Author: ARM

Ask Shade About Trusts: My Mum Just Found Love Again! But How Do I Protect My Future?

By setting up a trust, your mother can ensure that the fashion line is passed on to you at her death, even though she retains full control while she is alive. She can name beneficiaries of the trust and include her new spouse so as to achieve some balance.

Hello Shade,

For five years since I returned from the UK after my Masters program, I’ve worked side by side with my mum to run her highly lucrative fashion line. As a single mum, my mother single-handedly worked hard to build her fashion empire, and with my additional effort, it is currently worth millions of naira. I share in her passion and have shown it through dedication and hard work, but now I’m worried. Mum recently found love again and wants to get married to a widower who has two sons. My mum is wealthier than this man, and the man’s sons are still totally dependent on him.

How do I ensure that this marriage won’t cost me the fashion empire, which by right should remain in my family as an inheritance?
– Jessica, Lagos

***

Dear Jessica,
I totally understand your apprehension regarding your mother’s fashion empire. Indeed, your concerns are genuine, as it could be very disappointing to lose out completely in a business you have contributed so much to. The reality is that most people fail to take the necessary steps that would ensure that their assets are protected and preserved for the benefit of their loved ones when there is a major change in their circumstances, i.e. marriage, divorce, separation, death or permanent disability.

In the case of your mother, it would be most constructive if she considers setting up a trust to manage the affairs of her business and ensure continuity of her fashion empire, for the benefit of her beneficiaries even after her demise. A trust is an arrangement that affords the settlor (the person who sets it up) to transfer its/his/her assets to a third party (the trustee) to hold for the benefit of a named person or group of persons called the beneficiary(ies).

By setting up a trust, your mother can ensure that the fashion line is passed on to you at her death, even though she retains full control while she is alive. She can name beneficiaries of the trust and include her new spouse so as to achieve some balance.

I would advise that you find a convenient time to have a conversation with your mother to confirm how she intends to sustain the business continually. This trust structure should gain her interest and allay any form of misconception about your intentions, since the discussion would be centered more about protecting her legacy than one of you trying to oust your soon to be step-father and step brothers from your mother’s estate if she predeceases them.

I wish you and your mum the best.

Cheers,
Shade

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Stock Recommendation for the Week , April 23

After five consecutive weeks of losses, the market took a turn last week with the NSE ASI appreciating 2.52% WoW to close at 30,086.31 points, and the market capitalization gaining N197.5 billion. The bullish sentiment was spurred by gains across major sectors – Banking (+2.01%), Breweries (+5.53%), Cement (+1.52%), Personal care (+1.54%), and Food (+8.12%). Dissecting the sector performance reveals interest across bellwether stocks (ACCESS: +14.17%, GUARANTY: +1.61%, ZENITH: +2.20%, NB: +7.97%, DANGCEM: +1.61%, NESTLE: +8.97%, and DANGSUGA: +5.17%).

• United Bank for Africa Plc – STRONG BUY (FVE: N13.04): Despite sluggish performance over 2018, we believe UBA growth story across Africa remain compelling. Particularly, we expect meaningful growth in earnings over 2019 on the back of strong retail deposit growth, increase in loan book, expansion in trading book and net fee income, and healthier asset quality. Consequently, we see FY 19E earnings growth of 15% YoY to N90.2 billion (lower than prior estimate of N102.5 billion), with FY 20F and FY 21F growth forecasts of 6% and 5% respectively. Overall, we maintain our STRONG BUY recommendation with a revised FVE of N13.04 (previously: N14.10).

• Zenith Bank Plc – STRONG BUY (FVE: N38.17): Following a mark down in its stock price, Zenith offers a more attractive entry point. The stock trades at a FY 19E P/B of 0.9x, at a discount to GTB of 1.3x. Our FVE of N38.17 translates to a STRONG BUY rating based on current pricing. Strong valuation for Zenith is hinged on i) expansion in assets yield from increase in loan book which would more than outweigh funding cost to support moderate expansion in NIM ii) increase in NIR due to resilience in fee income and iii) improvement in asset quality with non-performing loan (NPL) ratio of 4.5% (FY 18: 5.0 %) and slower expansion in cost of risk (CoR) to 1.0%. At current price, expected dividend of N2.92 over FY 19E translates to a dividend yield of 14.3%.

• Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): Our case for GUARANTY remains the resilience in noninterest revenue, improved cost management with cost to income ratio expected to moderate 50bps YoY to 36%, still strong loan book with a moderate expansion in credit loss provision to 0.5%. Reflecting our expectation of increased transfer of salary accounts to GUARANTY following the Quick Credit Scheme, we model 12% YoY growth in deposits over 2019. However, reflecting the sticky funding cost, we see a slight decline in net interest margin by 7bps YoY. Overall, we see a slower growth in EPS by 4% YoY to N6.53.

 Guinness Nigeria Plc – STRONG BUY (FVE: N77.31). Despite stiff competition across the brewery sector, we expect the wider portfolio mix of Guinness and gains from the Spirit segment to support a slower moderation in margins. Also, following lower finance cost after recent deleveraging of its FCY debt using proceeds from rights issue, we see improved profitability for the company.

 Okomu Oil Palm Plc – STRONG BUY (FVE: N97.75): Over our forecast period, we anticipate volumes growth emanating from the harvest of fresh fruit bunches from its extension 2 plantation. Based on our expectation for volumes growth, accompanied by margin expansion, we raise our FVE to N97.75.

Kindly, visit ARM Research Portal for full stock reports.

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THE UNEXPECTED GIFT

I had mixed feelings as I stared at my admission letter into the University sitting in my mail. On one hand, I was extremely happy but on the other, I was totally sad because father is no more and can’t celebrate this win with me. Aside that, there was no obvious means to pay the required fees if I accept the admission.

Three weeks ago while he was returning from an official trip, my father was involved in a fatal auto crash. Exactly two days after, the entire extended family gathered in our middle-class sitting room and debated on how his wealth would be distributed which they said is the tradition. Now according to what I knew of the custom, a man’s son inherits most of his earthly possessions and where he’s still underaged as it was in my case (I was still a few months shy of eighteen), his mother would manage the inheritance until he arrived the legal age of eighteen. The extended family conveniently forgot this detail and decided to do this as it pleased them.

My mother, who was still in shock watch, helplessly as they fought over his estate. When they were finally done with the vicious bickering and throat grabbing, they allotted the home we lived and an account that held only about fifty-thousand Naira to me, mother and my little sister.

In the evening I crept into mother’s bedroom to show her the mail containing my admission into the university. I could not hide it from her even though I wanted to spare her the heartache because I knew that she couldn’t afford my fees, especially with father’s burial looming and with the family’s insistence on an elaborate ceremony.

Mother was overjoyed and I watched her smile for the very first time since the disaster happened. I sat on her bed and watched as she did a few dance steps and my heart nearly broke in two. I  dreaded seeing the watery smile go back into a downpour of sorrowful tears.

Sensing my sadness she stopped dancing and watched me closely.

“Why do you look so sad instead of being happy at this good news,” she scolded me sternly.

“Mother, you know that we cannot afford this as the moment.”

Then it hit her. She then understood my mood. To my surprise, she began to cry and smile even more at the same time. I didn’t understand her but I stood to hug her.

“You are such a good boy, Kenneth. You do not need to worry too much about this though, your father had prepared for this day a long time ago.”

She drew away from the embrace and went into her bedside drawer to get a file. I stared at her curiously not understanding what she meant.

She motioned for me to sit beside her, handed the file to me and urged me to open it. I found that it contained ARM Life Education Plan. I still did not fully understand what it meant but mother explained it all to me.

Father got an insurance policy for me and my sister ten years ago with ARM Life and that definitely changed everything.

I hugged my mother tight and couldn’t stop my own tears as I silently thanked my late father for this unexpected gift. With this Education Plan our dreams do not have to die.

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Stock Recommendation for the Week , April 15

ARM Research | Weekly Call

The Nigerian equities market extended its loss run last week, with the ASI shedding 0.19% to close at 29,560.47 points while market capitalization lost N21 billion. This performance was largely driven by bearish sentiments in the Breweries (-0.32%), Personal Care (-2.16%), Food (-0.21%) and Insurance (-0.39%) indices, offsetting the mild gains in Banking (+0.08%), Cement (+0.04%) and Oil and Gas (+0.70%) sector. Dissecting the sectoral performance revealed marked sell-offs in (GUINNESS: -3.92%, CCNN: -5.88%, PZ: -9.69%, GSK: -1.58%, UACN: -4.76%, CADBURY: -3.8%, DANGFLOUR: -1.75%, DANGSUGA: -1.44%, and MANSARD: -5.00%).

• United Bank for Africa Plc – STRONG BUY (FVE: N13.04): Despite sluggish performance over 2018, we believe UBA growth story across Africa remain compelling. Particularly, we expect meaningful growth in earnings over 2019 on the back of strong retail deposit growth, increase in loan book, expansion in trading book and net fee income, and healthier asset quality. Consequently, we see FY 19E earnings growth of 15% YoY to N90.2 billion (lower than prior estimate of N102.5 billion), with FY 20F and FY 21F growth forecasts of 6% and 5% respectively. Overall, we maintain our STRONG BUY recommendation with a revised FVE of N13.04 (previously: N14.10).

• Zenith Bank Plc – STRONG BUY (FVE: N38.17): Following a mark down in its stock price, Zenith offers a more attractive entry point. The stock trades at a FY 19E P/B of 0.9x, at a discount to GTB of 1.3x. Our FVE of N38.17 translates to a STRONG BUY rating based on current pricing. Strong valuation for Zenith is hinged on i) expansion in assets yield from increase in loan book which would more than outweigh funding cost to support moderate expansion in NIM ii) increase in NIR due to resilience in fee income and iii) improvement in asset quality with non-performing loan (NPL) ratio of 4.5% (FY 18: 5.0 %) and slower expansion in cost of risk (CoR) to 1.0%. At current price, expected dividend of N2.92 over FY 19E translates to a dividend yield of 14.3%.

• Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): Our case for GUARANTY remains the resilience in noninterest revenue, improved cost management with cost to income ratio expected to moderate 50bps YoY to 36%, still strong loan book with a moderate expansion in credit loss provision to 0.5%. Reflecting our expectation of increased transfer of salary accounts to GUARANTY following the Quick Credit Scheme, we model 12% YoY growth in deposits over 2019. However, reflecting the sticky funding cost, we see a slight decline in net interest margin by 7bps YoY. Overall, we see a slower growth in EPS by 4% YoY to N6.53.

 Guinness Nigeria Plc – STRONG BUY (FVE: N77.31). Despite stiff competition across the brewery sector, we expect the wider portfolio mix of Guinness and gains from the Spirit segment to support a slower moderation in margins. Also, following lower finance cost after recent deleveraging of its FCY debt using proceeds from rights issue, we see improved profitability for the company.

 Okomu Oil Palm Plc – STRONG BUY (FVE: N97.75): Over our forecast period, we anticipate volumes growth emanating from the harvest of fresh fruit bunches from its extension 2 plantation. Based on our expectation for volumes growth, accompanied by margin expansion, we raise our FVE to N97.75.

Contact [email protected]

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Her children, her everything

Mama Divine was a lanky, very dark and young mother of two kids. She owns a moderate foodstuff business which every family in our estate depends on for their mini mid-week shopping.

Her story was as unbelievable as it is pitiable. Having left her home in Delta state at the age of 14 after several issues with her stepmother, she arrived Lagos seeking a way forward in life.

From sleeping in churches, to working and sleeping at a restaurant, and finally to accepting shelter under a man’s roof, Mama Divine has had her own share of life’s unfair treatment.

A few short years later, she has two sons for the man who sheltered and eventually left her – and alone, she has struggled to make a living in order to give her children the best she could. She wasn’t prepared to let her children suffer like she had even if it meant working double time.

Life for her was all about her two children.

One day, she walked up to me and said.

“Aunty abeg no vex, I wan ask you something.” I urged her to go ahead. “I wan start to dey save money for bank but I no sabi answer the question wey dey the paper.”

“Okay, show me” I said. She motioned for me to wait as she rushed into her one-room apartment to fetch the forms.

I took the forms and moved closer to a bench by the pavement to sit and put her through. While we filled the form, she told me stories that brought tears to my eyes. I couldn’t believe that this young girl had so much to worry about. While her mates went about bothered only by the latest clothes to wear and choicest hair-do to make, she was here at 21 thinking about how to eke a living and give her two boys the best.

When I saw how much she desired the best for her children, it was only right that I mentioned the education plan to her.

I explained that if she put as little as N5k in that account every month, in five years, she would have a lump sum along with accrued interest to fund her sons’ education. I went on to explain that even in the case of uncertainty, the plan could translate to insurance for her children ensuring that her dreams for them never gets altered along the way. No more does she have to constantly worry if she can afford to send her children to the university.

She looked me in the eye and said “Aunty, God go bless you well well.” I nodded as I held back a tear threatening to spill. I advised her to henceforth, try to put some money in the new account she was opening every month in case of emergency or have her customers pay into the account.

I also made sure to get the education plan form for her the following week and helped her fill it out. To ensure she keeps it funded, Mama Divine opted for a direct debit (after I explained what it was to her) – that way she would be able to stay consistent with putting money in the education account and wouldn’t use the money for something else.

As long as I stayed in that vicinity, I would do my best to help this strong woman in the best way I could because her willingness to secure a future for her children is nothing short of admirable.

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#ILoveMyFamilySeries: A Gift For Everyone

I felt my phone vibrate in my pocket as I showed a new customer an array of complete sitting room sets in my workshop display room. I gestured to the workshop manager to continue with the customer so that I could take the call. The caller identity showed an unrecognized international line.

“Hello”, I said in my most professional and engaging voice.

” Hello, son!”

“Dad?” I was puzzled. “How are you calling with an international line?”

He laughed and I could hear the excitement in his voice as well as some giggles in the background. Who was that? If it’s mum, it was strange to hear her giggling like a child, so I proceeded to ask for clarity purposes.

“Dad is that mum I am hearing her voice in the background?”

“Your mother and I are holidaying at Kenya! You need to see this place!”

I began to stutter. How? When? It would be rude to ask him how they both could afford a holiday trip to another country now that they are retired.

Then he explained.

They had cashed in on the ARM Annuity Plan that I introduced to dad 10 years ago! He said he told mother too to get on board and together they have been able to save for their retirement. In fact, they  planned to visit Egypt next to see the pyramids and the Nile.

I had a huge lump in my throat. I stood there stunned and emotional even after the call had ended. It is just so beautiful that my parents can live out their retirement having fun instead of getting constantly worried about monthly pension or working themselves to the grave.

At that moment, a delivery guy arrived with a specially packaged lunch from Chicken and Spices restaurant. I smiled automatically as my stomach growled in anticipation. Chicken and Spices is my wife’s restaurant that has been opened for four years now with the lump sum payment she got from ARM Savings plus . I opened my dream carpentry workshop last year too and took an early retirement from my stressful banking job after I got my own lump sum from the same plan.

“Good afternoon sir!”

“How are you Jeff?” I asked him cheerfully.

“Doing well sir. Madam made a special dish today and asked me not to hint you.” He looked excited and was almost bursting with the secret.

His smile was infectious when he added, “I asked about Chinedu and Nifemi, madam says they have returned to college.”

“Yeah! They went back last week.”

My mood improved even more when he mentioned my kids.

Please include how many years ago the son introduced his dad to the annuity plan to give people a sense of how long the process of cashing in could take. [CO1]

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Monetary Policy: MPC Springs a dovish surprise

MPC Springs a dovish surprise

The CBN Monetary Policy Committee (MPC) voted to cut the key benchmark interest rate by 50bps to 13.5%, taking the Standing Lending Facility and standing deposit facility to 15.5% and 8.5% respectively. The decision was surprising in that ARM Research and most analysts surveyed by Bloomberg anticipated no change in policy parameters. The MPC also switched its policy stance to ‘easing’ from ‘neutral’, which was a majority decision. What’s more amazing though is the sharp swing in the policy perception within the MPC members. Until yesterday’s meeting, majority of the members expressed caution on exchange rate stability and inflation and advocated for a neutral stance in the last four (4) meetings noting the risk to price and currency stability. Yesterday, 9 out 11 members voted for a rate cut, though only 6 members voted for a 50bps rate cut.

In the justification for a rate cut, the committee expressed satisfaction with the relative stability in the price level and exchange rate, and thus sought to support growth. Particularly, following the calm outcome of the general election together with the recent resurgence of foreign portfolio investment[1] into the country and continued deceleration in inflation reading, the CBN thought it imperative to signal a new direction.

Contact [email protected] for the full report

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#ILoveMyFamilySeries: What Miracle Can Save Dad’s Retirement?

After demolishing a mountain of pounded yam and vegetable soup with bush meat and assorted fishes prepared by my wonderful wife, my mind took a stroll to how she proffered a solution to my dream career pursuit with ARM Savings Plus. I smiled across the dining table at her and counted my numerous blessings. Thanks to her ingenuity, I started  ARM Savings Plus and it was easier than we thought.

“Daddy, I will like to buy new jeans and a white dress to take along for my trip to grandma and grandpa’s place for Easter.”

I gave a non-committal grunt.

The end of the school term drew near and Nifemi has used every opportunity to remind me of my promise that she’d spend the Easter holiday with my parents.

I joined my wife to clear the dishes and she told me about some cabinet designs she saw online knowing I’d be interested in looking at new designs for my weekend clients. She promised to show them to me when we were done in the kitchen.

After placing the last plate neatly in the rack, my wife poured us a cup of grape juice each and we went to the living room to relax.

As soon as my bottom touched the settee, Nifemi sat at my feet and started all over again to chatter non-stop about how she wanted to spend the holiday with her grand parents. I was almost beginning to regret making that promise. I and my wife exchanged glances above her head and my wife giggled as I rolled my eyes in frustration.

“You know she’s never going to stop talking about this until you call mum and dad to inform them, right?” my wife said.

“I better get right down to it then before my ears begin to ring in protest”, I responded.

I asked Nifemi to get me my phone from the room and in a split second, she was gone and back with it.

Predictably mother didn’t pick the call the first time. Probably she’d kept her phone deep inside her purse as usual. I redialed and she picked on the second ring.

After the initial pleasantries, she asked about Nifemi and Chinedu.

“Oh! The kids are doing great, in fact, Nifemi has been hounding me about spending the Easter holidays with you.”

My mum was elated and I heard her passing the message happily to my dad close by. She handed the phone over to him after and left to attend to other issues.

I and father had a brief chat about the visit and other stuff. When I asked dad about his work, I noticed he wasn’t really excited. His response was a flat ‘fine’ which in itself was unsettling.

“Is anything the matter?” I pressed.

He sighed deeply, “Honestly, son I am not looking forward to retirement. My surgery last year took away a chunk of my savings and I can’t help but worry.”

I was silent for a moment.

“I see…”

My dad was 52 and close to retirement. He had been saving over the years but a serious health challenge and operation had eaten really deep into that money last year.

“I don’t mean to bother you with this though. I will find a solution soon I suppose.”

We moved on to other topics but I couldn’t remove my mind from the talk about his retirement. My parents have been hard working all their lives and they deserve a comfortable retirement.

With this thought, I vowed to seek for a solution.

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Guaranty Trust Bank Plc Slower but persistent earnings growth in near term

At its full year 2018 analysts conference call and our follow up engagement, management guided to a 10% growth in loans over 2019, with focus on oil & gas sector, retail clients and manufacturing sector. Further, they guided that submissions have been made to unlock funds from the differentiated cash reserve ratio introduced by the MPC and awaiting approvals by the apex bank. Leveraging its retail presence, management expects 12% growth in deposit, 40% cost to income ratio, 9% net interest margin (NIM), and cost of risk and NPL ratio (coverage ratio above 100%) of below 1% and 5% respectively. Overall, management guided to PBT growth of 2% to N220 billion (8% YoY in FY 18).

We maintain our STRONG BUY rating on GUARANTY with a revised FVE of N49.66/share. GUARANTY trades at a FY 19E P/B of 2.1x, at a premium to ZENITH of 1.4x, which is justified given its strong and sustainable ROE. At current price, our expected dividend of N2.82 over FY 19E translates to a dividend yield of 8% (Zenith: 13.6%).

For the full report, please contact [email protected]

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