The Nation Newspaper

Category: Equities

  • Why we are raising new equity funds, by Diamond Bank chief

    Why we are raising new equity funds, by Diamond Bank chief

    Diamond Bank Plc would use the net proceeds of its ongoing new supplementary equity issue to strengthen its internal processes with a view to ensuring better returns to shareholders.

    Speaking yesterday at a “Facts Behind the Figures” forum at the Nigerian Stock Exchange (NSE), group managing director, Diamond Bank Plc, Dr. Alex Otti, told the investing public that the net proceeds of the N50.37 billion rights issue would put the bank in a better position to sustain impressive returns to shareholders.

    Diamond Bank is currently offering a total of 8.69 billion ordinary shares of 50 kobo each to existing shareholders in the ratio of three new ordinary shares for every five ordinary shares held as of June 13, 2014 at N5.80 per share. The issue, which commenced on July 30, is scheduled to close on August 26. Eighty six per cent of the net proceeds of the rights issue would be used for the expansion and refurbishment of the bank’s business locations  while four per cent and 10 per cent would be used for the development of the bank’s information and technology infrastructure and as additional working capital respectively.

    Otti said the rights issue with its “very large discount” was a way of compensating shareholders that have stood by the bank through thick and thin.

    He urged shareholders to take advantage of the rights issue adding that the offer would ensure that the bank continued to have superior returns.

    He outlined that Diamond Bank has remained focused on supporting the real sector of the economy noting that the bank’s winning strategy revolved around “innovative market leading products, focus on retail segment, growth in high-end corporate banking clients, focus on human capital management, and driving business expansion through organic growth.”

    “We believe organic growth is the way to go,” Otti said.

    He pointed out that the bank has been the best performing Tier 2 bank since 2012 in terms of return on equity and stock market performance.

    In his remarks, chief finance officer, Diamond Bank, Mr. Abdulrahman Yinusa, who talked about the group’s half-year performance, said it achieved a return on equity of 19.2 per cent in first half 2014 with the return on equity expected to rise above 20 per cent for the full year, excluding impact of any increase in equity capital.

    Yinusa added that the rights issue was expected to be 100 per cent subscribed at its close.

    Otti said the half-year performance and the state of Diamond Bank currently was evidence that it was set for sustained growth.

  • Kaduna signs N2b MoU with BoA, BoI

    Kaduna signs N2b MoU with BoA, BoI

    Kaduna State Government yesterday signed a two N2 billion Memorandum of Understanding (MoU) with the Bank of Agriculture (BoA) and the Bank of Industry (BoI) as part of efforts to revive the agricultural sector and promote industrial development in the state.

    The counterpart funding between the state government and the financial institutions is also to be used in granting small industries, create jobs, reduce poverty and subsequently create wealth.

    Kaduna State Governor, Mukhtar Ramalan Yero said the state government got the approval of the House of Assembly to use  N500 million from its 2013 Subsidy Reinvestment and Empowerment program (SURE-P) funds as counterpart fund to access the funds from the BoA while additional N500 million as loan from BoI to be used as counterpart fund to access that of the BoI.

    According to the him, the Small and Medium Enterprises (SMEs) remains a critical aspect in implementing the industrialisation policy of his administration to reduce poverty and create jobs and wealth among its citizenry.

    While assuring of judicious use of the funds, he lamented the high interest rate charged by the commercial banks which according to him is a discouraging factor for assessing their loans.

    “The state target is to develop its economy and make it economically independent without waiting for Federal allocation.”

    Earlier in his remarks, the Managing Director/Chief Executive Officer of the Bank of Agriculture, Alhaji Mohammed Santuraki averred that, once the agricultural sector and the SMEs are adequately taken care of, every other area of development will be captured.

    He disclosed that the bank had so far spent about 2.4 billion naira to about 8,000 farmers in the state, while assuring that, there are plans to extend credit facilities to about 2,500 SMEs throughout the 23 local government area of the state.

    “As we see expected successes, we will very soon scale up the intervention funds” he assured.

    Similarly, the Managing Director/Chief Executive Officer of the Bank of Industry, Rashid Olaoluwa said the counterpart funding was geared towards the industrial development of the state.

    He said, the synergy will provide platform for accelerated economic growth and transformation of the state, adding that, Kaduna State has now joined the league of dynamic states.

    Mr. Olaoluwa also disclosed that BOI has disbursed over 23 billion naira as loans to businesses in the state while assuring of further and continuous support to the state government.

     

  • IOSCO reviews effects of storage warehouses on price formation

    IOSCO reviews effects of storage warehouses on price formation

    The International Organization of Securities Commissions (IOSCO) has launched a research into the potential effects of storage infrastructure on the integrity of the price formation process of commodity derivatives in member jurisdictions.

    IOSCO is asking its members to respond to the questionnaire and to encourage other relevant entities in their jurisdictions-storage and market infrastructure providers, market participants and end users, to do so as well. There are no restrictions on who can answer the questionnaire.

    IOSCO believes that the questionnaire is a fundamental part of its work in this area, as it will inform its thinking going forward.

    IOSCO had recently also set up a work agenda to strengthen and foster the roles of capital markets as trusted sources of capital with a view to encouraging greater use of capital markets as financing channels for transactions.

    The board of IOSCO, which met recently in Madrid, discussed progress on a number of key initiatives to support the G20-FSB efforts to restore stability in the global financial system and build economic growth.

    The board, which included Nigeria’s Securities and Exchange Commission (SEC), also looked into methodologies for identifying non-bank global systemically important financial institutions or activities in the areas of asset management and market intermediaries.

    IOSCO also discussed the role capital markets and securities regulators can play in supporting long-term finance, including infrastructure investment and small and medium enterprises (SME )financing.

    The meeting also considered the implementation of IOSCO Principles on Financial Benchmarks, the IOSCO Principles for Oil Price Reporting Agencies and the IOSCO Principles for the Regulation and Supervision of Commodity Derivatives Markets.

     

     

     

     

     

    Chairman, International Organization of Securities Commissions (IOSCO), Greg Medcraft said capital markets are emerging as a key source of the finance needed across the globe to drive economic growth.

    “Through a work agenda focused on fostering markets as a trusted source of capital, IOSCO is playing an important role in supporting that growth,” Medcraft noted.

    The IOSCO board also discussed audit quality and important initiatives to build confidence in global securities markets and to reduce the reliance of asset managers and market intermediaries on credit ratings as well as promote effective credible deterrence as a key element in improving investor protection and confidence in markets.

    Members discussed the results of the IOSCO research department´s latest market survey on market trends, which emphasizes the growing leverage in securities markets, the impact of cross-border capital flows on emerging markets, financial risk disclosure, collateral management, and potential counterparty risk in central clearing houses.

    Board members also examined policy measures aimed at building capacity in emerging markets and supporting the creation of strong regulatory frameworks for sustaining growth in both emerging and developed markets.

     

     

  • Diamond Bank’s rights issue opens for trading on NSE

    Diamond Bank’s rights issue opens for trading on NSE

    The Nigerian Stock Exchange (NSE) has listed the rights issue by Diamond Bank Plc for trading, paving the way for non-shareholders to buy renounced rights from existing shareholders.

    Diamond Bank is raising about N50.4 billion from its shareholders through a rights issue of about 8.69 billion ordinary shares of 50 kobo each at N5.80 per share. Diamond Bank’s share price closed at the weekend at N6.35 per share. The rights issue had been pre-allotted to shareholders of the bank as at June 13, 2013.

    The rights issue opened on July 30, 2014 and it is expected to run till August 26, 2014.

    Rights issue gives the first right of refusal to existing shareholders and thus preserve existing shareholding structure. It however provides window for new investors to buy into the company through rights trading on the secondary market.

    Half-year report of Diamond Bank for the period ended June 30, 2014 showed that profit before tax dropped from N17.56 billion in first half 2013 to N16.07 billion in first half 2014. However, profit after tax increased from N12.64 billion to N13.79 billion.

    Diamond Bank had announced a 16.7 per cent increase in profit before tax to N32.1billion for the full year ended December 31, 2013. The bank declared a dividend of 30 kobo per ordinary share.

    Group managing director, Diamond Bank, Dr. Alex Otti, had noted that the pre-tax profit exceeded its N30 billion profit guidance pointing out that the result is rooted in the bank’s strength to attract low-cost deposits and deploy these into various assets at profitable yet acceptable risk levels.

    While the bank achieved a net interest income of N104.6 billion, an increase of 17.1 per cent from N89.3billion recorded in 2012, it generated interest and similar income of N143.1 billion, an increase of 27.3 per cent from N112.4 billion earned in 2012. Diamond Bank also achieved a 46.2 per cent increase in other income from N23.8 billion it recorded in the preceding year to an impressive to N34.8 billion in 2013.

    Diamond Bank’s 2013 financial results also showed improvements in various areas of the group balance sheet with loans and advances to customers increasing by 17.8 per cent to N689.2 billion; deposits from customers increasing by 32.5 per cent to N1, 206 billion.

     

     

     

  • Lafarge Africa has better prospects for returns, say analysts

    Lafarge Africa has better prospects for returns, say analysts

    The emergence of Lafarge Africa Plc would lead to better returns and benefits for the investors, the Nigerian capital market and the African cement industry.

    Investment experts and advisors told The Nation that the decision of Lafarge to consolidate its Nigerian and South African businesses under a single entity was a synergistic strategic move that could change the game plan in the Nigerian investment market, the cement industry and African mergers and acquisitions industry.

    Lafarge on July 9, 2014 received overwhelming shareholders’ approval to consolidate its cement businesses in Nigeria and combine these with South African operations to create a leading sub-Saharan building materials giant to be known as Lafarge Africa Plc. The consolidation is being done by transferring Lafarge’s assets in South Africa and Nigeria to Lafarge Cement Wapco Nigeria Plc.

    Under the transaction, Lafarge Group will transfer its direct and indirect shareholdings in Lafarge South Africa Holding Limited of 72.4 per cent and its equity stakes in three other cement companies in Nigeria-United Cement Company of Nigeria Limited (35%), Ashaka Cement Plc, (58.61%) and Atlas Cement Company Limited (100%) to Lafarge Wapco for a cash consideration of $200 million and the issuance of some 1.4 billion Lafarge Africa shares to the Lafarge Group. Lafarge Africa, which would retain Lafarge Wapco’s subsisting listing on the Nigerian Stock Exchange (NSE), is estimated to have an initial market capitalization of over $3 billion (about N468 billion), making it the 6th largest Company on the NSE by market capitalization.

    Following the shareholders’ approval and other regulatory processes, Lafarge Wapco last week formally notified the NSE of the change in its name to Lafarge Africa Plc, paving the way for the impending listing of the consolidation shares.

    Since the July 9 approval, Lafarge Wapco’s share price has risen by about 7.1 per cent as against the average decline of 0.91 per cent recorded by the Nigerian stock market in July. Lafarge Wapco’s share price closed at the weekend at N120 as against its closing price of N112.07 on July 9.

    In emailed responses to The Nation’s enquiries, equity advisors and market experts in several leading investment firms, which are not involved in the Lafarge transaction, said they believed the emergence of Lafarge Africa would create better values for shareholders through increased dividends and capital appreciation as well as the cement industry through a much more competitive pricing and quality scenarios.

    According to them, the Lafarge Africa transaction could encourage other multinationals and Nigerian companies to further explore the potential for mergers and acquisitions, thus stimulating the investment markets.

    Investment advisors and analysts at Lead Capital Plc, Cardinal Stone Partners and Sterling Capital Markets among others agreed that the emergence of Lafarge Africa could directly and indirectly boost the Nigerian stock market through increased liquidity and returns on the Lafarge Africa stock and general inducement of mergers and acquisitions.

    They also agreed that the decision to use the Nigeria-based entity as the vehicle for the consolidation reflected Lafarge’s foresights and depth of the potential of the Nigerian cement market while also holding on to opportunities that the two largest African economies-Nigeria and South Africa, could create in continuing bilateral relationships.

    Head, research and investment advisory, Sterling Capital Markets, Sewa Wusu, said investors and the cement industry would benefit significantly from the Lafarge Africa transaction.

    “I think the Nigerian market stands to benefit immensely from this strategic move. We are going to witness increased capacity in cement production in Nigeria as these companies struggle with strategic initiatives to enhance quality in cement production in order to increase market share. This is also a positive development for the Nigerian Stock Exchange (NSE), particularly the investors,” Wusu said.

    According to him, the Lafarge Africa transaction would enhance competition and compel fringe players in the cement industry to fine-tune their strategies to carve their own market share in their own chosen niche environment as the competition increases.

    “Going forward, we expect to see significant increase in returns in terms of dividend declaration, share price appreciation coupled with renewed interest by portfolio managers, both domestic and foreign as they continue to further tilt their investment decisions in favour of the company due to anticipated returns,” Wusu, also an economist and equity investment specialist, said.

    He added that the global cement outlook for the African market provides a strong support base for the realization of the immediate and long-term gains from the Lafarge Africa transaction.

    “The cement industry, not only in Nigeria but also other African countries, has huge prospects due to the continent’s huge infrastructure deficit. Most countries are now embarking on huge infrastructure financing to fix these problems in Africa. As such, there is huge and massive demand for cement in the continent. This clearly is huge opportunities for cement companies going forward and I think Lafarge is positioning to tap these huge markets and deliver good returns to its shareholders,” Wusu said.

    Group head, research, Lead Capital Plc, Sadiq Waziri, said the consolidation into Lafarge Africa will translate into greater efficiency through the advantages of economies of scale with the emergent company in good stead to better serve the African market, hence increase in revenue for the listed entity.

    He noted that the combined entity will immediately be producing 12 million metric tonnes of cement per year as against Lafarge Wapco’s pre-consolidation 4.5 million metric tonnes per year adding that further planned capacity expansion would increase the new company’s market share.

    “I would expect the combined entity would generate higher revenues, higher returns on asset and capital, and robust market valuation matrix. This should move the share price northwards. Besides, since the combined entity will be listed, one should expect the new Lafarge Africa to increase its number of shares to accommodate the merger. There is prospect of raising additional capital through the stock market to buttress this. This would increase the total market capitalization of Lafarge Africa, which may result in greater turnover in trades,” Waziri said.

    He pointed out that Lafarge Africa, based and listed in Nigeria, will have better opportunity to improve its market share and balance cross-country risks and benefits to deliver better returns to shareholders.

    According to him, the larger cement market in Africa is in Nigeria– Nigeria has a growing real estate sector estimated at  N6.4 trillion ($41.2 billion) and would need  $20 billion a year, or up to $200 billion in the next 10 years to finance its infrastructure deficit, which would require lots of cement.

    “The Lafarge Africa deal is a consolidation of related companies. This is a sensible step by Lafarge Worldwide to have their African operations in one entity. We believe the Lafarge style consolidation is operationally efficient, so it is possible for other multinationals to adopt this strategy. We think the fundamentals of Lafarge are strong as it attains peak capacity utilization at its Ewekoro plant and as cost containment initiatives start to pay off,” said analysts at Cardinal Stone Partners.

    Investment advisor, Cardinal Stone Partners, Damilola Lawal, noted that the consolidation would be good for existing Lafarge Wapco shareholders because the new entity would enjoy increased efficiency from the elimination of redundant capacity, economies of scale, and higher borrowing capacity.

    According to him, there could also be expect better synergies across Lafarge’s cement manufacturing, aggregates and Ready Mix Concrete lines and better geographical diversification.

    Analysts at Cardinal Stone Partners outlined that while the South African cement market is seen as mature, the Nigerian cement market is still emerging, with large infrastructural and housing deficits that will fuel growth in the future, thus putting the Lafarge Africa in vantage position to diversify and improve earnings across the economies.

    They noted that the expected increased capacity in the cement industry would definitely lead to an increase in competition among the cement players.

  • FBN Holdings grosses N212b in first half

    FBN Holdings grosses N212b in first half

    FBN Holdings Plc, the holding company for First Bank of Nigeria (FBN) Limited and its previous subsidiaries, grew its top-line by 7.9 per cent to N212 billion in the first half of this year.

    Interim report and accounts of FBN Holdings for the period ended June 30, 2014 released yesterday showed that gross earnings rose by 7.9 per cent to N212 billion in first half 2014 as against N196.4 billion recorded in comparable period of 2013. The top-line showed mixed performance from the interest and non-interest incomes. Net interest income inched up by 2.2 per cent to N115.2 billion compared with N112.7 billion in first half 2013. Non-interest income was flat at N43.2billion as against N43.3 billion in 2013. Operating income rose marginally by 1.5 per cent from N155.5 billion to N157.8billion.

    While impairment charge for credit losses dropped by 33 per cent to N6.7 billion in 2014 from N9.9 billion in 2013, operating expenses increased by 14.3 per cent to N102.9 billion as against N90.0 billion. Profit before tax thus dropped by 12 per cent to N48.3 billion in first half 2014 as against N54.8 billion in first half 2013. Profit after tax also dropped by 19 per cent from N46.1 billion to N37.2 billion.

    Further analysis showed that the company’s total assets closed first half at N4.0 trillion, up by 3.4 per cent from N3.9trillion recorded by December 2013. Customer deposits however dropped by 5.9 per cent to N2.8 trillion as against N2.9 trillion recorded in December 2013. Customer loans and advances stood at N1.8 trillion in first half 2014 as against N1.7 trillion by December 2013.

    Key fundamental indices underlined the depressed bottom-line.         Return on average equity dropped to 15.7 per cent in 2014 as against 20.6 per cent in first half 2013. Net interest margin dropped from 8.2 per cent to 7.4 per cent. Cost to income ratio stood at 65.2 per cent as against 57.9 per cent. Non-performing loans ratio stood at 3.0 per cent as against 3.8 per cent in comparable period of 2013.

    Chief executive officer, FBN Holdings Plc, Bello Maccido, said the performance of the company during the period showed its resilience in view of the tough operating environment and regulatory headwinds.

    According to him, the company has continued to implement measures to ensure improved performance with a review of the current business model of its commercial banking business group and the investment banking and asset management business in the coming period.

  • Skye Bank to complete tier 2 capital raising by September

    Skye Bank to complete tier 2 capital raising by September

    Skye Bank Plc plans to complete its ongoing tier 2 capital raising exercise before the end of September, according to the latest update made available yesterday by the bank.

    In the outlook for the second half of 2014, Skye Bank yesterday said it has achieved substantial milestones in its capital raising programme and it is optimistic that the exercise would be concluded within this quarter.

    For the remaining six months of the year, the management of the bank said it would consolidate on its market penetration strategies in the retail and commercial segments and engage more with its customers to continuously add value to their businesses.

    According to the management report, the bank will deploy more electronic channels and leverage on its newly upgraded IT platform to support various internal processes and create convenient banking experience.

    “We expect our transactions in the pipeline to mature in the remainder of the year. With continuous deployment of electronic channels to deepen our presence in the various segments of the market, execution of short cycle transactions, replacement of tenured funds, focus on efficiency and better turn-around time to serve our customers, and enhanced cost management, we are optimistic about a sustainable improved performance on all the major indices,” the bank stated.

    Against the background of the modest performance in the first half, management indicated that the bank would still achieve its 2014 targets.

    First-half earnings report for the period ended June 30, 2014 showed that the bank grew its total asset to N1.131 trillion by first half 2014 as against the N1.116 trillion reported during the corresponding period in 2013, representing a marginal growth of 1.3 per cent. Similarly, the bank’s total liabilities including deposits grew to N1.016 trillion during the review period from N996.221 billion the previous year, an increase of 1.9 per cent.

    The bank, in the interim report submitted at the Nigerian Stock Exchange (NSE) yesterday, attributed the growth in its total assets to its various business development activities in diverse sectors of the economy.

    However, the bank indicated that profit before tax dropped to N7.266 billion as against N10.545 billion during the corresponding period in 2013. Profit after tax also decreased to N5.786 billion as against N8.428 billion the previous year.

    It attributed the decline in profit to its aggressive approach to loan provisioning in the earlier part of the year, with an increase of 100 per cent to N5.010 billion from N2.511 billion in June 2013, with a view to streamlining provisioning on a quarter by quarter basis for easier comparison, as well as marginal increase in operating expense of N30.882 billion compared to N30.877 billion in 2013.

    According to the bank, the cautious growth of all business lines coupled with a continuous improvement in operational processes and enhanced efficiency are signposts to a promising end to the financial year.

    With gross earnings of N63.9 billion, interest expense dropped by 24 per cent year-on-year to close at N20.7 billion compared to N27.2 billion as at June 2013, in line with the bank’s operational strategy of increasing the volume of low cost funds in its deposit portfolio.

    “Our loan impairment charge increased by 100 per cent year-on-year to N5.0 billion; being a deliberate policy of aggressive provisioning early in the year to enable a fairly sustained position and avoid high-figure concentration in the last quarter. Exchange earnings improved by 5.0 per cent to N5.8 billion compared to N5.5 billion of the corresponding period in 2013,” the bank stated.

    It noted that the deliberate focus on cost reduction organization-wide also paid off with a flat growth in operating expenses which closed at N30.8billion as against N30.9 billion in June 2013, and resulted into a profit before tax of N7.3 billion.

     

  • Nigerian equities lose N128b in July

    Nigerian equities lose N128b in July

    Nigerian equities lost the momentum and struggled through the seventh month as a mixed of modest and uninspiring earnings dampened investors’ appetite. With the market closing on the downtrend, investors lost about N128 billion in July, implying average decline of 0.91 per cent. The downtrend in July depressed the average year-to-date return from 2.79 per cent at the beginning of the month to 1.86 per cent yesterday.

    Also, accumulated capital gains over the course of the year, which stood at N802 billion by the end of June, dropped to N674 billion yesterday as a last-day bearish trend sent most equities to lower prices. Yesterday, 34 stocks suffered depreciation while 24 stocks appreciated.

    Aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE) closed July at N13.900 trillion as against the month’s opening value of N14.028 trillion. The All Share Index (ASI), the composite index that tracks prices of all equities on the NSE, also dropped from its month’s opening index of 42,482.48 points to close at 42,097.46 points.

    The seven-month performance in 2014 represented a significant reversal against the performance in the corresponding period of 2013. Nigerian equities had by July 2013 consolidated their bullish rally as improved first-half earnings drove the market to a seven-month average return of 35.03 per cent. Equities closed July 2013 on a high note, trotting back to N12 trillion after adding N581 billion capital gains in July.

    Aggregate year-to-date return thus improved from six-month value of N2.45 trillion to N3.03 trillion by the end of July 2013. After the downtrend in June, the market was particularly spectacular in July with a month-on-month average return of 5.08 per cent. The market closed the last trading day of July 2013 with a gain of N34 billion.

    Aggregate market value of all equities closed July 2013 at N12.007 trillion as against its opening value of N11.426 trillion for the month. The ASI also rose from month’s opening index of 36,164.31 points to close at 37,914.33 points by July 2013. With a bulging pocket of N3.03 trillion and average year-to-date return of 35.03 per cent, equities had readied for another record successive performance. In value terms, the seven-month capital gain of N3.03 trillion had already surpassed total gains of N2.44 trillion recorded for the entire 2012. Also, real benchmark return of 35.03 per cent was only a point below the average full-year return of 35.45 per cent recorded in 2012.

    The July 2014 downtrend dampened enthusiasm that started the second half as capital gains accumulated to N802 billion on the back of early positioning for the second quarter and first half earnings. However, the first half reports have shown muted performance across several sectors; especially in the financial services sector where banks have shown tight bottom-line.

    Aggregate market value of all quoted equities had opened this year at N13.226 trillion while the ASI started the year at 41,329.19 points. Riding on the back of sustained gains in May and June, the stock market had erased the losses in the previous four months and left the investors with some N802 billion in capital gains by the end of first half.

    A six-month analysis of the first half had shown that the market benefited from increasing positioning and portfolio rebalancing as investors sought to strengthen their portfolios across sectors. Aggregate market value of all quoted equities closed the first half at a high of N14.028 trillion as against its 2014 opening value of N13.226 trillion. The ASI rose from the year’s opening index of 41,329.19 points to close first half at 42,482.48 points, representing average return of 2.79 per cent.

    Nigerian equities had in June built on strong gain made in May to add additional capital gains of N333 billion. Aggregate market value of all quoted equities closed June at N14.028 trillion as against the opening value for the month at N13.695 trillion. This represented additional gain of N333 billion. The ASI rose from index on board for the month of 41,474.40 points to close June at 42,482.48 points, indicating month-on-month average return of 2.43 per cent.

    In May, equities had broken away from a year-long bearish streak with a gain of N1.02 trillion. While the market had closed April with a four-month average loss of -6.88 per cent, the average gain of 7.77 per cent recorded in May turned the average year-to-date return positive at 0.35 per cent. Though modest, the five-month average gain of 0.35 per cent represents a significant breakeven for the equities market. It also underlined the overtly bullish overall market situation during the month.

    Aggregate market value of all quoted equities closed May at N13.695 trillion as against its opening value of N12.672 trillion, indicating a whooping gain of N1.02 trillion. The ASI also rallied by 7.77 per cent to close May at a high of 41,474.40 points compared with its index-on-board of 38,485.48 points. The market had seen strong rally last week with the ASI recording a week-on-week gain of 4.12 per cent.

    Quoted equities had wriggled all through the first four months with negative month-on-month return. The stock market recorded a negative return of -0.68 per cent in April, building on the bearish trend that had characterized the stock market in the first quarter. In January, February and March, the market consistently recorded losses of 1.8 per cent, 2.5 per cent and 2.0 per cent respectively.

    The negative return in April further depressed the overall market performance, increasing the four-month average loss to 6.88 per cent. This implied that an average investor had lost 6.88 per cent of its portfolio over the four-month period.

    Aggregate market value of all quoted equities closed April at N12.672 trillion as against its opening value of N13.226 trillion for the year. The ASI closed April at 38,485.48 points as against its opening index of 38,748.01 points for the month.

  • Equities break losing streak with 0.20% gain

    The Nigerian equities market resumed trading yesterday with a new rally as strong demand for blue chip stocks and news of the payment and closure of Oando’s acquisition of ConocoPhillips’ Nigerian assets restarted the market on the uptrend.

    The stock market had struggled all through last week with sustained downtrend, closing the week with average loss of 1.41 per cent.

    But the average return regained the uptrend yesterday as investors resumed trading after the two-day holiday for the Muslim’s celebration of Eid-ul-Fitri. Average gain at the Nigerian Stock Exchange (NSE) yesterday stood at 0.20 per cent, propping the market’s average year-to-date return to 2.52 per cent.

    The All Share Index (ASI), the common value based index that tracks prices of all quoted equities, inched up to 42,368.99 points as against its opening index of 42,285.82 points. Aggregate market value of all quoted companies also rose from N13.963 trillion to N13.990 trillion, implying capital gains of N27 billion.

    With equal spilt between the advancers and decliners, the positive overall market situation was driven largely by gains recorded by some highly capitalised stocks, especially Oando, which recorded nearly the maximum daily allowable gain of 10 per cent. Oando led the gainers with a gain of N2.47 to close at N27.94 per share. Oando had yesterday paid $1.5 billion to close its acquisition of ConocoPhillips’ Nigerian oil and gas businesses.

    Dangote Cement recorded the second highest gain of N1.94 to close at N233.94. Stanbic IBTC Holdings followed with a gain of N1.45 to close at N30.54. Nigerian Breweries and Lafarge Cement Wapco Nigeria added N1.05 to close at N179.05 and N120 respectively. Nestle Nigeria rallied N1 to close at N1,121. Zenith Bank rose by 37 kobo to close at N25.60. Portland Paints and Products Nigeria gathered 26 kobo to close at N5.48. Ashaka Cement gained 23 kobo to close at N30.50 while Vitafoam Nigeria rose by 20 kobo to close at N4.35 per share.

    The market’s turnover was also on the upside with the exchange of 713.84 million shares valued at N6.73 billion in 5,835 deals. Financial services sector accounted for 585.78 million shares valued at N4.03 billion in 2,565 deals. Access Bank was the most active stock with a turnover of 217.53 million shares valued at N2.17 billion in 143 deals. Wema Bank followed with a turnover of 153.44 million shares worth N162.68 million in 48 deals. Transnational Corporation of Nigeria (Transcorp) placed third with a turnover of 44.45 million shares worth N242.45 million in 375 deals.

    On the negative side, Seplat Petroleum Development Company led the decliners with a loss of N5.04 to close at N670. Forte Oil followed with a loss of N5 to close at N211. Total Nigeria dropped by N4.45 to close at N172. GlaxoSmithKline Consumer Nigeria declined by N2.89 to close at N66.10. CAP lost N2 to close at N39. Guaranty Trust Bank dropped by N1 to close at N30. Dangote Flour Mills lost 36 kobo to close at N7.25. Red Star Express slipped by 35 kobo to close at N4.65. Union Bank of Nigeria dropped by 30 kobo to close at N8.61 while FBN Holdings dwindled by 22 kobo to close at N15 per share.

  • Sovereign Trust Insurance to seek N1.1b from shareholders

    Sovereign Trust Insurance (STI) Plc plans to raise about N1.1 billion in new equity funds from existing shareholders, The Nation has learnt.

    A regulatory filing obtained yesterday at the Nigerian Stock Exchange (NSE) indicated that Sovereign Trust Insurance would float a rights issue to raise about N1.1 billion before the end of this year. Although the details of the rights issue are still sketchy, rights issue are usually pre-allotted to existing shareholders on the basis of their shareholdings at a particular qualification date.

    Market trend indicated that the rights issue may be offered at around the insurance company’s nominal share price of 50 kobo.

    According to the document, the net proceeds of the rights issue would be used to finance the company’s strategic plan accomplishing its five-year blueprint. The blueprint is expected to reinforce the company’s competiveness’ in the Nigerian market, including its market share.

    The rights issue is expected to commence in the third quarter of this year. However, the rights issue is still subject to approval of the Securities & Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE).

    Several companies are turning to existing shareholders to raise funds as the primary public offer market remains largely inactive.

    Shareholders of RT Briscoe (Nigeria) Plc last week authorised the board of the company to raise N10 billion to deleverage its operations as the automobile and real estate company struggled with losses induced by huge interest expenses.

    At the annual general meeting in Lagos, shareholders mandated the board to raise new funds through any option or a combination of debt instruments, preference shares and ordinary shares by way of rights issue, private placement or offer for subscription.

    To create room for the impending fresh capital, shareholders also increased the authorized share capital of the company from N2 billion divided into 4.0 billion ordinary shares of 50 kobo each to N3.25 billion divided 6.5 billion ordinary shares of 50 kobo each.

    Majority and retails shareholders in several quoted companies have been using rights issue to bridge equity financing gaps and reduce dependence on bank loans by injecting their own funds into their companies.

    Against the background of the in investors’ apathy and deteriorating pricing trend at the capital market, several core investors that hold the decisive votes on the success of recapitalisation of quoted companies have opted for rights issue, which allows existing shareholders to recapitalise their companies.

    Rights issue gives the first right of refusal to existing shareholders and thus preserve existing shareholding structure. It however provides window for new investors to buy into the company through rights trading on the secondary market.

    Market analysts said the growing list of rights issues early this year underscores the preparedness of core investors to refinance their companies as well as the undervaluation of several companies at the stock market.

    According to analysts, rights issue implies significant financial commitment by the core investors.

    Market analysts said they expected more companies to file for rights issue given the high gearing ratios of several quoted companies, which interest burden could stifle returns to shareholders in the period ahead.

    Managing director, GTI Securities, Mr. Tunde Oyekunle, said the recourse to rights issue was a sign of confidence of share holders in the prospects of their company, especially the core investor, which would provide the larger chunk of the required capital.

    He added that the generally weak state of the capital market has left core investors with little option then to pick up the gauntlet.

    Economist and securities advisor, Sterling Capital, Mr. Sewa Wusu said the current market scenario and timing did not favour public offer, particularly given d recent experiences and loss of value by most investors.

    “We are seeing more of rights issues because the core shareholders are ready to inject more funds to their company and still maintain their current holdings. The rights issue avenue will also give the existing shareholders the right to purchases new shares at a discount to the current market price,” Wusu said.