Niger Delta Exploration and Production Plc (NDEP)

[solainvest]

Proshare News

[solainvest]

THISDAYonline

Based on the article above which was in 2004, I extracted this:

''Although, the company disclosed that the shares of NDEP have not been and will not be quoted on any Stock Exchange immediately upon conclusion of the offer, it was the intention of the directors of NDEP to seek quotation of the company's ordinary shares on an approved Stock Exchange within the next 3 to 5 years, or sooner if considered suitable''.

The initial offer then was at N42 (how time flies!)

[Distinction]

SolaInvest, I hear you! I wonder what the minimum purchase limits will be set at, as this Placement sounds very lucrative. Those that invested back in 2004are sitting very pretty right now...

[zainabusman]

Well lets not get excited by the seemingly excellent return from N42 to N155 bw 2004 to date. Lets compare an Investment in NDEP in 2004 to an investment in GTB in early 2004.

Lets say you had N33,000 in 2004 and u bought GTB at N11 in Feb 2004 (it sold for as low as N10.54 in Feb 2004). U would have 3,000 shares. GTB announced a bonus of 1 for 3 in 2004. Consequently, u would have 4,000 units. In 2006, GTB gave another 1 for 3 bonus. Ur holdings are now 5,333. In 2007, GTB gave a bonus of 1 for 4. So ur total holdings are now N6666. At todays price of N32, ur investment is valued at N213,312. If we ignore cash dividends and charges, u made a gain of 546%.

Ur investment in NDEP would have now yielded 269% (from N42 to N155). Off course i dont know whether NDEP issued huge dividends ( i doubt much) or bonus (possible). If this is so, then the returns will be different.

Considering how risky an investment in NDEP is and the lack of easy exit, an investment in GTB would have been the better choice.

The lesson here is we should examine any PP b4 we enter carefully and see whether it really provides returns commensurate with the risk we are taking.
Unfortunately, sometimes we see a PP as an opportunity 4 a quick gain should listing be quick.

[hispy99]

Originally Posted by zainabusman

Well lets not get excited by the seemingly excellent return from N42 to N155 bw 2004 to date. Lets compare an Investment in NDEP in 2004 to an investment in GTB in early 2004.

Lets say you had N33,000 in 2004 and u bought GTB at N11 in Feb 2004 (it sold for as low as N10.54 in Feb 2004). U would have 3,000 shares. GTB announced a bonus of 1 for 3 in 2004. Consequently, u would have 4,000 units. In 2006, GTB gave another 1 for 3 bonus. Ur holdings are now 5,333. In 2007, GTB gave a bonus of 1 for 4. So ur total holdings are now N6666. At todays price of N32, ur investment is valued at N213,312. If we ignore cash dividends and charges, u made a gain of 546%.

Ur investment in NDEP would have now yielded 269% (from N42 to N155). Off course i dont know whether NDEP issued huge dividends ( i doubt much) or bonus (possible). If this is so, then the returns will be different.

Considering how risky an investment in NDEP is and the lack of easy exit, an investment in GTB would have been the better choice.

The lesson here is we should examine any PP b4 we enter carefully and see whether it really provides returns commensurate with the risk we are taking.
Unfortunately, sometimes we see a PP as an opportunity 4 a quick gain should listing be quick.

Good analysis

[Distinction]

Zainabusman, your analysis makes sense regarding the comparison between the two stocks in terms of which would have been a more profitable investment if purchased back in 2004. Either way, both investors still made a profit (just one more than the other). Since I can't turn back the hands of time, I have to look at the opportunity currently on hand and determine if it will still be a worthwhile investment going forward. With the worldwide energy and oil crisis, this sector will prove to continue to be important for years to come.

If anyone gets access to the Prospectus when it comes out, please post so that we can all start analyzing and see if it makes sense to invest in.

Happy Investing!

[solainvest]

Originally Posted by zainabusman

Well lets not get excited by the seemingly excellent return from N42 to N155 bw 2004 to date. Lets compare an Investment in NDEP in 2004 to an investment in GTB in early 2004.

Lets say you had N33,000 in 2004 and u bought GTB at N11 in Feb 2004 (it sold for as low as N10.54 in Feb 2004). U would have 3,000 shares. GTB announced a bonus of 1 for 3 in 2004. Consequently, u would have 4,000 units. In 2006, GTB gave another 1 for 3 bonus. Ur holdings are now 5,333. In 2007, GTB gave a bonus of 1 for 4. So ur total holdings are now N6666. At todays price of N32, ur investment is valued at N213,312. If we ignore cash dividends and charges, u made a gain of 546%.

Ur investment in NDEP would have now yielded 269% (from N42 to N155). Off course i dont know whether NDEP issued huge dividends ( i doubt much) or bonus (possible). If this is so, then the returns will be different.

Considering how risky an investment in NDEP is and the lack of easy exit, an investment in GTB would have been the better choice.

The lesson here is we should examine any PP b4 we enter carefully and see whether it really provides returns commensurate with the risk we are taking.
Unfortunately, sometimes we see a PP as an opportunity 4 a quick gain should listing be quick.

I do agree with your analysis above.

The only point I want to stress is that Private Placements trade OTC. There is always an exit option though not easy as an exit on the stock exchange when the company has listed.

You are right that people should look before the leap on PPs but there is an exit for all PPs if you want to exits. For every PP with a sound fundamental that you have parcipated in, you can exit. 'SOUND FUNDAMENTAL and not EMOTIONAL FUNDAMENTAL'

I can list about 10 companies that trade over the counter and this includes the ones that have recently concluded their PPs. All you need to do is go to the company registrars or issuing houses. There are people who want to sell for liquidity reasons or other reasons and there are those who have a better alternative/use for their cash.

[zainabusman]

Originally Posted by Distinction

Zainabusman, your analysis makes sense regarding the comparison between the two stocks in terms of which would have been a more profitable investment if purchased back in 2004. Either way, both investors still made a profit (just one more than the other). Since I can't turn back the hands of time, I have to look at the opportunity currently on hand and determine if it will still be a worthwhile investment going forward. With the worldwide energy and oil crisis, this sector will prove to continue to be important for years to come.

If anyone gets access to the Prospectus when it comes out, please post so that we can all start analyzing and see if it makes sense to invest in.

Happy Investing!

I dont want to over flog the point, but Oil companies are not really the ones pocketing most of the gains acruing from the high oil price. Most of it goes to
governments due to the high tax regime applied to oil exploration. Currently they are taxed at 85% in Nigeria!

As an example, last year by now Total shares were trading at about 60 euros. Oil price was around the $80/barrell mark. Today Total shares are trading at 56 euros even though oil has exceeded $125/barrell. This is because the market understands that most of the gains dont accrue to Total. What makes an oil company is the reserves in its books.

The botteom line is oil exploration is a very complicated business and we should understand it b4 we commit our funds.

[Distinction]

Zainabusman, you've definitely taken me to school on your breakdown of the oil sector. Your point is well taken about "looking before leaping"! Thanks for the info.

D.

[polosco]

The problem with this PP will be volume purchase, how many people will be able to but at the high pric ethey will be listing, hence recouping investment may not be fast in coming