By Peter Egwuatu
Ahead of the listing of Oando Plc’s marketing division (OML) on the Nigerian Stock Exchange (NSE), shareholders have advised its Board of Directors to be cautious in the fixing of the share price in order to realise full subscription.

Some of the shareholders who spoke to Vanguard on the proposed plan by its Board to divest 49 per cent stake in Oando Plc said the move is in the right direction as it would make the OML compete effectively in the petroleum marketing sector.

According to the National Chairman of Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu who bears the minds of its members, “ Despite the fact that Oando is a good brand there is need for the pricing to be reasonable considering the downward trend of the Nigerian capital market and the economy in general.

When the price is adequately fixed the level of patronage will be high and the tendency of under subscription will be eliminated. There is no doubt that we have a good brand and the quality of our products are superb.”

Nwosu further stressed that the existing shareholders should be carried along and investors forum should be organised to continuously educate the people on the benefits of the divestment.

According to Mr. Adebayo Adeleke, a shareholder, “ pricing is very important in determining the level of patronage. Oando should take advantage of the bearish market by showcasing its brands to be above its peers. We know that our stock market is down generally since the global meltdown, so the hope of our market piking up is there provided the regulatory authorities are able to put their houses correctly”.
It should be noted that Oando has a history of pioneering and innovative transactions. The Unipetrol acquisition of OOH in 2000 was Nigeria’s first truly leveraged privatisation buy out. Judged to be one of the most successful privatisation based on growth in the company and shareholder returns.

Unipetrol’s acquisition and merger with Agip in Nigeria in 2002 was the largest transaction ever completed on the NSE. Oando’s N16 .1 billion equity raising in 2004 was the largest amount by non financial institution on the NSE.
Analysis of the Oando marketing division shows it has a historical core business and cash generating with approximately 500 outlets.

Furthermore, stockbrokers are of the opinion that the eventual listing of Oando Marketing on the NSE may significantly alter the current classification of companies as the Exchange will have to create a different category for Oando Plc, the oil exploration and production business.

According to them “ That category could be called Energy, as the case on the Johannesbourg Stock Exchange, while Oando Marketing will remain under the petroleum marketing sector. Oando Group currently owns 100 percent of the marketing business, but Vanguard learnt that the company may release as much as 49 percent to the investing public in Nigeria, a move that will eventually lead to the listing of Oando Marketing on the Exchange.

The move is likely to be interpreted by the market as a clear effort by the company to create an understandable distinction between its upstream and downstream businesses, as it continues to grow its oil exploration portfolio and with a marketing operation that has been on for more than 50 years.

“What this means is that the creation of Oando Marketing Plc from the group will favour shareholders who seek yearly dividends from a company that on its own will no longer be tied to the very long term nature of oil exploration and production business where investors often have to wait for that big pay day even while enjoying capital appreciation in the value of their shares,”  a broker added.

Analyzing the some of the benefits of the divestment, Oando believes that the move would offer long-term investment option through the company’s upstream business, Oando Plc, affording investors the opportunity to maximise risks through diversification.

After the divestment and sale of shares to the public, Oando Marketing will be listed separately on the NSE , thus enabling both Oando Plc and Oando Marketing to have an independent peer-to-peer comparison.

Oando, which has its primary listing on the Nigerian Stock Exchange (NSE) and a secondary listing on the Johannesburg Stock Exchange (JSE), recently announced an increase in half year turnover by 5 per cent to N172.9 billion in relation to the same period in 2009.

The Group grew pre-tax profit by105 per cent to N10.8 billion, while Profit After Tax increased 73 per cent to N6.6 billion.

Commenting, Group Chief Executive, Mr. Wale Tinubu,  said: “The first half of our financial year validates our diversified business model. Overall, positive performance was recorded in the downstream, midstream and upstream divisions of the company”.

According to the half year result, the Upstream division realised additional revenue from the newly deployed swamp rig and the steady ramp up in production from the oil & gas portfolio; the Midstream division inaugurated its maiden Independent Power Plant (IPP) and additional connects on its gas pipeline network; whilst the Downstream division made the largest contributions to profitability with the recovery of outstanding payments from the Petroleum Support Fund (PSF). There was also an increase in throughput as a result of the implementation of the Sovereign Debt Note Programme by Federal Government of Nigeria (FGN), which guarantees future subsidy re-imbursements.

Going forward, Tinubu said: “Our focus for H2, 2010 will be to maximise current earnings from existing portfolio, whilst bringing on stream projects in the midstream and upstream to improve overall profitability.

The Upstream division is expected to increase production as a result of the inauguration of the OML 56 pipeline and the deployment of the third swamp rig to commence operations in our oil services subsidiary; the Midstream division will be inaugurated and commence operations on its 128 kilometers gas pipeline, which traverses the South East region of Nigeria; the Downstream division will be partly divested to release equity to the Group for investment in the Upstream division, with the support of the FGNs indigenous and local content industry reforms.

“With these initiatives and barring unforeseen circumstances, we are confident in our ability to deliver an outstanding financial year end performance,” he added.