PRESCO Plc is set to offer N100 billion Series 1 bond issuance from the Nigerian capital market, an investment that would position investors to earn N23.75 billion in interest payments.
Presco, one of Nigeria’s biggest palm oil makers, recently announced its plans to raise the N100 billion as part of its N150 billion bond programme.
The instrument will be issued at a 7-year tenure with a yield range of 23.25 per cent to 23.75 per cent.
It would return approximately N23.75 billion in interest to participating investors and mark the largest corporate bond issuance in the industry
A bond is a debt obligation, according to the Nigerian Securities and Exchange Commission (SEC).
Investors who buy corporate bonds are lending money to the company issuing the bond, and in return, the company makes a legal commitment to pay interest on the principal and to return it when the bond matures.
The N100 billion bond issuance represents Presco’s second venture into the Nigerian capital market, following its successful raise of N34.5 billion in 2022 under Series 1 of its N50 billion issuance programme.
The issuance was also a 7-year bond but carried a coupon rate of 12.85 per cent.
“I think that it’s relatively easy for Nigerians to take advantage of the Presco bond,” the head of Financial Institutions Rating at Agusto & co, Ayokunle Olubunmi, told The ICIR while responding to how Nigerians could take advantage of the Presco bond issuance.
“What would be best to do is for any interested individuals to check the prospectus for details information about the bond issuance or approach the Issues House for details.
“I am sure they will get the details of the transaction in the prospectus, including the minimum subscription amount that someone can invest,” he said.
With the Central Bank of Nigeria (CBN) rate hike spiking the boom being witnessed in the Nigerian capital market, Olubunmi believes it is a good time for Nigerians to invest in the capital market.
“Now the interest rates are high, and we all know that it will come to be high forever. Depending on how you look at it, the expectation is that interest rate might turn lower this year,” he said.
Olubunmi further explained that by investing in this kind of instrument, whether a five-year or seven-year instrument, the individual investor would earn the fixed interest rate all through the tenure of the bond.
He stressed, “Even if the CBN decides to start cutting interest rates downward, the interest on the bond will remain.
“So, irrespective of the movement in interest rates, even if the interest rate in the market drops to 0.5 per cent or even 0.7 per cent, you will still be earning the exact amount of 23.25 interest rate for the Presco bond,” Olubunmi added.
A capital market operator, David Adonri, told The ICIR that the boom being recorded in the Nigerian capital market is expected to extend to 2025 due to emerging favourable market and economic conditions.
Commenting on Presco’s proposed bond issuance, he said, “The company is performing well and the new capital injection will strengthen it further in seizing the vast businesses available in its industry.
“The capital raising exercise will attract a lot of interest from investors and hence facilitate its success. It is a good development for prospective investors who will benefit from the prospects of the company.”
The ICIR analysis of companies’ profit margins in the first quarter of 2024 revealed that Presco posted the highest profit margin than companies in other sectors.
The organisation reported that Presco’s revenue increased to N42.55 billion compared to N21.92 billion in the first quarter of 2023.
Its net profit rose to N24.06 billion from N9.96 billion, and its net profit margin to 56.54 per cent from 45.46 per cent in the review period.