend what you earn? It’s imperative that you know where your money is going in order to account for it. This is what budgeting is really about.

When your budget only features bills, needs, wants or debts there’s a big problem. Why? Because you can never be financially free if you live to work and spend it all. Have you thought about the day you won’t be so young and agile enough to work as you do now? What if along the line, you have an emergency that needs money to solve, can you sincerely say you have an emergency fund somewhere? Better still, wouldn’t you like the peace that comes with knowing that even when you’re not working, you are making money? Think about it.

Wouldn’t it be a dream come true to have enough money, your own home and the freedom to go and do whatever you want especially as you get older without your heart skipping at the thought of the financial implication?

To get this life, you must focus on what you do with what you are paid while striving to get to a place where you are paid better.

One way to get closer to the affluent lifestyle is to make investing a habit. With focus, consistency, patience and a willingness to dream big, the sky will only be your starting point. Ready to play it big? Explore investment options at www.arminvestmentcenter.com 

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