The Nation Newspaper

Category: Equities

  • Investors opt for penny stocks amid continuing decline

    Low-priced stocks, otherwise known as penny stocks, were the toasts of the stock market last week as investors sought to lock in into stocks with potential high dividend yields and capital appreciation. Low-priced stocks, which traded around nominal value of 50 kobo, were the most active stocks and the highest gainers at the Nigerian Stock Exchange (NSE).

    Sectoral analysis showed that broad indices that included penny stocks and the insurance sector dominated by penny stocks outperformed the average market performance and other indices that trailed large-cap stocks.

    The All Share Index (ASI), the value-based benchmark index that tracks prices of all quoted equities, indicated a week-on-week decline of 1.31 per cent last week. The NSE Main Board Index, which excluded the trio of Dangote Cement, FBN Holdings and Zenith Bank International, dropped by 1.01 per cent. The NSE Insurance Index showed more restraint with a decline of 0.22 per cent.

    The NSE 30 Index, which tracks the 30 most capitalised stocks, recorded above average performance of -1.43 per cent while the NSE Premium Index, which tracks the trio of Dangote Cement, FBN Holdings and Zenith Bank International, recorded the third highest loss of 1.84 per cent. Dangote Cement is Nigeria’s most capitalised stock while FBN Holdings and Zenith Bank are among the 20 most capitalised stocks. The NSE Banking Index, which features many highly capitalised stocks, recorded the highest loss of 4.26 per cent. The NSE Pension Index followed with a week-on-week decline of 2.04 per cent.

    The NSE Consumer Goods Index recorded the lowest loss of 0.15 per cent. The NSE Industrial Goods Index dropped by 1.32 per cent while the NSE Lotus Islamic Index, which tracks ethical stocks according to Islamic rules, depreciated by 0.73 per cent. However, the NSE Oil and Gas Index played the contrarian with a modest gain of 0.09 per cent.

    Analysts said investors went for penny stocks because they could run faster than mid and large-cap stocks in a rebound.

    Head, financial advisory group, GTI Capital, Mr. Hassan Kehinde, said substantial returns that run into double-digit can compensate for low liquidity usually associated with penny stocks while their low prices make them stocks to watch for several low-income retail investors.

    Law Union and Rock Insurance recorded the highest gain of 21.82 per cent to close the week at 67 kobo.  Learn Africa followed with a gain of 18.18 per cent to close at 78 kobo while Eterna Plc placed third with a gain of 17.76 per cent to close at N1.79 per share.

    Multiverse and Guinea Insurance, which trade around 50 kobo, were the two most active stocks. Together with Zenith Bank International, the three accounted for 397.435 million shares worth N1.86 billion in 1,785 deals, representing 33.85 per cent and 13.50 per cent of the total equity turnover volume and value respectively.

    Aggregate market value of all quoted equities dropped by N124 billion last week to close at N9.376 trillion as against its week’s opening value of N9.500 trillion. The ASI also declined from 27,631.05 points to close at 27,269.71 points. The sustained decline built up the negative average year-to-date return to -21.32 per cent. There were 37 decliners against 25 advancers last week while 128 stocks closed flat.

    Total turnover stood at 1.17 billion shares worth N13.85 billion in 13,870 deals as against a total of 1.22 billion shares valued at N14.69 billion that were traded in 13,495 deals two weeks ago. The financial services sector remained the most active with a turnover of 827.65 million shares valued at N5.11 billion in 8,266 deals; representing 70.49 per cent and 36.89 per cent of the total equity turnover volume and value respectively. The natural resources sector rode on the deals on Multiverse to pool a total of 147.047 million shares worth N73.740 million in 18 deals. The consumer goods sector placed third with a turnover of 88.35 million shares worth N4.43 billion in 2,518 deals.

    Also, a total of 318,734 units of Exchange Traded Products (ETPs) valued at N1.469 million were traded in 50 deals, compared with a total of 23,812 units valued at N417,201.24 traded in 32 deals in the previous week. A total of 10,501 units of bonds valued at N12.024 million were traded in five deals.

    “While concerns about the further decline in oil prices following OPEC’s decision and the looming Fed rate hike may further weaken sentiments in the week ahead, we believe that pockets of opportunities still exist in the equities market for end of the year bargain hunters,” Afrinvest Securities-a Lagos-based dealer at the NSE, stated at the weekend.

     

  • Private sector expands as business environment improves

    • NBS adopts official gauge for private sector

    The maiden reading of the Stanbic IBTC Nigeria Purchasing Managers Index (PMI), which was officially adopted as Nigeria’s private sector gauge last week, indicated that private sector expansion increased and there were modest improvements in business conditions in November.

    At 53.9, the maiden reading of the Stanbic IBTC Nigeria PMI suggested that private sector expansion gathered speed in November, while signalling modest improvements in business conditions. The PMI will subsequently be published on the third working day of each month.

    The National Bureau of Statistics (NBS) last week adopted the Stanbic IBTC Nigeria Purchasing Manager Index (PMI) as its private sector-based index for the country.

    Statistician General of the Federation and Director-General, National Bureau of Statistics (NBS), Dr. Yemi Kale, who disclosed this, said the bureau decided to adopt the PMI because it was confident that it meets global standards of measurement. The index, which was compiled by Markit, was launched last week.

    “We looked at the methodology, asked questions and we are extremely happy with the PMI. And to show the extent to which we are happy with it, we have officially adopted the Stanbic IBTC Nigeria PMI as government’s PMI,” Kale said.

    The index, according to Stanbic IBTC, will reflect figures derived from the survey of the business landscape. The index, among other things, will measure private sector operating status and thereby provide an early indication of business conditions in the country. It is a composite index, calculated as a weighted average of five individual sub-components including: new orders, 30 per cent; output, 25 per cent; employment, 20 per cent; suppliers’ delivery times, 15 per cent and stocks of purchases, 10 per cent.

    Chief executive officer, Stanbic IBTC Bank, Mr Yinka Sanni, said the availability of data has been an invaluable input for individuals and businesses to weigh in environmental, political, economic, financial and capital market opportunities and issues in taking strategic positions for the future.

    “We recognised that Nigeria needs accurate, timely and reliable data by which individuals and corporates can quickly gauge the temperature and momentum of economic activity,” Sanni said.

    Highlighting some of the key features of the PMI, Director, Economics Indices, Markit, Mr Richard Willis, said the PMI has been widely accepted globally by leading economies because it is accurate, timely and has a wide sector coverage, which includes agriculture, manufacturing, services, construction, and retail services.

    “The PMI surveys are based on facts, not opinion, and are the first indicators of economic conditions to be published each month. Moreover, the same methodology is applied across all PMI surveys to facilitate international comparisons in the over 30 economies which the PMI covers, including the United States, the Eurozone, Japan, the United Kingdom, and Germany,” Willis said.

     

  • Africa Prudential Registrars wins PEARL Awards

    Africa Prudential Registrars (APR) Plc received double honour as it won Best Profit Margin Ratio and Best Corporate Governance awards at 20th Pearl Awards Dinner in Lagos.

    In the market excellence category, APR Plc won the award for Best Profit Margin Ratio, beating every other listed company in Nigeria. In 2014, it led the entire group of listed companies by profit margin with a distance at 54 per cent, the closest rival being 40.7 per cent.

    APR also won the Best Corporate Governance in the Special Recognition category, making her awards two on the night. Other nominees in this category were Total Nigeria Plc and Custodian and Allied Plc.

    Managing director, Africa Prudential Registrars (APR), Mr. Peter Ashade, said the company would continue to strive to improve on its performance year-on-year, particularly when it comes to ability to convert revenue into profit.

    Chairman, Africa Prudential Registrars (APR) Plc, Chief Eniola Fadayomi noted that the “Best Corporate Governance Award” highlighted that the board and management of the company have been working in harmony.

    She assured stakeholders that the company will continue to protect their interests, while ensuring international best practices in corporate governance.

    Organisers of the Pearl Awards noted that it was established to reward corporate excellence and  thereby challenge and spur quoted companies to explore innovative and competitive approaches towards achieving outstanding performance and growth. Therefore, nominees and eventual winners were selected through a verifiable and objective award selection process.

     

  • Global hedge funds’ assets rise by 34% to $2.6tr

    • Equity-based strategies most popular with hedge funds, says IOSCO

    A new report published at the weekend by the International Organisation of Securities Commissions (IOSCO) indicated that assets under management in the hedge fund industry have risen by 34 per cent to $2.6 trillion.

    The report, the “Third IOSCO Hedge Fund Survey” gathered data from hedge fund managers and advisers about the markets in which they operate, their trading activities, leverage, funding and counterparty information. It forms part of IOSCO’s efforts to support the G20 initiative to mitigate risk associated with hedge funds. The report provides an overview of the hedge fund industry as of September 30, last year.

    The IOSCO Hedge Fund Survey remains the only global view on hedge funds from a regulatory perspective.

    The report indicated that assets under management had risen by 34 per cent to $2.6 trillion since the previous survey in September 2012. Most of this growth can be attributed to changes in asset values, net inflows and fund structures while some of the growth also reflects more widespread and accurate reporting across participating jurisdictions, according to the report.

    The survey captured data from 1,486 qualifying funds, an increase of 42 per cent from the 1,044 funds that participated in the September 2012 survey.

    The report noted that the use of equity-based strategies remains the most popular among hedge funds while hedge fund industry is still largely concentrated in the United States of America.

    Hedge funds remain mostly US dollar based and predominantly invested in North American assets, while the Cayman Islands continue to be the tax domicile of choice.

    The report indicated that financial leverage was being used by hedge funds across all jurisdictions, except in Japan; comparisons of synthetic and gross leverage continue to be hampered  by the different leverage metrics used by jurisdictions.

    “Reported data suggests there is no significant liquidity mismatch in hedge funds; however, this is against the backdrop of “normal” market conditions; and hedge funds seem aware of the market liquidity of their portfolio positions, and they can generally make use of suspensions and gating to manage investor redemptions,” the report stated.

    IOSCO stated that it would, through its policy Committee C5 on Investment Management, continue to discuss how the survey can be further improved to enhance regulators’ understanding of hedge fund activities and their risks.

     

     

     

  • Exchange inducts 31 stockbrokers

    Exchange inducts 31 stockbrokers

    The Nigerian Stock Exchange (NSE) has inducted 31 dealing clerks, who recently qualified to trade on the Exchange..

    The induction is the end of a long-drawn process of internship and paves the way for the stockbrokers to trade on any floor of the Exchange or through personal remote access.

    Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema, charged the new dealing members to uphold the virtues of integrity, good character and high ethical and professional standards.

    He noted that the Exchange has clear and enforceable rules with a zero tolerance policy on all infractions.

    “Today’s ceremony  is not just a celebration. It marks a call to stand tall on integrity, to be spotless in character, to be professional in service and to be deep in ethics and values,” Onyema said.

    He said with the rigorous process that led the qualification of the new dealing members, the Exchange has found them worthy to be a practising stockbroker and able to trade on any floor of its floor.

     

     

     

  • NSE, brokers pick May & Baker as stock to watch for sustainable growth

    May & Baker Nigeria Plc has sustainable growth potential and its fundamentals and investments have positioned it to deliver better returns in the medium to long term.

    This was the assessment of top management and dealers at the Nigerian Stock Exchange (NSE) who undertook a factory tour of May & Baker Nigeria’s manufacturing complex in Ota, Ogun State. The manufacturing complex includes May & Baker Nigeria’s World Health Organisation (WHO)-certified pharmaceutical manufacturing plant, otherwise known as The Pharma Centre.

    May & Baker Nigeria’s share price recorded the highest gain last week at the NSE, rising by 10.64 per cent to close at N1.04 per share. The benchmark index at the NSE, the All Share Index (ASI), indicated a week-on-week average gain of 0.05 per cent.

    Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema led the team of the leadership of the Nigerian stock market, which included president, Association of Stockbroking Houses of Nigeria (ASHON), Mr Emeka Madubuike and Doyen of Stockbrokers, Mr. Sam Ndata.

    Onyema said May & Baker Nigeria has taken a long-term view of development by its investments in the Ota manufacturing complex noting that such long-term view guarantees sustainable growth.

    “Another thing that impresses me about the company is that most quoted companies want to see their share price do well. They want short-term gain. So they take a shorter view to investing. But the company has done the opposite. It takes a long-term view which, in my opinion, is more sustainable,” Onyema said.

    He said the current share price of the company belied its earnings potential and reflected the downturn in the national economy and the stock market.

    “We commend you for the diversification of your business and for the long term investment strategy. The low price of your share is reflective of the general condition of the Nigerian economy. Be assured that your share price will go up once the economy picks up. This is because the company has good fundamentals, like your price earnings ratio is a good indicator to show that the company has bright future,” Onyema said.

    He said the factory tour has given the market opportunity to get acquainted with the challenges the company is facing, the opportunities before it and its expectations for the future, adding that he was fascinated by the diversification as well as the long-term nature of May & Baker Nigeria’s vision.

    Onyema said the company should consider a combination of bond and equity issue as it seeks to raise fresh fund to bolster its operations and deleverage its balance sheet.

    Madubuike said May & Baker Nigeria is a stock for investors that seek stable and sustainable returns on investments.

    According to him, May & Baker Nigeria will make a lot of progress with its investments and it is one of the companies for the future.

    Ndata praised the management of May & Baker Nigeria and urged them to interact more with the investing public in order to give them better understanding of the prospects of the company.

    “It is a stock for the future, it is best to buy now that the price is low, anybody that buys now will be smiling to the bank later,” Ndata said.

    Managing Director, May & Baker Nigeria Plc, Mr. Nnamdi Okafor, said the share price of the company does not reflect its fundamental values and recent investments, including its position as one of the four pharmaceutical companies certified by the WHO as having current general manufacturing practices.

    “May & Baker Nigeria has potentials as a strong Sub-Saharan African brand. A country with huge population of over 188.6 million people; biggest economy in Africa; strong Gross Domestic Product growth rate of 6.5  per cent in 2014 to 4.0 per cent in 2016 and vibrant workforce with emerging middle class, has a lot to benefit from the success of this our great company,” Okafor said.

    He noted that the pharmaceutical business contributes 70 per cent of the company’s revenue and recapitalisation of the business would improve its ability to compete in current and planned businesses.

  • SEC moves to deepen market with rules on crowdfunding

    Securities and Exchange Commission (SEC) has started arrangements to introduce crowdfunding into the Nigerian capital market as part of efforts to deepen the market and enhance its global competitiveness.

    Director-General, Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, said the commission was partnering with the Ontario Stock Exchange to develop framework and rules on crowd funding for the Nigerian capital market.

    Crowdfunding is a means of raising money from a large number of people to fund a project or venture. It is usually undertaken through online medium and it has gathered steam as a form of alternative finance. The crowdfunding model is based on three actors: the project initiator who proposes the idea, individuals or groups who support the idea and the platform that brings the parties together.

    Gwarzo said the commission was interesting in developing Nigeria’s crowdfunding framework as another way of deepening participation in the Nigerian capital market and ensuring that businesses and entrepreneurs have many channels of accessing funds.

    He said the apex capital market regulator has been implementing initiatives that would strengthen investors’ confidence in the capital market.

    According to him, SEC believes that retail investors will return to the capital market once their concerns are properly addressed.

    He noted that the commission has inaugurated the board of Investors Protection Fund (IPF) and from next year, proceeds of shares sale will be paid directly into the account of investors as part of efforts to address the investor concerns.

    He pointed out that dematerialisation is very important to the growth of the market and by 2016 more shares would be dematerialised.

    Gwarzo said the introduction of the over-the-counter (OTC) platforms- FMDQ OTC Plc and NASD Plc, have transformed the way the capital market is perceived in Nigeria.

    According to him, the level of liquidity and price of unlisted securities in Nigeria has been greatly enhanced by the operation of the two OTC platforms.

    “On our part at the SEC, we will continue to ensure that these platforms are optimally regulated so that they can continue to add value to investors. As you are aware, the SEC is currently leading the capital market in implementing the 10-year master plan for the growth and development of our market,” Gwarzo said.

     

  • FirstBank sells its microfinance bank

    FirstBank sells its microfinance bank

    FBN Holdings Plc, the holding company for FirstBank of Nigeria (FBN) and its former subsidiaries, has concluded arrangements for the sale of the group’s microfinance subsidiary-FBN Microfinance Bank Limited, to Letshego Holdings Limited.

    Letshego, a Botswana company, is  a holding company with consumer and micro lending subsidiaries across nine countries in Southern and East Africa including Botswana,  Kenya,  Lesotho,  Mozambique,  Namibia,  Rwanda,  Swaziland,  Tanzania  and Uganda

    In a regulatory filing obtained at the weekend signed by FBN Holdings’ company secretary, Tijjani Borodo and head of finance, Oyewale Ariyibi, the group said it has obtained the requisite approval from the Central Bank of Nigeria (CBN) for its divestment from FBN Microfinance Bank.

    FBN Holdings has executed Sale Purchase Agreement (SPA) with Letshego Holdings Limited to sell its shares in FBN Microfinance Bank to Letshego Holdings.

    “We expect that the sale will be concluded before the end of the current financial year,” the group stated, referring to its business year ending December 31, 2015, within the next 24 days.

    FBN Holdings’ holding company structure allows it to own and operate the microfinance bank. Central Bank of Nigeria (CBN)’s Scope of Banking Activities and Ancillary Matters No 3, 2010 requires banks to fully concentrate on core banking functions. The new model requires banks to either sell all non-core banking businesses or form a holding company to hold such non-core banking businesses including activities such as insurance, asset management and capital market operations.  Three banks including First City Monument Bank (FCMB) Plc, First Bank of Nigeria (FBN) Plc and Stanbic IBTC Bank Plc then opted for holding company structure while others opted to divest from non-core subsidiaries.

    FBN Holdings’ share price declined by 1.80 per cent to close at N4.90 per share at the weekend, playing the negative contrarian stock in a market with modest average gain of 0.26 per cent.

    Head, Media & External Relations, FBN Holdings Plc, Mr. Babatunde Lasaki, in a response to The Nation’s enquiry said the divestment was part of the a strategic intent to refocus the group.

    He said the board of FBN Holdings decided to divest its interest in FBN Microfinance Bank to a strategic investor on a going concern basis.

     

  • Equities rebound as investors go for undervalued stocks

    Where were more than two advancers for every decliner yesterday at the Nigerian Stock Exchange (NSE) as a renewed demand for quoted equities spurred a major rebound. After successive declines in the previous two trading sessions, bargain-hunters returned to the stock market on Thursday, holding out higher prices for most transactions.

    From banking to consumer goods sectors, investors showed improved appetite for quoted equities. Aggregate market value of all quoted equities rode on the back of the increased demand to close at N9.354 trillion, N69 billion above its opening value of N9.285 trillion.

    The All Share Index (ASI), the benchmark index at the NSE, rose by 0.75 per cent to close at 27,205.95 points compared with its opening index of 27,004.50 points. The NSE Banking Index rose by 2.3 per cent while the NSE Consumer Goods Index appreciated by 2.0 per cent. The upturn reduced the negative average year-to-date return to -21.50 per cent.

    There were 25 gainers against 11 losers in a five-hour trading sessions that saw substantial interests in low-priced large-cap stocks as well as low-cap penny stocks. Nigerian Breweries, Nigeria’s second most capitalised stock, led the advancers with a gain of N4.30 to close at N116.31. Guinness Nigeria, the second most capitalised brewer, followed with a gain of N1.60 to close at N124.60. Presco added N1.30 to close at N32.30. Zenith Bank rose by N1.25 to close at N15.25. PZ Cussons Nigeria gathered 96 kobo to close at N27.46. Cadbury Nigeria rose by 93 kobo to close at N19.61 while Seven-Up Bottling Company added 90 kobo to close at N182.

    Total turnover stood at 179.05 million shares valued at N1.46 billion in 2,747 deals. The three most active stocks, in terms of volume, were Law and Union Rock Insurance, 32.85 million shares, United Bank for Africa, 30.87 million shares and FBN Holdings, which recorded a turnover of 16.10 million shares. The most active sectors were financial services, 147.51 million shares; conglomerates, 15.17 million shares and consumer goods sector, which recorded a turnover of 5.0 million shares.

    Analysts at Cowry Asset Management attributed the upturn to renewed bargain-hunting.

    “The rebound today was in line with our expectation of bargain hunting after many value counters fell to year lows yesterday. In our view, the fact that some stocks with low prices are still not generating enough buy-attractions suggests that aggregate market buy-appetite remains weak and the current positive sentiment might be short-lived. We continue to advise caution on the part of retail investors with a short holding period,” analysts at Afrinvest Securities stated.

    Dangote Cement recorded the highest loss of N2.19 to close at N160. Fidson Healthcare and AXA Mansard Insurance dropped by 13 kobo each to close at N2.56 and N2.61 respectively.

  • Equities slump to 37-month low amidst crude oil decline

    Nigerian equities slumped below its three-year low yesterday as global decline in crude oil price exacerbated concerns over Nigeria’s fiscal and macroeconomic outlook. After a loss of 1.08 per cent or N104 billion on Tuesday, quoted equities dropped by 1.92 per cent or N 181 billion on Wednesday as investors reacted sharply to similar decline in crude oil price.

    The average decline at the Nigerian stock market yesterday correlated with 1.95 per cent decline in the Brent Crude Oil price to $43 per barrel. Crude oil incomes account for about 85 per cent of Nigeria’s national revenue. Nigeria’s N6 trillion budget for 2016 was benchmarked against crude oil price of $38 per barrel.

    “OPEC’s decision to abandon its production quota which has led to a further decline in oil prices, seems to have fuelled the renewed sell pressure on the Nigerian Bourse,” said Afrinvest Securities- a Lagos-based dealer at the Nigerian Stock Exchange (NSE).

    Aggregate market value of all quoted equities on the NSE slumped from N9.466 trillion to close at N9.285 trillion, representing a loss of N181 billion. The All Share Index (ASI)-the value-based common index that tracks prices of all quoted companies, also dipped by 1.92 per cent from 27,533.03 points to close at 27,004.50 points, its lowest point in the past 37 months.

    The successive decline built up the negative average year-to-date return at the stock market to -22.08 per cent. With 24 losers to 15 gainers, widespread losses across the sectors and losses within the highly capitalised stocks group. The NSE Industrial Goods Index dropped by 2.6 per cent. The NSE Consumer Goods Index declined by 0.6 per cent while the NSE Insurance Index slipped by 0.3 per cent. However, the NSE Oil & Gas Index rose by 0.9 per cent.

    Dangote Cement, the most capitalised stock at the stock market, recorded the highest loss of N8.53 to close at N162.19. Guinness Nigeria followed with a loss of N1.90 to close at N123. Nigerian Breweries, the second most capitalised stock at the market, lost 99 kobo to close at N112.01. Cadbury Nigeria declined by 98 kobo to close at N18.68. GlaxoSmithKline Consumer Nigeria lost 66 kobo to close at N36. PZ Cussons Nigeria dipped by 50 kobo to close at N26.50. Guaranty Trust Bank lost 37 kobo to close at N18.53. Zenith Bank declined by 35 kobo to close at N14 while Ecobank Transnational Incorporated and Fidson Healthcare lost 14 kobo each to close at N16 and N2.69 respectively.

    Afrinvest Securities stated that the downtrend reflected the waning investors’ appetites consequent on the ongoing decline in crude oil prices that has sparked concerns on Nigeria’s fiscal viability and macroeconomic fundamentals.

    “As outlook for the oil market remains bearish, strong policy responses from fiscal and monetary mangers to adjust to the reality of a lower oil revenue environment are medium term factors that could lead to an improvement in sentiments. In the interim, our short term outlook for the market remains bearish although we anticipate that bargain hunting might result in a mild uptrend in the trading session ahead,” analysts at Afrinvest Securities stated.

    Total turnover stood at 240.8 million shares valued at N2.41 billion in 3,073 deals. Zenith Bank was the most active stock with a turnover of 64.3 million shares worth N856.04 million in 590 deals.