STARCOMMS PLC Analysis 12th Jan 09
by Ope on January 12th, 2009
filed under Capital Market, Economy, Make Money
Brief Introduction
Starcomms plc was incorporated on the 19th July, 1995. It is the 4th largest Nigerian Telecom operator that provides fixed line, mobile and internet/data services over wireless CDMA network. In February 2007, Starcomms Plc launches its nationwide mobile services. Starcomms subscribers has grown to 1.92 million with 1.55 million active subscribers, having full operation in 11 major cities,and going with the plan of making 20 more coverage to sum up to 31 cities by the end of 2008.
The company is also the leading provider of 3G and 3.5G broadband services in Nigeria using CDMA 2000 Ev-Do and the first company in Africa to launch Ev-Do high speed (600-800 kbps) broadband services in June 2006. The company was listed on the Nigerian Stock Exchange on the 14th July 2008.
Starcomms over the years has position itself to exploit the significant growth expected in the Nigerian Telecommunications market.
Management Team:
The paddle of progress has been sustained over the years by well deserved executives with high level of professionalism, skills and experiences to the achievement of goals and objectives of the company. The board list includes:
1. Chief Maan Lababidi, OON (Chairman)
2. Maher Qubain (CEO)
3. Omar Lababidi
4. Navaid Burney
5. Folabi Williams
6. Paul Edwards
7. John Owers
8. Micheal Rosse
9. Oluwaseyi Owodunni (CFO)
10. Dr. Sam Nwosu (Sales Director)
11. Manoj Vashisht (Marketing Director)
12. Krishnan Madabushi (CTO)
FINANCIAL ANALYSIS
Price Movement: Performance of the shares price of Starcomms Plc on the secondary market has been on the downward trend as analyzed from the period of its listing to the current Market price. For instance, available statistics show that the Company’s share price movement, which stood at N14.33 as at 14 July, 2008, dropped to close the third quarter 26 September, 2008 at N8.04. With the current bearish trend established in the market, the share price dropped sharply to N4.05 as at December 31, 2008.
Turnover: There have been consistent and progressive increases in the turnover over a five (5) year period ending 31 December. Turnover for the year ended 31 Dec., 2003 shows a figure of N3.14 billion, N5.17 billion in 2004, N6.34billion, N13.61 billion, and N20.51 billion, for 2005, 2006, and 2007 respectively. The result for the third quarter ended 30 September 2008 showed an increase of N12.40 billion to stand at N27.13 billion as compared with the N14.73 billion third quarter result for 2007. This shows that the market for the company is expanding, and huge growth potential.
Technical Analysis/Conclusion
Listing price of 14.33 on 14/7/2008 rose to an all-time high of 14.90 the following day, and ever since has been on the decline till date closing at 3.01 on 9/1/2009. With a total of 6,878,478,096 shares in issue, this translates to a market capitalization of 20.7 billion naira as against a market capitalization of 98.5 billion at listing, a depreciation of 79% in market valuation of the company. The entire market capitalization on the other hand depreciated by about 43% over the same period.
Since the fortune of the market is not looking bright it may be concluded that the share price of Starcomms Plc would continue to fall at a faster rate than the market.
This conclusion is further corroborated by the fact that at the Price/Earnings ratio of the company is ? with an expected dividend of 76kobo per share in Year 2010, when the earnings of the company is expected to be in the positive region based on the company’s forecast. A cursory look at the company’s forecast however, indicates that the company’s performance is below expectation, and that the forecasts may not be met. The expected loss before tax for the year ended December 2008 is put at 454 million naira, but the third quarter (September 2008) results released to market put the company’s loss before tax at over 3 billion naira.
With the final results of the company being expected in a few weeks, and considering the current market meltdown and investor apathy, it is advisable to dispose holdings in Starcomms Plc now before the results come to the market, as the market reaction to these results is expected to further dampen the company’s share price.
Naira Devaluation..how effective?
by Ope on January 2nd, 2009
Experts have expressed divergent views on the deliberate devaluation of the naira by the Central Bank of Nigeria to maintain internal and external balance of the economy.
While some observed that this action, which the CBN said was a “deliberate and strategic” move aimed at saving the economy from an impending financial crisis, would not be effective at this point in time, others said that the adjustment could not have come at a better time.
A retired professor of economics, Kayode Familoni, who spoke with our correspondent in a telephone interview on Monday, said although the devaluation had its benefits in the face of the current global crisis, it might not be effective as a deliberate policy weapon for Nigeria at present.
Familoni, formerly of the Department of Economics, University of Lagos, said before naira devaluation could be effective as a deliberate policy weapon, the country’s non-oil products much contribute more to the Gross Domestic Product.
“Before that policy can work, the non-oil sector must be significant, which at present, is not the case in Nigeria. The price regime in the oil sector is exogenously determined, it is not controlled by the country,” he explained.
“When we devalue, our domestic products become more attractive to foreigners, but right now, the non-oil sector is relatively weak,” he added.
But the Chief Executive Officer, Financial Derivates, Mr. Bismarck Rewane, said the devaluation is a necessity at this time because of the continuous fall of oil prices.
Speaking in a telephone interview with our correspondent, Rewane noted that the country currently had a financing gap, which necessitated a prompt adjustment.
Governor of the CBN, Prof. Charles Soludo had told the Senate, while explaining the continued depreciation of the naira against the United States dollar, and other foreign currencies, that the process of devaluing the naira was “carefully thought through and deliberately implemented” to maintain an internal and external balance for the economy.
He said the crash of crude prices in the international market due to the global financial crisis had adversely affected foreign earnings and inflows into the Nigerian economy.
While explaining that this had implications for the nation’s balance of payments, Soludo said, “Every country that experiences this has two options –you either allow the prices to adjust by way of exchange rate or quantities would adjust”.
On the effect of the falling value of the naira on inflation rate, Familoni said if the value of the naira fell vis-à-vis other foreign currencies, then foreign goods and services would be relatively more expensive than domestic goods and services.
He noted that this meant that the country would be importing at higher prices, adding that “given the home price regime, the imported price regime is higher. And some of these imported goods serve as intermediate or finished goods”.
This, he said, automatically increased the prices of goods and services in Nigeria, which meant there would be higher inflation.
However, while agreeing that such effects could follow the lower value of the naira, Rewane said, “You cannot make omelette without breaking eggs”.
“There is no perfect world. Some things must give. If there is inflation, it can be managed,” he argued.
The naira, which recorded some stability in the last three years, has crashed continuously from N117 to about N138 to the dollar in the past five weeks.
The development prompted the closure of the foreign exchange market for two consecutive days shortly before the Muslim Eid el Kabir festival.