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GCR Affirms Forte Oil Issuer, Bond Ratings At A-(NG)

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GCR Affirms Forte Oil Issuer, Bond Ratings At A-(NG)

GCR Affirms Forte Oil Issuer, Bond Ratings At A-(NG)

By Modupe Gbadeyanka

The national scale issuer ratings assigned to Forte Oil Plc of A-(NG) and A1-(NG) in the long term and short term respectively have been affirmed by Global Credit Ratings (GCR) with the outlook accorded as Stable.

Concurrently, the Series 1 Fixed Bond rating has been affirmed at A-(NG) and placed on Stable Outlook. The ratings expire in June 2018.

A statement issued by GCR explained that the ratings were accorded to Forte Oil Plc after taking cognisance of the firm’s top-tier position in the Nigerian downstream petroleum industry, underpinned by a visible brand, significant assets across the value chain, strong relationships with suppliers, experienced management team, as well as an extensive distribution and retail network.

The downstream petroleum industry is heavily reliant on imports, due to low levels of domestic refining. As a result, challenges were heightened by hard currency shortages (which resulted in product scarcity), adverse exchange rate movements and delayed subsidy payments in 2016.

In addition, the harsh economic environment and reduced consumer spending power led to a temporary decline in demand for petrol (following a 67% increase in the pump price in May 2016).

In a bid to reduce exposure to foreign exchange fluctuations, Forte Oil significantly scaled back its refined petroleum product import volumes. As such, FY16 and 1Q FY17 revenue and earnings were significantly below initial forecasts.

Forte Oil’s revenue increased by 19% to N148.6bn in FY16, underpinned by a general price increase across business segments and higher traded lubricant sales volumes. However, the partial cost pass through saw the gross margin decline to 13.9% in FY16, before rebounding to 17.6% in 1Q FY17. Effective cost management and focus on high margin, non-regulated products, saw operating margin increased from 5% in FY15 to 6.3% in FY16 edging up to 9.5% in the 3-month period to March 2017.

The net finance charge spiked to N4.2bn in FY16 (FY15: N1.6bn), due to the impact of Naira devaluation on import finance facilities and higher lending rates. Accordingly, net interest cover reduced to 2.2x in FY16 (FY15: 3.6x), and further to 2x in 1Q FY17.

The N9bn Series 1 Bond Issue and funding raised for the Geregu Power plant overhaul pushed debt up to N49.4bn at FY16. Coupled with a reduction in distributable reserves (following a dividend payment), this drove net gearing up to 75% at FY16 and 80% at 1Q FY17.

Positively, net debt to EBITDA improved to a respective 263% and 209% at FY16 and 1Q FY17, albeit behind target.

Forte Oil plans to raise additional capital of N20bn equity during 3Q 2017. Following the equity raise, management anticipates net gearing to reduce below 35% at FYE17 and FYE18 respectively, while net debt to EBITDA is projected to register around 100% for both years.

Despite the downstream petroleum industry challenges, prospects are enhanced by a strong baseline of demand, on the back of the country’s large urban population and heavy vehicular traffic.

In addition, the completion of Dangote Group’s 650,000bbl/d refinery (set for 2019), is expected to materially reduce the dependence on imports, with the Ministry of Petroleum projecting the cessation of fuel importation once the plant is at full capacity.

Forte Oil plans to expand its retail network and diversify its non-fuel revenue streams with strong local and international brands. In this regard, the power generation business had increased capacity utilisation to 100% by 1H FY17 (1H FY16: 35%) and should contribute materially to earnings in the medium term.

The Group also anticipates a rebound in the upstream oil and gas services business on the back of broader economic recovery in the medium term, and thus plans to expand service offerings.

Sustainable margin enhancement, on the back of the materialisation of current business plans could result in positive rating action if it translates to stronger credit protection metrics in the medium term.

Conversely, adverse regulatory/policy changes, or other external factors could adversely affect earnings and result in liquidity strain and/or increased gearing metrics, placing downward pressure on the ratings. In addition, sustained increase in debt levels and gearing metrics would lead to negative rating action

As the Series 1 Fixed Rate Bond is a senior unsecured obligation of the Issuer, the Bonds will bear the same rating as the Issuer, and any change in the rating assigned to the Issuer will directly affect the Bond rating.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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Economy

Investors Give Nigeria’s Orda $1.1m to Grow Services in Africa

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Orda restaurant management

By Adedapo Adesanya

A Nigerian restaurant management startup, Orda, has raised a $1.1 million pre-seed funding round to speed its growth and expand across Africa.

The pre-seed round was led by Lofty Inc Capital Management, with participation from Techstars – Boulder, Magic Fund, Hustle Fund, Norrsken Foundation, Microtraction, DFS Labs, Oxford Seed Fund, Enza Capital and Agroly Advisors, as well as Ire Aderinokun, Jesse Ovia, Ademola Adesina and other angel investors.

Following the raise, the startup is looking to increase its rate of growth and expansion across the continent.

Orda has developed a full-stack approach to integrating local payments, logistic companies while building inventory management, and business analytics for small to medium-sized food businesses.

It says it is the only technology solution on the continent that allows restaurants to accept and process all their in-store, website, social media, WhatsApp, Jumia Food, Glovo and Bolt Food orders from one easy-to-use interface.

The startup’s cloud-based solution is currently available for restaurants in Nigeria and Kenya.

In addition, its Gross Merchandise Value (GMV) has been growing at more than 15 per cent week-on-week as Orda now processes thousands of weekly transactions.

Speaking on the inspiration behind the technology, Mr Guy Futi, the startup’s CEO, said the team had kept trying to address the real pain points of chefs, caterers and small restaurants.

“From that Orda grew. Before Orda, a small food business owner could spend up to four hours a day reconciling transactions while trying to figure out losses. We looked to alleviate that burden. In the process, we noticed that food business owners were not fully integrated with local payment solutions, online sales channels, and logistic providers. This made their operations even more difficult,” he said.

On his part, the company’s Chief Technology Officer, Mr Fikayo Akinwale said, “Orda was built from a near 18 months of a collaborative customer feedback loop. We listened to everything, from how African restaurants reconcile inventory, how customers pay, to how they handle logistics and more.

“We can confidently say that no one has done as much work as we have to build an end-to-end solution for our food business owners. We are excited to usher in much-needed digitisation to the sector.”

Mr Idris Ayodeji Bello, a managing partner of LoftyInc Capital Management, said his team invested in Orda because it was building the core digital infrastructure for restaurants across Africa.

“The team has done the hard work of figuring out the core problems that African restaurant owners are facing and is building a solution that can revolutionise the food business across the continent. LoftyInc is excited to back a solution-focused team like Orda,” he said.

Launched in 2020, Orda is a cloud-based restaurant management system provider that hopes to provide one operating system to power African restaurants. Since its launch, the Lagos-based startup has worked with several well-known African and global restaurants including Barcelos, Eric Kayser, Johnny Rockets and Ofadaboy.

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Economy

Unlisted Securities Market Closes Flat on Wednesday

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Unlisted Securities Market

By Adedapo Adesanya

The key performance indices of the NASD Over-the-Counter (OTC) Securities Exchange closed flat on Wednesday, January 19 as investors begin to trade cautiously.

It was observed that during the trading session, none of the securities on the platform recorded a movement as their prices remained unchanged at the close of business.

According to data obtained by Business Post, the market capitalisation of the NASD Exchange retained its previous value of N633.06 billion, while the NASD Unlisted Securities Index (NSI) remained at 747.61 points.

However, trading data showed that there were declines in the volume, value, and deals carried out at the unlisted securities market.

Investors traded a total of 195.2 million units of securities in contrast to the 453.7 million units of securities transacted at the preceding session, indicating a fall of 56.9 per cent.

The value of shares exchanged by the market participants also depreciated, this time by 58.4 per cent to N4.1 billion from N9.8 billion published at the bourse at the Tuesday session.

In the same vein, the total number of deals executed by traders went down by 9.1 per cent as 10 deals were performed at the exchange as against the 11 deals printed at the preceding session.

At the close of transactions, the most traded stock by volume on a year-to-date basis was Central Securities Clearing Systems (CSCS) Plc with the sale of 844.7 million units valued at N17.7 million. VFD Group Plc followed with 916,161 units of its stocks valued at N331.5 million, while Friesland Campina WAMCO Nigeria Plc was in third place with 207,030 units valued at N24.5 million.

Also, CSCS Plc closed as the most traded stock by value (year-to-date) with the sale of 844.7 million units exchanged for N17.7 million, VFD Group Plc was also in second place with 916,161 units worth N331.5 million, while Friesland Campina WAMCO Nigeria Plc was in third place with 207,030 units valued at N24.5 million.

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Economy

Naira Trades N566.22/£1 at Interbank, Bitcoin Gains 0.8%

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Bitcoin loses

By Adedapo Adesanya

The Naira appreciated by 84 kobo against the British Pound Sterling at the interbank segment of the foreign exchange (FX) market on Wednesday to close at N566.22/£1 compared with the preceding day’s N567.06/£1.

Equally, the indigenous currency edged higher by N2.73 against the Euro at the same market window to finish at N470.99/€1 in contrast to N473.72/€1 it was exchanged a day earlier.

However, against the United States Dollar, the local currency suffered a loss as it depreciated by 30 kobo to close at N415.30/$1 versus N415.00/$1 it ended on Tuesday.

It was not the same scenario with the Naira at the Investors and Exporters (I&E) window as the Naira closed stronger than the greenback, appreciating by 17 kobo or 0.04 per cent to trade at N416.33/$1 compared with the previous day’s exchange rate of N416.50/$1.

This occurred amid an increase in the FX trades at the market window as the turnover went up by 12.2 per cent or $13.55 million to $124.57 million from the preceding session’s turnover of $111.02 million.

Meanwhile, at the digital currency market, the bulls took control amid a renewed investor confidence, causing seven of the 10 tokens tracked by Business Post to end in the positive territory yesterday.

The highest gainer for the session was Tron (TRX) as its value went up by 1.7 per cent to sell for N39.43, followed by Ripple (XRP) which appreciated by 1.4 per cent to N436.99, and Binance Coin (BNB), which grew by 0.9 per cent to trade at N192,540.74.

In addition, Bitcoin (BTC) gained 0.8 per cent to trade at N24,183,994.94, Dash (DASH) recorded a 0.7 per cent appreciation to sell at N74,381.31, Litecoin (LTC) added 0.7 per cent to its value to close at N80,114.51, while Ethereum (ETH) made a 0.4 per cent jump to trade at N1,802,564.40.

However, Cardano (ADA) depreciated during the session by 7.3 per cent to N805.27, Dogecoin (DOGE) retreated by 0.6 per cent to sell at N99.9, while the US Dollar Tether (USDT) declined by 0.1 per cent to sell for N577.45.

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