Category: Equities

By Taofik Salako

Nigerian equities appreciated by N62 billion within the first two trading sessions of this year as attractive valuations and early bargain-hunting for the earnings season sustained widespread rally.

Average year-to-date return so far this year closed weekend at 0.47 per cent, driven largely by bargain-hunting for financial services stocks.

The All Share Index (ASI)- the benchmark index at the Nigerian Stock Exchange (NSE) closed weekend at 26,968.79 points as against 2020’s opening index of 26,842.07 points. Aggregate market value of all quoted equities also rose simultaneously from opening value of N12.958 trillion to close weekend at N13.020 trillion.

The rally was driven mainly by large-cap banking and insurance stocks. The NSE Banking Index posted a two-day return of 2.27 per cent while the NSE Insurance Index appreciated by 1.53 per cent. The NSE 30 Index, which tracks the 30 largest stocks at the Exchange, recorded above average return of 0.70 per cent. However, the NSE Oil and Gas Index slumped by 6.0 per cent. The  NSE Industrial Goods Index declined by 2.26 per cent while the NSE Consumer Goods Index dropped by 1.05 per cent.

Read Also: Policy somersault, rising debts, insecurity confront economy

Most analysts have remained cautious about the outlook for the Nigerian equities market in 2020 after the bears beat analysts’ predictions to a second consecutive negative year in 2019. Investors in Nigerian equities lost about N1.71 trillion in 2019 as the market closed 2019 with negative average full-year return of -14.60 per cent. It had recorded negative average full-year return of -17.81 per cent in 2018.

“Our base case for equities posits muted stock market performance for the year (2020). Fundamentals are not strong enough to drive a natural correction in the equities market, however, recent policy directives from the CBN might offer some respite to the domestic bourse in the absence of much needed market friendly reforms,” Cordros Securities stated.

Analysts at Afrinvest Securities stated that recent price appreciation might trigger profit-taking, which expectedly will moderate price rally.

“In the coming week, we expect mixed performance in the equities market due to profit-taking activities and investors’ positioning in undervalued stocks,” Afrinvest Securities stated.

Meanwhile, total turnover for the four-trading session last week stood at 2.31 billion shares worth N21.68 billion in 14,906 deals, a significant increase above a total of 735.70 million shares valued at N7.13 billion traded in 7,138 deals two weeks ago.

The financial services sector continued to dominate activity chart with 1.92 billion shares valued at N10.15 billion in 9,287 deals; representing 83.3 per cent and 46.8 per cent of the total equity turnover volume and value respectively. The conglomerates sector followed with 188.54 million shares worth N284.53 million in 530 deals while the industrial goods sector placed third with a turnover of 56.01 million shares worth N4.79 billion in 1,304 deals.

The three most active stocks were Omoluabi Mortgage Bank Plc, Transnational Corporation of Nigeria Plc and Zenith Bank Plc, which altogether accounted for 1.13 billion shares worth N3.60 billion in 2,249 deals, representing 48.98 per cent and 16.61 per cent of the total equity turnover volume and value respectively.

Also, a total of 4,033 units of Exchange Traded Products (ETPs) valued at N4.233 million were in 26 deals, compared with a total of 14,443 units valued at N3.009 million traded in 19 deals two weeks ago.

In the debt market, a total of 204,300 units of Federal Government bonds valued at N237.21 million were traded in four deals compared with a total of 1.07 million units valued at N1.28 million traded in 24 deals penultimate week.

There were 44 gainers against 24 losers during the week compared with 31 gainers and 17 losers recorded in the previous week. Cornerstone Insurance led the gainers, in terms of percentage, with a gain of 39.47 per cent to close at 53 kobo. Eterna followed with a gain of 20 per cent to close at N3.60. Royal Exchange rose by 17.86 per cent to close at 33 kobo. Vitafoam Nigeria appreciated by 17.50 per cent to close at N4.70 while AXA Mansard Insurance rose by 11.1 per cent to N2 per share.

On the negative side, Fidson Healthcare led the losers with a drop of 12.9 per cent to close at N2.70. Union Bank of Nigeria followed with a loss of 11.76 per cent to close at N6. Deap Capital Management declined by 10 per cent to 36 kobo. Omatek Ventures also lost 10 per cent to close at 45 kobo while Learn Africa declined by 9.6 per cent to close at N1.13 per share.

By Taofik Salako

C & I Leasing Plc has indicated that the 2018 audited financial statement of its Ghana subsidiary, Leasafric Ghana Limited, will be restated in order to correct errors in the accounts.

Leasafric Ghana Limited accounts for 10 per cent of the C & I Leasing Group’s financial performance. C & I Leasing holds the majority 71 per cent equity stake in Leasafric, a non-bank financial institution incorporated in Ghana in 1992 to carry on the business of finance leasing as its principal business.

In a regulatory filing at the weekend, the board of C & I Leasing stated that the auditors to Leasafric, Deloitte & Touché, had conducted a review in order to ascertain the impact of the errors on Leasafric financial statement.

“Following the review, the auditors have recommended that the financial statement be restated for 2018 in order to effect the correction. Based on the auditor’s review, C&I Leasing Plc has estimated the impact of the restatement on its group’s 2019 financial performance to be a maximum of N25.5 million and therefore considered not significant,” C & I Leasing stated.

C&I Leasing assured the investing public that the group is resilient and well diversified to cushion the impact of the detected financial error noting that adequate and robust control frameworks have been put in place to prevent a recurrence.

Read Also: Belgian brewer votes N123b for Nigerian subsidiary

C & I Leasing recently extended the offer period for its ongoing rights issue to January 13, 2020. Application list for the rights issue had opened on Monday November 18, 2019 and was scheduled to close on Friday, December 27, 2019.

C & I Leasing is seeking to raise N3.23 billion from existing shareholders through a rights issue of 539 million ordinary shares of 50 kobo each at N6 per share. The rights were pre-allotted on the basis of four new ordinary shares of 50 kobo each for every three ordinary shares of 50 kobo each held as at the close of business on Wednesday, September 04, 2019.

The company would use the net proceeds of the offer to bolster its working capital and increase leasing assets.

AbraaJ Investment Management Limited (AIML), which had secured approval to convert its $10 million loan in C & I Leasing to equities in the Nigerian leasing company, and thus became a majority shareholder, has indicated that it will not be picking its rights. Renounced rights are usually sold through trading on the NSE or through pro rata allocation to other shareholders that demand for additional shares.

C & I Leasing had in January 2019 concluded a massive share reconstruction that saw cancellation of 1.479 billion ordinary shares of 50 kobo each, about 79 per cent of the company’s pre-consolidation issued share capital.

The share capital reconstruction had reduced the leasing company’s outstanding shares from 1.883 billion ordinary shares of 50 kobo each to new total outstanding ordinary shares of 404.25 million ordinary shares of 50 Kobo each. Under the share consolidation, four ordinary shares of 50 kobo each were consolidated into one ordinary share of 50 kobo each.

By Taofik Salako

Authorities at the Nigerian Stock Exchange (NSE) have approved voluntary delisting of Continental Reinsurance and AG Leventis Nigeria, in a final process that will end decades of public trading on the shares of the two companies.

The NSE had earlier suspended trading on the shares of the two companies after the two companies completed major stags in their quests to delist their shares and revert to private limited liability companies.  The voluntary delisting of the two companies is as a result of the push by the majority core investor to takeover minority shareholdings.

AG Leventis Nigeria, one of the oldest companies at the stock market, seeks to buy out minority shareholders and revert to private limited liability status. The Leventis family, which remains the majority core investor in the conglomerate with some 88 per cent controlling shareholding, had launched the process to buy out minority shareholders in order to implement a turnaround programme. AG Leventis has some 30,000 minority shareholders.

One of Nigeria’s oldest and largest conglomerates, AG Leventis, was incorporated in Nigeria as a private limited liability company in 1952 and was converted to a public limited liability company and listed on the Nigerian Stock Exchange in 1978. At the last count, the AG Leventis Group consists of eight subsidiaries, three associates and three Joint Ventures, all of which were incorporated in Nigeria.

Read Also: NSE lifts suspension on Omatek ventures after two years

The group’s operations span the wide gamut of the economy from foods and beverages to automobile, real estate, hotel, general trade and merchandise.

AG Leventis had been under regulatory watch-list for failing to meet the minimum free float requirement for its listing category. The company has a free float of 11.64 per cent, 8.36 per cent below the 20 per cent free float for companies listed on the main board.

Free float, otherwise known as public float, refers to the number of shares of a quoted company held by ordinary shareholders other than those directly or indirectly held by its parent, subsidiary or associate companies or any subsidiaries or associates of its parent company; its directors who are holding office as directors of the entity and their close family members and any single individual or institutional shareholder holding a statutorily significant stake, which is 5.0 per cent and above in Nigeria.

The majority core investor in Continental Reinsurance, CRe African Investments Limited (CRe Investments) had initiated the bid to acquire minority shareholdings in the reinsurance company.

Shareholders had at the court-ordered meeting approved the takeover bid launched CRe Investments, which will turn Continental Reinsurance into its wholly-owned subsidiary.

The board of Continental Reinsurance said CRe Investments was undertaking the buyout in order to initiate a much needed restructuring exercise for Continental Reinsurance, with a view to consolidating its operations and repositioning it for enhanced competitiveness in the global insurance market.

The acquisition is being executed through a Scheme of Arrangement under Section 539 of the Companies & Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004 and other applicable rules and regulations.

CRe Investments had initially offered N2.04 per share for the 10,372,744,314 ordinary shares of 50 kobo each or one ordinary shares of $1 each in the capital of CRe Investments for every 176 ordinary share of 50 kobo each held in Continental Reinsurance. However, the scheme consideration was revised upward from N2.04 to N2.10 per share, with the new price representing 51.08 per cent premium on the share price of Continental Reinsurance as at the close of trading on October 5, 2018 which was the last business day prior to the date on which the proposal was received from CRe African Investments Limited.

By Taofik Salako, Capital Market Editor

Investors in Nigerian equities lost about N1.71 trillion in 2019 as a combination of political risk, weak macroeconomic performance and tense global outlook drove the stock market to second consecutive negative performance.

The stock market closed yesterday with negative average full-year return of -14.60 per cent for the 2019 trading year, equivalent to net capital depreciation of N1.71 trillion for the year. It had recorded negative average full-year return of -17.81 per cent in 2018.

The All Share Index (ASI)- the common value-based index that tracks all share prices at the Nigerian Stock Exchange (NSE) closed yesterday at 26,842.07 points as against its opening index of  31,430.50 points for 2019, which was also the closing index for 2018. It had opened 2018 at 38,243.19 points.

With average return of -14.09 per cent by November 2019, the average decline of 0.59 per cent recorded in December 2019 nudged the full-year return to -14.60 per cent. The December 2019 negative performance marks the first time in 10 years that the market suffered a relapse in the last trading month of the year.

The negative average full-year return of -14.60 per cent implies that investors in the Nigerian stock market lost nothing less than 14.6 per cent of their portfolios during the year. However, with higher losses in several sectors, actual losses by most investors may be higher than average benchmark.

Aggregate market value of quoted equities closed 2019 at N12.958 trillion as against its opening value of N11.721 trillion for the year. The seeming appreciation in the year-to-date performance of aggregate market value of all quoted equities was due to the unabsorbed boost from the listing of two leading telecommunication companies- MTN Nigeria Communications Plc and Airtel Africa Plc.

Based on market values, both the ASI and market capitalisation are correlated indices and without new listing or delisting, usually move simultaneously in the same direction. But the ASI is weighted, and as such adjusted for effect of new listing while the market capitalisation is a straight-line summation of share prices and issued shares. Thus, where the ASI and market capitalisation differ, the ASI is widely regarded as the true representation of the market condition.

Read Also: ‘High level of corporate governance key to attracting investors’

Chief Operating Officer, GTI Securities Limited, Mr. Kehinde Hassan said the market as a barometer of the national economy reflected the uncertainties that characterised the 2019 business year.

He however noted that the fundamentals of the market, as shown by the operational and financial performances of quoted companies, remain strong despite the price depreciation.

The 2019 pricing performance marks the fifth negative closing in six consecutive years. After a world-leading positive return of 42.3 per cent in 2017, the market had reversed to negative in 2018 with average full-year return of -17.81 per cent. Aggregate market value of all quoted equities at the NSE had declined by N1.889 trillion in 2018. The stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion.

Most analysts agreed that political risks, security risk and macroeconomic uncertainties were major factors that adversely impacted the capital market. The intense political activities in the run-up and aftermath of the 2019 general elections further fuelled macroeconomic concerns as investors waited on the sideline for clear macroeconomic direction.

With foreign portfolio investors accounting for nearly half of transactions at the Nigerian stock market, the tense global economic outlook, trade disagreements among major economies, decline in crude oil price and attractive yields in less-risky economies compounded the Nigerian market situation.

There is a new move to build a sustainable environment for Lagos that promotes economic development and wellbeing of the people, General Manager of the Lagos State Environmental Protection Agency (LASEPA), Dolapo Fasawe has said.

In her view, the sustainability of the environment remains crucial. She said there is a lingering question of how sustainable is the environment and whether the impact of daily activities of individuals and industries positively or negatively affect their surroundings and the universe as a whole.

Recently, there have been continuous conversations on climate change as a result of these environmental activities and different levels of government are coming together to discuss this risks and how we all have a role to play in saving the world from this growing concern.

Lagos State accounts for over 60 per cent of Nigeria’s commercial and industrial activities such as refining, construction, manufacturing, production, automation, utilities, oil & gas amongst others. All of these activities are on a clock work with visible effects on the environment comprising land, air, water and a long term influence on the global climate due to change in average weather patterns.

As a rapidly developing city with a steady increase in population size which is estimated to hit over 35 million people by 2050 according to the United Nations, industrialisation have become an extension of our economy. This involves a lot of manufacturing and the large scale use of energy and the alteration of natural systems from their original state. Industrialisation in Lagos has involved many technological innovations, economic and social transformation.

READ ALSO: Equities lose N11b on Yuletide cash squeeze

However, because of the adverse shift in climate systems due to these heavy industrial activities, areas such as crop production, livestock production, fisheries, forests and rainfall patterns will be altered, resulting in changes in our current livelihood. There is also a threat of rise in water levels, flooding and storm surges, which will destroy farmlands as well as increase in temperature and humidity which can increase pests’ activities and an outbreak of diseases. The underlying fact is that our livelihood, as we know it, is posed to be altered and damaged causing severe harm to life and property.

According to Fasawe, what this means is that the impact of climate change is no longer as distant as people think it is and we must pay urgent attention to the activities in our immediate environment. There is a need for committed efforts from individuals and institutions, providing sustainable solutions, implementation and control to clean up our environment. At the Lagos State Environmental Protection Agency (LASEPA), we have a responsibility to protect and improve the environment, through regulations and clean development with emphasis on how we all own the environment.

Within the state, we focus on ensuring that activities across the different aspects of our environments are closely monitored to ensure compliance with the laws and regulations. Land and water pollution is constantly a growing issue and we ensure that guidelines in these areas are looked into on a frequent basis to ensure compliance. The impact of land pollution especially with indiscriminate waste disposal by residents is a daunting risk with blockage of the drainage systems which has contributed to adverse flooding in the state.

Incidences of air pollution relating to emissions into our atmosphere and the burning of fossil fuels is also a great concern. Research have actively linked the major causes of climate change and global warming to events relating to air pollution and we must be intentional about the use of more alternative sources in the area of manufacturing and production. As an Agency, we advocate for inclusion of more green energy sources by companies operating within the state. In response, some industries have adopted combined heat and power systems in their operations, which saves energy and cost to the company and the environment.

Ecology and conservation is also a very important aspect of environmental protection we pay close attention to because we believe, that there is a strong opportunity to build and repair the earth through ecology and conservation. Our surveillance and monitoring team runs an ongoing check on conservation centres within the state, sensitize communities on erosion and flooding, active advocacy programmes on wildlife conservation and coordination of tree planting exercises which plays a huge role in reducing and eliminating the harsh effects associated with deforestation.

According to Fasawe, just recently, residents were advised to adequately prepare for an upsurge in heatwaves arising due to the change in season. From a domestic point of view, activities such as burning of refuse, poorly serviced generators and use of other ozone depleting materials in our homes, can also contribute to greenhouse gas emissions.

We have also began a major crackdown on generators that emit significant pollutants into the air and are collaborating with other agencies to ensure that vehicular emissions are within acceptable limits. From an industrial point of view, we have partnered with relevant international development agencies to inform, educate and empower local small and large scale industries with information on alternative materials and technology to ozone depleting substances and processes respectively.

In sustaining a green environment for Lagos state, and reducing the impact of climate change which not only affects us but the world in general, we must first of all imbibe the culture of taking care of our environment through our domestic activities and our larger scale industrial activities. We must begin to see climate change and global warming as an existing threat with severe consequences, if we do not play a part in saving the environment.

We must also actively engage the six R’s – refuse, rethink, reduce, reuse, repurpose and recycle – in guiding our actions towards environmentally sustainable outcomes. If there is an opportunity to refuse materials and activities that affect our environment negatively, we should actively do so. More importantly, we must attempt to always rethink our activities and processes to ensure that our footprint on the environment is reduced as well as making sustained efforts to extend the life of materials by repurposing and recycling them for further use.

From a global perspective, we understand that tackling the issue of climate change is a collaborative effort with active participation from governments, industry, pressure groups and research institutions, on a long term path to reclaiming earth from impending chaos and winning the war against climate change.

The future of a world free from the effects of climate change is encouraging as we would have cleaner air to breathe and nature would be in recovery; there would be less noise, access to healthier foods and an increase in disposable income because we would buy less items as a result of reuse and recycling of products.

While we are active as a government in regulating and addressing issues associated with climate change through LASEPA, we all as individuals must understand that we own the environment and when we save the environment, we save ourselves.