Last Update05 Aug 25
Haldane McCall Plc: Ambitious ₦250 Billion Bond Plan to Tackle Housing Deficit and Expand Growth Opportunities
Haldane McCall Plc’s plan to float a ₦250 billion bond represents a bold move to address Nigeria’s 25 million housing unit deficit and expand its hospitality and real estate businesses. The initiative aligns with a significant structural demand opportunity in Nigeria’s housing market and the growing hotel sector in Lagos. However, the proposed bond faces major challenges, including high interest rate conditions, regulatory approval delays, and elevated credit risk, given the company’s relatively small market capitalization of ₦14–16 billion compared to the size of the planned raise. While the long-term growth prospects are compelling, near-term funding cost pressures and execution risk present material uncertainties.
Strategic Rationale for the Bond Issue
- Target Size: ₦250 billion (₦75 billion first phase)
- Purpose: Fund affordable housing projects, expand hospitality assets, and grow real estate footprint.
- Current Status: Awaiting SEC approval and credit rating.
- Market Context: Nigeria’s housing deficit estimated at 25 million units, creating a large demand opportunity.
Key Strengths
1. Strong Market Opportunity Nigeria’s massive housing deficit provides a significant growth runway for developers capable of delivering affordable housing at scale. Lagos, as the largest urban hub, offers high demand for both residential and hospitality assets.
2. Capital Market Strategy as Alternative to Expensive Bank Funding By tapping the bond market, Haldane McCall aims to circumvent prohibitive bank lending rates—driven by inflation and tight monetary conditions—while securing long-term financing for strategic projects.
3. Diversified Use of Proceeds Funds will support real estate development and hotel expansion, enabling the company to capture opportunities in two high-demand sectors and diversify revenue streams.
4. Vision for Sustainable Growth Management emphasizes innovative partnerships and community-building, which could enhance brand reputation and attract ESG-focused investors over time.
Key Weaknesses & Risks
1. High Funding Cost Environment The Central Bank of Nigeria recently borrowed at 23.5%, setting a high benchmark for private-sector debt pricing. Haldane McCall’s bond, being riskier than sovereign debt, will likely attract a substantially higher yield, raising cost of capital and profitability risks.
2. Size of Planned Raise vs Market Capitalization With a current market cap of ₦14–16 billion, raising ₦250 billion represents over 15x the company’s equity base, signaling significant leverage risk and raising questions about investor appetite.
3. Regulatory & Credit Rating Delays The issuance is contingent on SEC approval and obtaining a credit rating, which could delay timelines and affect market confidence.
4. Execution & Market Uptake Risks Delivering large-scale housing projects in Nigeria comes with challenges, including land acquisition issues, rising construction costs, currency volatility, and consumer affordability constraints.
Haldane McCall’s ambitious capital raise underscores management’s growth vision and strategic alignment with a massive housing gap, which could unlock significant long-term value if executed successfully. However, the risk-return profile is currently skewed toward execution and funding cost risks, given prevailing interest rate conditions and the disproportionate scale of the raise relative to the company’s balance sheet.
For risk-tolerant investors, participation in the bond may be considered if the coupon compensates adequately for credit and liquidity risks. Equity investors should monitor funding progress, regulatory approvals, and project execution milestones before reassessing valuation upside.
Haldane McCall Plc has reported a stable performance for the half-year ended June 30, 2025, demonstrating consistent profitability, healthy balance sheet strength, and improved asset base — although growth in inventories and receivables may require close monitoring for operational efficiency.
🔑 Key Highlights from the Financial Results:
📈 Profitability Maintained
- Revenue declined significantly by 57% YoY to ₦1.20 billion (from ₦2.78 billion in H1 2024), raising questions on top-line sustainability.
- Despite the fall in revenue, gross profit held steady at ₦998 million, supported by a significant drop in cost of sales.
- Operating profit improved slightly to ₦423 million, showcasing cost efficiency despite reduced other income (₦1.4 million vs. ₦42.9 million in prior year).
- Profit after tax stood at ₦283 million, up 3.8% YoY from ₦273 million.
💰 Strong Equity Position
- Shareholders' funds rose to ₦16.64 billion, up from ₦14.21 billion — driven by retained earnings growth and increased revaluation reserves.
- Revenue reserve increased to ₦5.03 billion, showing the company’s ability to generate and retain earnings consistently.
💼 Balance Sheet Observations
- Total assets grew to ₦20.83 billion (from ₦18.62 billion), largely due to a significant increase in inventories, which surged by 161% to ₦5.92 billion. This may indicate buildup for future sales or possible inefficiencies in stock turnover.
- Trade and other receivables declined by almost 49%, a positive sign of improved receivables management or reduced credit sales.
- Cash and equivalents fell to ₦127 million (from ₦199 million), possibly due to working capital commitments.
📉 Debt and Liabilities
- Total liabilities slightly reduced to ₦4.20 billion (from ₦4.41 billion), improving the debt-to-equity ratio.
- Bank overdrafts and short-term loans remain notable but manageable in relation to equity base.
✅ Strengths
- Consistent profitability even in the face of falling revenues.
- Robust equity base (₦16.6 billion), providing financial flexibility.
- Improved operational efficiency as operating profit margin held firm.
- Low gearing with manageable finance cost (₦5.1 million only).
- Revaluation reserve growth shows possible appreciation in property, plant, and equipment.
⚠️ Weaknesses / Risks
- Revenue contraction is a major concern; if continued, it could eventually pressure margins.
- Heavy inventory buildup might indicate slower sales turnover or overstocking, which could strain cash flows.
- Declining cash may restrict liquidity unless managed prudently.
- Overreliance on equity funding (e.g., ₦5 billion in "deposit for shares") could signal delays in finalizing capital structure.
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Disclaimer
The user WaneInvestmentHouse has a position in NGSE:HMCALL. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.