Latest / Green Ticker Tales / Regency Alliance Insurance rights issue: Is it worth taking up?

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Regency Alliance Insurance rights issue: Is it worth taking up? · Green Ticker Tales

• 0:00
  Is the Regency Alliance rights issue worth taking up? Let's get into the numbers. Now, please note that this is not investment or trading advice. Do your own research. Why do I say so? If you want to go to heaven or if you want to go to hell, that's a personal decision. That's not for me to make for you. Please note that this is not investment or trading advice. Now, let's get into the numbers. This is a rights issue of 3.2 billion shares.
• 0:27
  on the basis of one new share. For every five shares held, that's at the 8th of May, 2026. Application list, that is simply put, the rights issue opened on the 24th of June, 2026, and will close on the 7th of July, 2026. What's the money going to be used for? A bulk of the money goes to increasing statutory deposit. Obviously, you have higher capital basis, so obviously that means you have your statutory deposit up. And then the next,
• 0:56
  Large sum goes to expansion of e-business and retail business lines. So 40% goes to statutory deposit, and then 29% goes to e-business and retail business expansion. Rest goes to working capital, ICT infrastructure, and additional investment in subsidiaries. So for those who are listening on Spotify and other audio platforms, please take out the time to go watch the video. The video will be up.
• 1:24
  by the time this goes out. So it will be video first, audio later. Please take out the time to listen and watch. Now, the insurance numbers, as I said, are quite fair. I can blow this up a bit. In fact, I actually think I can stretch this a bit because my focus is on insurance service and net investment income. So insurance service results, if you can look at it, there's been growth. Insurance revenue has gone up. Insurance service results, you can kind of think as your, essentially your,
• 1:54
  profits on your insurance business, on the insurance subset of the business, has gone up. Except for 2025. In 2025, what happens is that you had a big bounce in insurance service expenses. So that's the core reason why you had that sharp drop in profit after tax for 2025. But these are unaudited numbers. I only wish this firm had dropped more recent set of numbers to make for sharper analysis. So insurance...
• 2:22
  segment of the company has been doing well. Investment e-commerce has also been doing well, but if you strip away the fair value gains, and I did that in the next page, you would see that the profit after tax come down drastically. So fair numbers, but if we're going to be looking at the bottom line, meaning return on equity, this firm hasn't created value. And I agree it's a tough task in Nigeria, but if your cost of equity
• 2:52
  anywhere between 2022 to 2025, even if you want to be conservative and say my cost of equity should be, let's even be conservative and say 19%. Most people use a 22, 21, 23% cost of equity, but let's even say 19, 20%. This firm, in essence, has actually destroyed value because if your equity is generating, your returns your equity is generating are lower than the cost of equity, then you've not created value. So this firm hasn't created value.
• 3:20
  And I hope that that figure accelerates. But you might argue, historically speaking, in a high interest rate environment, and this is what you're delivering, if slash when interest rates start to go down, then what are you going to do? So going by the bottom line, return on equity, this firm hasn't delivered value. Is the rights issue worth taking up? The convoluted answer is yes. Why do I say yes?
• 3:48
  And this is where the company has just made life difficult for themselves. Because one, launching a rights issue in the real market, ideally, well, I mean, probably this has been in the works for a while, but ideally, this should have either launched way before, because with all the hype and balls around the Dangotiri Petro-Kelbuka refinery was happening, a lot of liquidity is meant to leave the market. In some cases, you might argue liquidity has started leaving the market.
• 4:17
  I would argue that if you're going by post-Rice issue book value, you can argue that the book value for this firm is probably, unfortunately, I don't have the Q1 numbers. If they had dropped Q1 numbers, then one could calculate, but just doing some mathematical engineering, you can argue that the book value of this stock is somewhere between maybe 1.9, 1.9, 10 couple. So from that,
• 4:44
  angle, you could see maybe you can take it off. But if you're looking at the angle of where would I get a bigger return, you'd say no. Because if the current market price, Friday closing price was 79 copper, price issues are 95 copper, why would I want to take the rights issue? I would rather sell the rights, even if I sold the rights for 50, 60 copper, I'll put all the pennies together and I'll go and buy on the floor because it's cheaper on the floor.
• 5:12
  I think the companies shot themselves in the foot by just not getting their results out on time and not pursuing this rights issue on time. Because if we knew that you were going to do a rights issue, I mean, yes, the hype around the Dangote refinery maybe kind of kicked off about two, three months ago. But the deadline for capitalization has been known all this while. So they probably should have.
• 5:36
  kicked this off three, four months ago, but I'm sure they have their reasons for doing so. I hope they hold the fact behind the rights. Maybe we'll get some more context as to that. I hope they do so. Unfortunately, a lot of these penny stocks, they don't do earnings calls, so you can't even get context. Or maybe they do calls and they don't share the details, but that's as good as not doing calls. You need to circulate your details. So it's a struggle to take up this rights issue, going by the rights issue being more expensive than...
• 6:04
  the current market price and all. These are my thoughts on the firm. Have yourselves a lovely day ahead.