Company Overview

NASD Plc (NASD), an over-the-counter securities exchange, was established by the National Association of Securities Dealers in 1998. In 2012, the Securities and Exchange Commission (Nigeria) authorised NASD to provide a platform for trading the securities of unlisted public companies. NASD became a public company in May 2013. 

NASD helps small and medium-sized companies to raise capital, in addition to providing a formal market for unlisted securities. The company introduced NASD Enterprise Portal (NASDeP) and NASD VentureRamp to provide businesses with additional financing options. NASDeP allows high-growth companies to raise finance from venture capital firms, private equity firms and other investors. VentureRamp helps businesses obtain funds from crowdfunding investors and other members of the public for social causes.

NSE Consult Limited, Heirs Holdings Plc and Capital Assets Limited are the top three shareholders of NASD with equity stake of 10.87%, 8.58% and 8.03% respectively at the end of the 2024 fiscal year.

Mr. Kayode Falowo chairs the nine-man board of directors of the company.  The management team of NASD is headed by Mr. Eguarekhide Longe, the managing director/chief executive officer (CEO). .Mr. Longe was named CEO in July 2022, thereby replacing Mr. Bola Ajomale, the pioneer managing director of NASD.

Investment Thesis

NASD is an alternative market for trading securities such as equities, bonds, exchange traded funds, commercial papers and money market products in Nigeria. It provides unlisted private and public companies with recognised avenues of raising finance for their operations or projects. Organisations avail  themselves  of NASD’s financing options through five NASD platforms, namely NASD OTC Securities Exchange, Digital Securities Platform, NASD Enterprise Portal, Commercial Paper Portal and NASD VentureRamp.

Fee and commission income remains the major source of its earnings. Fee and commission fee has grown at a compound annual rate of 46.2% over the past 10 years. Trading commission accounts for over 90% of fee and commission income in the last three years. On the contrary,  the contribution of NASD Enterprise Portal to total fee and commission income dropped from NGN5 million in 2023 to NGN1 million in 2024. NASD launched its data portal in 2018 to boost its earnings. But Data related fee has always been less than 1% of fee and commission income.

In spite of the  rise in the number of companies registering on NASD and the volume of transactions, NASD has not been able to consistently grow its earnings. It had accumulated losses over the years.

But the company seemed to have turned the corner in 2024. The company’s revenue and profits reached a record high in 2024 fiscal year, surpassing all previous values. An operating profit was made after five consecutive years of incurring operating losses. Profit Before Tax and Profit After Tax became positive after recording losses for two successive years. Consequently, the accumulated losses were completely eliminated. The net income for the year exceeded NGN400 million, prompting the company’s decision to compensate the shareholders by paying dividend for the first time since its inception.  

We are of the opinion that the management should not relent on its effort to create more awareness and attract more participants to the OTC market in order to engender earnings stability. We will continue to monitor the company to ascertain the effectiveness of the strategies of  the management to sustains the improvements made recently.

Valuation

The current market price  of  NGN29.45 per share is well above our estimated fair value ranging from NGN3.90 to NGN5.65. In our opinion, the share of the company is overpriced.

Financial Overview

NASD’s financial performance in 2024 was remarkable. The company posted fee and commission income of NGN1.1 billion in 2024, translating into a compound annual growth rate of 64.2% over the past three years. Trading commission which produced over 70% of total fee and commission in the past ten years, jumped by 305.2% year-on-year to NGN798.4 million at 2024 year-end. Listing fee grew by 254% year-on-year to close at NGN251.9 million. Listing fee was responsible for 23.4% of total fee and commission income (2023:24.1%).

NASD also realises interest income from investment in money and capital market instruments. Interest income was NGN61.4 million in 2024, compared to NGN42.7 million in 2023.

The inability to consistently grow its gross earnings  has made it difficult for the company to  cover costs and produce profits in most of the years since it began operations. NASD had been accumulating losses until 2024 when its profit hit an all-time high, paving the way for the company to reserve part of its profits and pay dividend for the first time. NASD had a retained  profit of NGN184.8 million in 2024 as against an accumulated loss of NGN224 million in 2023.  

In 2024, operating profit was NGN520.8 million compared to an operating loss of NGN110.7 million recorded in the previous fiscal year.  The company made a  Profit  Before Tax (PBT) of NGN584.8 million as opposed to the Loss Before Tax reported in the previous two years,

NASD generated  a Profit  After Tax (PAT) of NGN408.8  million in 2024 as against a Loss After tax of  NGN69.6  million in 2023. Profit margins have not been encouraging; profit margins and returns  of NASD, on the average, have been negative. Operating profit amounted to 48.4% of  total fee and commission in 2024. PBT and PAT stood at 54.4% and 38% of fee and commission income respectively. Return on equity  and return on assets in 2024 were 44.6% and 31% respectively.

Shareholders’ equity rose by 80.4% year-on-year to NGN917.2 million. The company had a retained profit of NGN184.8 million at 2024 financial year-end contrary to the previous year’s accumulated loss of NGN224 million.  Total assets lost 136.2% year-on-year. Net cash flow from operations, which had  been mostly negative, was  NGN895.2 million in the year under review. Consequently, NASD was able to produce a positive free cash flow for the shareholders amounting to NGN853.1 million in 2024.

Business Risk

NASD is susceptible to the vagaries of the Nigerian economy.  A lull in economic activities would reduce the amount of transactions on the NASD platforms. Reduction in demand or rising unemployment may reduce business investment and the need to raise finance for new investments or projects.

NASD is a self-regulatory organisation; its success hinges on its ability to create a fair and transparent market that is free of rigging, insider trading and collusion. Therefore, the lack of  confidence in its ability to properly regulate the market will reduce the willingness to use its products.

Recommendation: Overpriced