The share price of Vono Products Plc appreciated by more than 86 per cent in the past three weeks as investors position themselves to take advantage of its expected merger with Vitafoam Nigeria Plc. Vono’s stock has consistently topped the gainer’s list in the Nigerian Stock Exchange in the last two weeks. It appreciated by 29.79 per cent in the week ended May 22 while the average market position at the stock market was negative at -0.49 per cent. By the week ended May 29, Vono Products also recorded the highest percentage gain of 38.52 per cent as against modest market’s average gain of 0.11 per cent.
While the Nigerian equity market opened last week with average day-on-day decline of 0.77 per cent, Vono Products’ share price rose by 4.73 per cent on Monday, the highest percentage gain by any stock, to close at N1.77, 88.3 per cent increase on its share price of 94 kobo three weeks ago. It maintained a stable price and closed last week at N1.75 per share, 86.2 per cent above its three-week’s opening price of 94 kobo.
It opened this week unchanged at N1.75 per share as investors held on to their shares in anticipation of the merger. “Investors are going after Vono Products because of the proposed merger between the company and Vitafoam Nigeria, the trend you saw early was due to early movers from investors that believed the valuation then stands in favour of Vono Products and now, it’s becoming more of public knowledge and investors are holding on to see final details,” SewaWusu, investment advisor and head of research at Sterling Capital Markets Limited, said.
Vitafoam Nigeria acquired the majority shareholding in Vono Products in 2010. It is on pre-merger processes to absorb the operations of Vono by filing the requisite documents for the scheme of merger with the Securities and Exchange Commission (SEC).
Vitafoam Nigeria currently holds 47.5 per cent in Vono Product after the former had increased its majority equity stake during a rights issue in 2012.
Market analysts said investors believed underlying assets of Vono Products would lead to favourable share-exchange ratio for shareholders of Vono Products. Vono Products opened yesterday with a market capitalization of N997.66 million with 563.65 million shares at N1.77 per share. Vitafoam Nigeria, which has declared a bonus share of one for five shares for its shareholders, has 982.8 million shares worth N5.11 billion at opening price of N5.20 per share.
Vono Products in 2012 launched a N840 million rights issue to strengthen its operations and pursue expansion programme as part of efforts to emplace the company on the path of sustainable profitability.
Vono offered 525 million ordinary shares of 50 kobo each at N1.60 per share to pre-qualified shareholders on the basis of seven new shares for every four shares held as at October 31, 2011. Vitafoam Nigeria took advantage of the rights issue to increase its majority equity stake to 47.5 per cent.
With the rights issue, Vono Products had raised the prospects of continuing as a stand-alone subsidiary. The company had indicated that it would use the net proceeds of the rights issue to strengthen its operations and pursue expansion programme.
Specifically, the net proceeds were to be used to upgrade the factory, buy new plants and machineries and boost its working capital among others. The additional capital was meant to reduce the company’s dependence on banks for funding to finance its operations.
Both Vono Products and Vitafoam Nigeria have continued to struggle with sluggish sales and depressed margins. First quarter report for the period ended December 31, 2014 showed that Vono Products grew sales to N215.15 million in December 2014 as against N193.16 million in comparable period of 2013. The company made a profit before tax of N570, 000 as against loss of N4.52 million in 2013.
By Dike Onwuamaeze
[divider]