Aug 13 (Lagos) - Notore Chemical Industries Plc ( NOTORE ) managed to list its shares on the Nigerian Stock Exchange on a valuation which is so high that no management would forgo that opportunity (to list the shares).
This Company has been around for a long time and is making a loss. It is no comparison to the tech IPO's that list in US stock markets which get sky high valuations while they are still making a loss.
1) Those companies are new companies which are mostly in technology sector.
2) Those companies are moving towards profitability and growing at a rapid rate usually above 30% per year for many years.
3) Their shares usually get gobbled up by shareholders as soon as they hit the floor. Or they fall sharply if the valuation is unrealistic even by wall street standards.
But on the Nigerian Stock exchange, an old chemical manufacturing company can get such a valuation is only surprising to those who have not been around for long.
My mind immediately goes back to
SEPLAT and CAVERTON in 2014. Those investors who trusted the market and bought those shares are still expecting to make their first Kobo on their investments. Even the recent rally in crude oil prices has not pushed
SEPLAT above its IPO price after more than four years of listing.
Coming back to NOTORE , the company released its 9 months results and it showed a big loss at the bottom line. Top line revenue also fell 20%. Some newspaper analysts are already recommending a "sell" rating on the stock.
Looking forward, everyone is waiting for the MTN IPO later this year or early next year.
Am worried by the valuation MTN will be able to attract from the exchange given their desperation to list more companies. This desperation allows Companies to dump their shares on stock market when their businesses are no longer growing and in this case actually contracting.
The investors are the losers at the end of the day who end up buying these shares.
reporting for easykobo.com on Monday, Aug 13 2018 from Lagos, Nigeria