Lafarge Africa Rises by 28% as Investors Target Acquisition Price
Alpha seekers trading highs and lows on the Nigerian Exchange (NGX) have been making quick bets on Lafarge Africa PLC stocks following Holcim deals with Chinese cement company, Xuaxin.
In the equities market, market value of Lafarge Africa increased by about 28% in one week due to strong demand for the cement company’s shares.
In a deal, Xuaxin is takeover Holcim all Holcim control interest in Lafarge Africa, trading as Ticker: WAPCO in the local bourse.
While Holcim is leaving Nigeria, Chinese company Xuaxin is making expansion into the country, culminating in $1 billion deal to seller, from the buyer.
Investment analysts revealed that Holcim got equivalent of N103.85 on each shares sold to Xuaxin, which would be the minimum expected from the Mandatory Takeover Offer (MTO) in 2025.
Xuaxin indicated plan to take Lafarge Africa out from the Nigerian Exchange, with expectation to make a mandatory takeover offer to minority shareholders.
This come at the time when the company’s market value on the Nigerian Exchange was below N1 trillion. Latest data from the local bourse showed that Lafarge Africa market value has increased to N1.191 trillion.
This is a significant uptick in market price of WAPCO versus 52-week low of N29 in the equities market.
Last week, the company market value hit new 52-week high to N76.95 due to fast and furious demand for Lafarge as estimates showed mandatory offer from Xuaxin would be significantly above stock market price.
Investment firm CSL Stockbrokers estimated total implied equity value of Lafarge Africa at US$838.13 million.
They noted that since Lafarge Africa Plc having 16,107,796 shares in issue, this translates to a transaction price of approximately US$0.06/s.
Using closing exchange rate of N1,672.69 per US dollar, this means N103.85 payment per share Xuaxin paid to Holcim.
“We anticipate that the announcement of the transaction terms will generate significant interest and potentially drive Lafarge Africa’s share price closer to the acquisition price.
“This presents an attractive investment opportunity for investors seeking to benefit from Lafarge Africa’s strong market position and growth prospects.
“We currently maintain a Buy rating on the stock, with estimates under review”, CSL Stockbrokers said.
After its 9M-2024 earnings release, analysts at CardinalStone said they have revised projections and arrived at a new 12-month Target Price of N84.27 and a HOLD recommendation, from Buy.
“Our expectations for FY’25E are positive, with projected robust topline growth underpinned by improved capacity utilization, innovative product offerings, and premium pricing strategies.
“We also anticipate a significant improvement in margins as the company focuses on energy cost efficiency through its ‘Green Planet” agenda alongside the success of the material balance sheet deleveraging efforts.
“These measures are expected to shield the bottom line from the adverse effects of FX volatility, minimizing FX losses and supporting strong profit growth despite a higher effective tax rate”, CardinalStone said in a review note.
The firm said it recognizes the likely upside from the expected acquisition of significant holdings by Huaxin Cement, saying this development is not factored into its current valuation or target price.
WAPCO delivered impressive topline growth in 9M’24, with revenue surging by 66.0% year on year, driven by a 9.8% year on year recovery in production volumes to 4.07MT.
Analysts said this growth reflects improved capacity utilisation, supported by ongoing debottlenecking initiatives at the Ashaka and Ewekoro plants.
CardinalStone noted that the company’s capacity utilisation is on track to rise to 52.4% in in 2024 up from 48.0% in 20223.
The company maintained strong pricing, with average revenue per tonne reaching N117,697 in 9M-2024, up from N77,920 in 9M-2023, according to CardinalStone Limited.
Analysts expect steady growth underpinned by further improvements in capacity utilisation as debottlenecking efforts continue to yield results.
“We project volumes to increase to 5.77MMt, with demand growth supported by WAPCO’s introduction of innovative products. Pricing strength is also expected to persist, enabling the company to protect margins amidst macroeconomic headwinds.
“We anticipate moderate price increases in 2025, with revenue per tonne forecasted at N136,983, driving total revenue to an estimated N811.9 billion for the year”, CardinalStone said in a review. #Lafarge Africa Rises by 28% as Investors Target Acquisition Price#
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