​Nigeria Equity Market & Small-/Mid-Cap Stock Opportunities

Comprehensive Investment Document

1. Market Overview

1.1 General Description

The Nigerian Stock Market (NGX) is one of Africa’s largest and most dynamic equity markets. It provides
access to sectors such as consumer goods, manufacturing, energy & oil and gas, financials (banking / fintech),
telecoms, and industrials.

The market is still in a growth/emerging stage: valuation multiples tend to be lower on average compared to
U.S. or mature markets; many opportunities exist for companies that are undervalued, or whose fundamentals
are improving faster than market expectations.

Key drivers: large and young population, increasing consumption of staple and manufactured goods; rising
digital/fintech penetration; government policies and reforms that encourage local production and import
substitution; recoveries in manufacturing and consumer sectors; demand for food staples, housing,
infrastructure.

1.2 Key Metrics & Recent Performance

The NGX All-Share Index (ASI) has been showing strong upward movement. Examples:

In May 2025, the ASI and market capitalization increased, with Beta Glass and other manufacturing stocks
leading gains.

Market capitalization for NGX has been rising toward ₦68-70 trillion+ in mid-2025 as liquidity returns and
investor confidence improves.

Manufacturing stocks have delivered >100% year-to-date (YTD) gains in multiple cases (e.g. Honeywell Flour
Mills, Beta Glass, Northern Nigeria Flour Mills, SCOA Nigeria).

Example of a recent strong performer: Nascon Allied Industries posted H1 2025 profit growth of ~222% YoY.
Revenue rose 55%; operating profit up ~196%.

Another example: Beta Glass posted profit after tax up ~334% in H1 2025 relative to H1 2024.

2. Recent Small / Mid-Cap Stocks with Strong Potential (In-Depth)

Below are detailed profiles of some of the most promising small or mid-caps, focusing on those with recent
strong performance, improved fundamentals, and clear opportunity.

2.1 Nascon Allied Industries Plc (NASCON)

Metric / Item Data / Details

Business Produces refined salt, seasoning, food processing goods. Owned ~62% by Dangote Group. Significant
footprint in domestic consumer staples.
Recent Performance H1 2025: Profit after tax ~₦15.6 bn vs ~₦4.8 bn in H1 2024 — up ~222%. Revenue up ~55%
to ~₦78.2bn. Operating profit ~₦21.3bn. <br> Q1 2025: Revenue up ~77% YoY (₦41.85bn vs ₦23.62bn), gross
profit up ~60%, PAT up ~515%.
Margins & Liquidity Gross margin expansion: Q2-2025 gross margin ~53.7% vs ~40.5% in same period last
year. EBITDA margin H1-25 ~28.8%, up from ~14.3% in H1-24. <br> Strong liquidity: cash & equivalents
increased; borrowings reduced somewhat.
Valuation & Dividends For FY 2024, revenue ~₦120.4bn (up ~49% YoY), profit after tax ~₦15.6bn. Earnings per
share ~₦5.77; proposed dividend ~₦2.00 per share. <br> Dividend growth in 2024: board recommended ~100%
increase to ₦2.00.
Opportunities Strong demand for staples; ability to increase pricing; volume growth especially in Northern
region; ability to scale and expand distribution; relatively clean balance sheet with manageable debt. Margin
improvement potential with economies of scale.
Risks Input cost inflation (raw salt, seasoning inputs, packaging); working capital strain (trade receivables
rising significantly); FX effects for imported items; margin compression if consumer demand becomes price
sensitive. Also cash flow vs accounting profit discrepancy noted.

2.2 Beta Glass Plc

Metric / Item Data / Details

Business Glass packaging (bottles, jars etc.) for beverage, food, pharma, and cosmetics industries. Key supplier
in Nigeria and parts of West Africa.
Recent Performance H1 2025 profit after tax ~₦18.70 bn, up ~334% YoY (versus ~₦4.30 bn in H1 2024). <br>
Revenue TTM ~₦147.93 bn by June 2025, up ~82.74% YoY.
Valuation & Margins Revenue growth strong; profit growth very strong. However, margin and net profit
margin remain constrained due to cost pressures (energy, raw materials, logistics). Cash & cash equivalents
dropped; interest expense rose.
Opportunities High demand in beverages, especially for local production; customers may prefer glass over
plastic given sustainability trends; ability to shift costs/prices if demand remains strong. Growth in export or
regional sales possible.
Risks Very sensitive to energy and input cost (imported raw materials, fuel); FX fluctuations; potential
increases in cost of logistics or power; interest coverage dropped, implying increased financial leverage risk.
<br> Also, profit margins are thin relative to revenue growth.

3. Comparative Strengths vs Larger / Saturated Markets

Aspect Nigerian Small-/Mid-Cap Market Advantage

Valuation Lower average P/E, P/B etc. compared to mature US names, implying value upside.
Growth Potential Many sectors under-penetrated: manufacturing, consumer staples, local branded foods,
pharma, packaging, environmental services. Demand growth is strong domestically.
Dividends & Yield Many small/mid caps are boosting dividends as profits rise; investors can get income while
waiting for capital growth.
Market Inefficiencies Less analyst coverage; less global investor saturation; misvalued or overlooked
companies; opportunities for alpha via fundamental research.

4. Risks & Challenges

Currency risk / FX volatility: Many companies have costs or inputs priced in foreign currency. Depreciation of
the Naira can eat into margins.

Input cost inflation: Raw materials, packaging, energy, and logistic costs rise quickly, affecting manufacturers,
glass makers etc.

Policy & regulatory risk: Changes in taxes, import tariffs, subsidy removal, regulatory permits can disrupt
operations.

Liquidity constraints: Smaller stocks often thinly traded, which raises bid-ask spreads and makes entry/exit
less smooth.

Cash flow vs accounting profit: Companies may show high profits but struggle with converting that to cash
(e.g. receivables, inventory buildup). Investors should watch free cash flow.

Macroeconomic headwinds: Inflation, interest rates, power supply, infrastructure issues remain persistent
challenges.

5. Sample Investment Plan & Portfolio Strategy

Here’s a suggested way we can collaborate, invest, and manage exposure in Nigerian small-/mid-cap stocks
based on realistic capital and risk stances.

5.1 Pilot / Initial Investment Size

Tier USD Amount Equivalent in NGN (assume ₦1,450/USD or slightly higher depending on prevailing rate) Goal

Pilot $5,000 ~₦7.25 million Test thesis, set up broker, test execution, pick 2-3 names, see cash flow conversion.
Starter $20,000 ~₦29 million Broader diversified small-/mid-cap exposure, monitor 6-8 names, build some
income from dividends.
Scale / Growth $100,000 ~₦145 million Strong portfolio with both small growth names and stable dividend
payers; possible inclusion of private opportunities or scale into regional export plays.

5.2 Sample Portfolio Allocation (for Starter + Scale Phases)

Here’s a sample portfolio mix (for $20,000 starter), focusing on small/mid caps with strong recent performance
but varying risk profiles:

Stock / Sector Allocation (%) Rationale

Nascon Allied Industries 15-20% Strong recent growth; staples with demand resilience; good dividend
potential.
Beta Glass 15% High demand, packaging niche, strong year-on-year profit growth.
Honeywell Flour Mills (FMCG / Consumer staples) 10% Consumer staples with steady demand; turnaround
track record.
The Initiates Plc (environmental / waste management) 5-10% Growth play, less crowded, ESG tailwinds.
Neimeth / Fidson Healthcare (Pharma) 5-10% Speculative growth; potential upside if regulatory / export & cost
challenges are managed.
Blue-chip buffer (e.g. a stronger large company) 20% To reduce overall volatility—maybe a telecom or bank
with stable cash flow.
Cash / FX buffer / Opportunistic 10% To take advantage of dips, pay for fees, possible hedging.

5.3 Time Horizon & Targets

Horizon Expected Return What Drives It

Short term (6–12 months) 10-25% total return inclusive of dividends, maybe more for very volatile small caps
Profit growth, improved margins, positive earnings surprises; possible rerating if market sentiment improves.
Medium term (1-3 years) 20-40% annualized possible in good names Expansion, stable margins, scaling,
maybe regional export growth or better FX stability.
Long term (3-5 years)** 30-50%+ annualized in top picks, moderate in stable ones Structural demand,
positioning early, possibly value multiples caught up, dividends plus capital appreciation.

6. What We Need to Do / Due Diligence Steps

To make this plan realistic and de-risked, here are the immediate actions and checks:

1. Select target names: Decide which small/mid-caps to focus on (Nascon, Beta Glass, Honeywell, etc.)

2. Get latest audited financials (5-year where possible), especially for recent two years. Include: revenue
growth, margin trends, free cash flow.

3. Cash flow analysis: Look at operating cash flow, working capital cycle (receivables, inventories), how profit
converts to cash.

4. Valuation multiples: P/E, P/B, EV/EBITDA vs sector peers and vs historical averages.

5. Dividend history & policy: Board declarations vs actual payouts; sustainability of payout given capex and
working capital.

6. Macro / FX risk modeling: Scenario work for Naira devaluation, input cost inflation, power/energy cost
escalation.

7. Liquidity & market / broker risk: Check average daily volumes, how easy to buy/sell without moving price,
broker fees, taxes, and delays.

8. Ownership / corporate governance: Who owns the company, related party transactions, management track
record, audit quality.

7. Example Case: Nascon + Beta Glass

To illustrate, here are side-by-side recent metrics for Nascon Allied Industries and Beta Glass:

Metric Nascon Allied Industries (H1-2025) Beta Glass Plc (H1-2025)

Profit growth YoY ~222% increase in PAT for H1 2025 vs H1 2024. ~334% increase in PAT in H1 vs same period
last year.
Revenue growth ~55% YoY for H1 Nascon. Revenue TTM ~82.74% up YoY for Beta Glass.
Margin improvement Nascon: Gro
ss margin, EBITDA margin both improved; operating profit tripled. Beta Glass: metrics less detailed but profit
growth confirms strong margin leverage though with cost-pressure caveats.