IMG Rights Issue

Industrial & Medical Gases Nigeria Plc (IMG) has opened a rights issue that is drawing significant attention from both investors and analysts. The offer, which runs from August 22 to October 2, 2025, allows existing shareholders to purchase additional stock at a discounted rate. The company is offering nearly 200 million ordinary shares at ₦32.00 each, on the basis of two new shares for every five already held as of May 21, 2025.

At the time of that qualification date, IMG’s share price was trading at ₦39.85, meaning the rights issue represented a steep 24 percent discount to the prevailing market price. However, the stock has since weakened, sliding by about 16 percent to close at ₦33.30 as of yesterday. This decline has also pulled its year-to-date performance into negative territory, with a loss of 12.3 percent. For many observers, the pressing question is whether this rights issue is an opportunity worth seizing or a signal for caution.

IMG’s long-term track record gives shareholders plenty to consider. Over the past five years, the company has consistently grown its revenue at a compound annual rate of 21.4 percent, reaching a total of ₦26.65 billion. More impressively, profits expanded even faster, growing at 34 percent annually to reach ₦1.62 billion. Cash flow from operations during this period stood at ₦2.9 billion, reflecting the company’s ability to convert sales into real cash.

This performance underscores IMG’s resilience and dominance in Nigeria’s healthcare and industrial gases markets. With three production plants strategically located in Lagos, Port Harcourt, and Kaduna, the company enjoys both geographical spread and operational capacity. Its diverse product mix also ensures steady demand, serving hospitals, industries, and specialized clients across the country.

For long-term investors, this record of growth is a persuasive reason to take up the rights issue. By participating, they can increase their stake in a company that has shown the ability to expand steadily and maintain relevance in a competitive industry.

While IMG’s long-term story is encouraging, its recent results reveal challenges that potential investors cannot ignore. In the first half of 2025, the company reported revenue growth of 19 percent, with sales rising to ₦4.23 billion. However, profits told a different story. Profit after tax plunged by 69 percent to just ₦476 million, compared to ₦1.52 billion in the same period of 2024.

The main culprit was the sharp drop in foreign exchange gains. In the first half of 2024, IMG had benefited from ₦1.2 billion in FX gains. By contrast, in 2025, this figure collapsed to just ₦240 million. This loss of windfall gains significantly reduced net income, masking the positive topline performance.

Compounding the concern was a negative operating cash flow of ₦281.5 million in the same period. Negative cash flow raises questions about the company’s ability to sustain operations without drawing down reserves or relying on external funding.

For investors with a cautious outlook, these figures suggest that IMG’s fundamentals are under short-term pressure, making it harder to justify an aggressive bet on the rights issue.

Valuation remains another area of concern. Even after the stock’s recent decline, IMG trades at a price-to-earnings (P/E) ratio of 33 times, nearly double the industry average of 17 times. Its price-to-sales (P/S) ratio of 2.28 is also higher than the industry benchmark of 1.78. This suggests that investors are already paying a premium for IMG’s growth story, leaving little room for error if earnings disappoint further.

At ₦32 per share, the rights issue does offer shareholders a cheaper entry than the current market price of ₦33.30. However, this slight discount does not fundamentally alter the fact that the company remains richly valued relative to peers.

If the rights issue is fully subscribed, IMG’s outstanding shares will increase by 40 percent, from about 499.5 million to nearly 699.3 million. This expansion will dilute existing earnings per share unless profits rebound significantly.

On the positive side, the fresh capital will almost double shareholders’ funds, from ₦5.99 billion to about ₦12.38 billion. This will strengthen the company’s balance sheet, reduce its price-to-book ratio to a more attractive 1.48 (from 3.45), and provide resources for further expansion.

From a valuation perspective, the adjustment improves IMG’s appeal on a balance sheet basis. However, it also means the pressure will be on management to ensure profits keep pace with the enlarged equity base, otherwise returns to shareholders could weaken.

IMG has shown a willingness to reward investors with dividends. In 2024, the company declared ₦0.80 per share, up from ₦0.50 in 2023. This represents a yield of 2.4 percent at current prices. While this is below the broader market average, it demonstrates management’s intent to balance growth needs with investor returns. However, given the capital intensity of its operations and the new equity raise, dividend income alone may not justify investing at today’s valuation.

For existing shareholders, the rights issue presents a rational way to remain invested in a company with a solid long-term story. By subscribing, they can average down their cost per share and avoid dilution of their holdings. The company’s proven ability to expand sales and profits over time, coupled with its strong market position, makes this a reasonable move for those with a patient, long-term perspective.

For new investors, the case is less compelling. Entering at current prices is essentially a bet that IMG will rebound in the medium to long term, despite its current earnings pressure and premium valuation. For conservative investors, it may be wiser to wait until clearer signs of cash flow stability and profit recovery emerge before committing funds.

In summary, IMG’s rights issue is a tale of two perspectives. For loyal shareholders, it is a chance to strengthen their position in a company with a track record of growth. For outsiders considering a first-time investment, caution is advisable until the short-term headwinds ease and fundamentals improve.