By Babajide Komolafe
The Dangote Petroleum Refinery and Petrochemicals, DPRP is a good investment prospect but there are risks. There are many reasons why the company is a good investment prospect but l will list the most basic ones here.
First is the products of the company, petrol, diesel, aviation fuel, petrochemicals. These are products that are necessities for the functioning of the global economy and as such, demand for them is inelastic, at least for the foreseeable future.
Second is the market share of the company. Dangote Refinery supplied 71% or 35.87 million litres of the 41.5 million litres of petrol consumed daily in Nigeria. This is besides the global market.
These two factors combined with the tract record of the Dangote Group management reflected in the Dangote Cement and other subsidiaries, the DPRP shares become an irresistible investment prospect.
But there are factors that can affect the ability of the company to either produce or even make profit from the sale of its products. Also there are factors that can affect the share price of the company negatively and these factors are not within the control of the company. There are 56 of such factors, referred to as risks in the share offer document (prospectus), and for these reasons prospective contains a segment titled, ‘Risk Warnings relating to the Prospectus.’
In this regard, the document states:
“Prospective investors should be aware that an investment in the Offer Shares involves certain risks. Accordingly, prospective investors are strongly advised to carefully review the entire contents of this Prospectus and not to rely solely on any summary or key information contained herein.
“Prospective investors should consult their own professional advisers before making any investment decision in relation to the Offer Shares, to, among other things, assess the merits and risks of such investment and to determine whether they are eligible to subscribe for or purchase the Offer Shares in light of their particular circumstances.”
And with respect to the projections about the future performance of the company, the document also warned prospective investors as follows: “As such no assurance can be given that such future results, including guidance provided by the Issuer, will be achieved; actual events or results may differ materially due to risks and uncertainties facing the Issuer. The occurrence or non-occurrence of an assumption could cause the actual financial condition and results of the Issuer to differ from or fail to meet expectations expressed or implied by such forward-looking statements.”
The implication of the above is that prospective investors should buy the shares with money they would not need now or for a very long time.