Ellah Lakes has been on a bullish run days after it announced plans to raise N200 billion for the 100 percent acquisition of Agro-Allied Resources & Processing Nigeria Limited (ARPN) from ARPN PTE Ltd, a Singapore-based entity jointly owned by Tolaram Africa and Valuestar Holdings.
Shares of Ellah Lakes rose 10 percent on Monday with a volume of 80 million, one of its best in recent weeks after it achieved a record high of 145 million on July 11. The stock that began the year at N3.16 has gained 369 percent on that price valuation to close trading at N14.81 per share.
Investors are betting on the expansion push to power bountiful returns as the agro-industrial company moves to position itself as one of the indigenous oil palm firms in Africa’s most populous nation in terms of scaling.
The company has been actively pursuing growth opportunities this year. In July, its shareholders voted in favour of a planned N250 billion capital raise that sent its stocks soaring.
Read also: Ellah Lakes to acquire Tolaram’s ARPN in major expansion push
According to the management, the raise is needed to strengthen Ellah Lakes’ balance sheet and provide the funding capacity needed to execute its expansion strategy.
Chuka Mordi, chief executive officer of Ellah Lakes, described the ARPN deal as “a defining step” in the company’s transformation journey.
“This acquisition will more than double our production footprint, accelerate earnings growth, and position us as a national champion in agro-industrial production,” Mordi said. “We are excited about the immediate and long-term value this transaction will deliver to our shareholders and to Nigeria’s broader food security objectives.”
The agricultural sector, specifically the oil palm industry, is reaping the benefits of a renewed appetite for palm produce in what has sent crude palm oil prices up the roof and boosted the profitability of bigwigs such as Presco and Okomu Oil.
But in terms of year-to-date performance, investors are rewarding Ellah Lakes more as its shares have surged 369 percent over the last nine months, with analysts seeing the rally continue over the medium term.
A N1 million investment in Ellah Lakes in January would be worth N4.69 million today, as the stock has been one of the best top performers in terms of year-to-date returns.
Read also: Ellah Lakes sets December deadline to acquire 100% stake in ARPN
That same N1 million will accrue to N3.12 million if an investor had bought Presco, currently priced at N1479.90. The stock has risen 212 percent year-to-date.
Okomu Oil has gained 130 percent so far this year, with its current market price at N1,020. That means a N1 million in January would give returns of N2.3 million.
While these returns are impressive, such steep gains also suggest valuations may be stretched. Investors may need to watch for possible profit-taking or corrections, especially if earnings don’t keep pace with the stock price surge.
However, the rally indicates that investors are rotating into real-sector and commodity-backed equities, reflecting optimism about domestic production and non-oil growth in Nigeria’s economy.