Dangote refinery IPO could raise NGX market cap to N236trn – Rewane

Bismarck Rewane, the managing director of Financial Derivatives Company (FDC), says the proposed initial public offering (IPO) of the Dangote Petroleum Refinery could increase the market capitalisation of the Nigerian Exchange (NGX) from N161 trillion to N236 trillion.

Rewane spoke recently at the June edition of the Lagos Business School (LBS) breakfast session.

“In a ‘pure addition’ world the NGX would jump from N161 trillion to N236 trillion at listing and the ASI would re-rate proportionately,” the economist said.

He said the projection assumes that the IPO attracts fresh capital into the market, and without investors rotating funds out of existing stocks.

Rewane said the refinery’s targeted valuation is $50 billion, implying an addition of between N60 trillion and N75 trillion to the market at an exchange rate of N1,385 to the dollar.

He said the NGX could record a market capitalisation uplift of between 37 percent and 47 percent, while the all-share index (ASI) could gain between 30 percent and 40 percent.

The economist also noted that the reality of the Dangote refinery IPO is that the ASI will dip before it rises because the inflation caused by the United States of America and Iran war has squeezed retail wallets (35 percent of NGX investors).

“We believe part of the IPO will be funded by trimming liquid blue-chips making the net cap gain smaller than expected,” he said.

“In reality, the NGX would not jump from N161 trillion to N236 trillion at listing, and neither would the ASI. It would first fall under sell-off pressures before gaining on the back of the Refinery IPO’s $50 billion.”

Under the scenario, Rewane said the refinery’s $50 billion valuation would translate to an additional N45 trillion to N50 trillion in market value, resulting in a 30 to 40 percent increase in NGX market capitalisation and a 25 percent to 30 percent gain in the ASI.

Aliko Dangote, president of the Dangote Group, had saidthe planned IPO of its refinery might be conducted in September amid investor demand running into “billions of dollars”. (TheCable)