The Nation Newspaper

Tag: investors

  • Investors net N433b gain in February rally

    Investors in Nigerian equities netted N433 billion in capital gains in February. The bullish performance in February covered net loss of N326 suffered in January and left investors with net capital gains of N107 billion over the two-month period.

    Despite a streak of month-end profit-taking transactions, benchmark indices at the Nigerian Stock Exchange (NSE) showed average gain of 3.80 per cent in February, equivalent to net capital gain of N433 billion. With this, average year-to-date return, which was down by 1.82 per cent in January, rebounded to a gain of 1.26 per cent.

    The All Share Index (ASI)- the common value-based index that tracks share prices at the NSE closed February at 31,718.70 points as against its month’s opening index of 30,557.20 points. Aggregate market value of all quoted equities also rose correspondingly from its month’s opening value of N11.395 trillion to close the month at N11.828 trillion.

    The ASI had declined by 1.82 per cent to close January 2019 at 30,557.20 points as against the year’s opening index of 31,430.50 points. Aggregate market capitalisation of quoted equities had dropped by N321 billion to close on January 2019 at N11.395 trillion compared with the year’s opening value of N11.721 trillion.

    February was an election month for Nigeria. The Independent National Electoral Commission (INEC) had postponed the presidential and national assembly elections from February 16 to February 23. After the elections, INEC announced President Muhammadu Buhari as the winner of rescheduled presidential election, defeating former Vice President Alhaji Atiku Abubakar. Abubakar has however opted to challenge the results at the election tribunal.

    Many analysts expected the equities market to sustain its rally in March with the combination of corporate earnings and dividends and the reduction in political risk. Post-listing rules at the Nigerian Stock Exchange (NSE) require quoted companies to submit their annual audited report and accounts with the Exchange not later than 90 calendar days after the relevant year end.

    Most quoted companies including all banks, insurance companies, major manufacturers, oil and gas companies, breweries and cement companies use the 12-month Gregorian calendar year as their business year.  The deadline for the submission of the 2018 annual report and accounts is Friday, March 29, 2019.

    Market pundits said the successful conclusion of the election has strengthened the outlook for the Nigerian financial markets. The considerable reduction in political risk, which has been a major factor in investment decision-making in the past 12 months, is expected to improve investors’ appetite for Nigerian stocks.

    “Following the conclusion of the 2019 Presidential Elections, we advise investors to take position in fundamentally good stocks trading at cheap prices as we expect improved earnings to buoy performance in the near term,” Afrinvest Securities stated.

    Financial market analyst and Fixed Income Trader, FSDH Merchant Bank, Mr Babajide Sholanke, said the conclusion of the election had cleared the hurdle, while investors await the electoral court process.

    Sofunix Investment and Communications Limited Chief Executive Officer, Mr. Sola Oni, said investors would consider the overall outlook of the economic direction of the government, noting that it would amount “to over dramatisation to link the decline at the equities market yesterday to final announcement of presidential election”. The equities market has rallied more than 6.0 per cent gain this month and many believed investors were taking profits on capital gains.

    “The announcement has put paid to an unusual waiting period for the final results. Regardless of the party that forms the government at any point in time, the critical issue is the economy in general and the financial market in particular.  Any government that manages macroeconomic challenges will ultimately win the heart of the people. The most important thing that any government can do to build investors’ confidence in the capital market is to fix the economy. The economy is the underlying asset while the financial market which comprises both money and capital market is a derivative,” Oni said.

    He noted that economic development is a natural consequence of an enabling environment including infrastructure such as power, road network, airways, waterways, security of lives and property, sanctity of contracts and a host of others.

    CardinalStone Partners Limited, an investment firm, said the conclusion of the election would bring much relief to investors as much of the nation’s economic activity in recent months have been conducted against the backdrop of electoral uncertainty.

    Analysts at CardinalStone Partners said they expected the re-election of President Muhammadu Buhari to lead to sustained implementation of Economic Recovery and Growth Plan (ERGP) to support growth, return of foreign portfolio investors to the equity market and sustained welfare programmes among others.

    “A victory for President Buhari means consolidation of the progress made on economic growth since the recovery from recession and sharp currency devaluation in 2017. The domestic economy has recorded improvements, albeit sluggishly,” CardinalStone Partners stated.

    CardinalStone Partners noted that with enough clarity in the political space following conclusion of the presidential elections, the attractive valuation of Nigerian equities, a slowdown in United State Fed rate hikes and improved emerging market sentiment, foreign investors will show greater interest in the Nigerian stock market.

    “It is noteworthy that the equities market had been the preferred destination for foreign portfolio investments (FPIs) in the last five years, accounting for over two-thirds of total FPI inflows. Only recently did we begin to see a tilt in favour of money market instruments. Given the aforementioned, we foresee renewed interest in Nigerian equities.

    ‘’We expect the rally to begin in the banking sector, owing to its liquidity benefit and spill to other counters on the index, trading at relatively attractive valuations. Both foreign and local investors have already begun taking positions as evinced by average market breadth of two times witnessed in the past three weeks,” CardinalStone Partners stated.

  • ‘Mutual Funds present opportunities to investors’

    The capital market is not likely to see a strong recovery until next year. But there are still huge opportunities in the market for savvy investors, especially in the Mutual Funds space. United Capital Plc Group Chief Executive Officer Peter Ashade speaks with COLLINS NWEZE on the investment outlook for this year, need for multiple exchange rates review and how regulators and operators can deepen the market.

    Looking back at the performance of the stock market in 2018, are you surprised that it could not sustain what it did in the previous year?

    Actually, I am not surprised. There are lots of factors that supported the performance of 2017 market position. For instance, the market grew by 42 per cent in 2017, and you saw the temperament even at the global level. But give or take, in 2018, a lot of parameter changed. When you looked at the global financial market, outlook tends to favour more of advanced community more than emerging markets. Also, in the case of Nigeria, the build up towards the 2019 election had started in the second half of last year, and really hit up the polity. So, the direction, in terms of 2018 outlook, was quite expected.That is why, to a very large extent, when you see what is happening in the global scene, again, the oil sector, and the political terrain in Nigeria really affected the performance of the market.

    Given that those factors that shaped market performance last year are still present, are you optimistic that we may see a recovery this year?

    Quite well, I can tell you that I am optimistic. This year, in terms of performance, there is likely to be an elevation in the market. Why do I say so? Give or take, considering both local and global scene too, there are lots of factors that could affect the performance. However, the election is definitely going to come in the first half of the year and the euphoria will end in the first half of the year. So, regardless of the party that eventually becomes the ruling party, I am quite optimistic. But, in terms of recovery, that we are looking at, it may not be strong recovery. But it is going to gradually recovery. By the time we will be feeling the impact of the recovery it will be 2020 upwards.

    It is expected that in the second half of the year, the market will enjoy a rebound.

    Despite that the equities market offers high returns, investors are still skeptical. What can be done to encourage more investors into it?

    One thing that is key in the capital market is that it is not a scene for short-term players. Capital market is for medium and long-term funds. So, each player must have that at the back of his mind. And it is not another gamble or bait. As you come into the market, one thing that is key to sustain the interest is investors’education.

    Investors will know that as they are coming into the market, it is not where they will make 100 per cent in one day. It could happen. But you have to have it at the back of your mind that it is a market for medium and long term players. When you come into the market, you will be careful, patient to drive through the growth and volatility that we see within the market.

    So, to a very large extent, if you want to build equity market, two things will happen. We have the regulator side and the investor side. The regulator needs to put structure in place to deepen the market. The depth of the market in terms of even coming up with different products that investors can play in.

    The second part is investors’education, which could be driven by the regulator or operator in the market. This market belongs to all of us. As far as the market is concerned, it has come to stay.

    Given that there is volatility in the market, what will be your advice to investors on the best way to go?

    The investor must, firstly, understand the market. Even if you do not understand where you are playing, there is no way you are going to take advantage of what is happening. Volatility is part of the capital market antics. When you have understanding that the market could go up and down. Secondly, is that you must have a clear objective of why you are investing in the market. Some may want to invest because of revenue, others may invest because of capital appreciation. You must have clarity. Thirdly is that you must not be greedy. Greed sometimes affect investors. So, when you set up your investment objective, you must be clear about it and stand by it. For instance, you can say if I have 10 per cent, I think I have made my day. I should leave. You now discover that the share price of your investment has started moving, it gets to that 10 per cent, but you still see that the market’s rally, and you decided to wait a little, then greed is coming in. And in waiting a little, it goes to 11, 12 per cent and before you know what is going on, you find yourself at seven per cent. So, the area of greed also needs to be addressed. You must identify your objective, and ensure that you are not greedy in terms of your investment outlook.

    Is United Capital doing anything to deepen the market?

    Sincerely, we are doing a lot. United Capital has been in this space for a very long time. We have at different times, played our roles in supporting the regulator in deepening the market. We have participated in various investors’ education that is being orchestrated by the regulator. On our part, we have ensured that we decentralised our investment platform. We are very stop on the social media.

    How far are you playing in the Mutual fund Market and the potentials you see in that market?

    One of our business lines, United Capital Asset Management, specialises in Mutual Funds. Mutual Funds market has potential for stable return for even low value investments. And we see the huge potential for growth that the market holds. The mutual funds market deepened last year, with most of the funds recording strong performance. Mutual Funds is the way to go especially in encouraging savings and investment habits among a large population, even for low income earners. At United Capital Asset Management, we currently have six Mutual Funds running and all of them are doing quite great. Between 2017 and 2018, we had triple digit growth in our Mutual Funds portfolio. We have a Mutual Fund targeted at women – Wealth for Women Fund – and the Eurobond fund, which is dollar-denominated fund. Our Eurobond Fund portfolio crossed $8 million in 2018 from $3.6 million in 2017 and that’s more than 100 per cent growth. So, what we are saying in essence is that the funds are really growing and that underscored why we won three awards last year alone including Best Mutual Funds at the 2018 BusinessDay Awards. As far as we are concerned, there is more to be achieved in the mutual  fund market.

    How do you see the entry of foreigners into the Mutual Funds Market. Do you see it as a challenge or opportunity for the local players?

    Foreigners coming to play in the local market, have often conducted extensive feasibility studies to see existing opportunities within their risk appetite. That means there are still huge opportunities in the mutual funds space, otherwise foreigners will not come and want to play in that market. What that means for us as an organization is that we are in the right direction. It also signals that we need to do more. As we execute our innovative strategies, we will create more products that will be available for the market. So, to answer your question specifically, we view this in a positive light, and not in a negative at all. We are poised to tap into  growth opportunities that we see in that space.

    What factors will define the economy and businesses this year?

    In 2019, we expect three dominant themes to shape events in the economy. Clearly, the general elections come ahead of others as the outcome will shape policy and overall momentum of growth. A possible change of guard at the office of the Central Bank of Nigeria (CBN), considering that CBN Governor Godwin Emefiele’s first five-year tenure ends in June. Finally, depending on the outcome of the election, we expect some policy and structural changes.

    What is your advice for investors in the capital market and fixed income securities?

    The risk that spooked investors from naira assets in 2018 can majorly be classified into global and domestic risks. However, while global risks are expected to remain in 2019, the domestic risks are expected to reduce in second quarter of this year,  especially after the winner of the presidential election is known.  Overall, financial market activities in 2019 will be driven by elevated uncertainties in local and global environment. We expect this to drive the yield environment higher in first quarter of this year ahead of the election. On the other hand, yields on fixed income should retrace after the election as clarity returns to the economy.  The Stock market is also unlikely to rebound until after the election due to weak sentiment and the continued flight to safety. However, we expect some decent rebound in the post-election and transition period as Foreign Portfolio Investment  flow return to the economy. The downside risk to this view remains the continued volatility in the global economy. Accordingly, investor should take advantage of cheap market prices before the election to benefit from the rally that may follow the post-election and transition period.

    Could you tell us about United Capital and its major area of focus for this year?

    We are a financial services group providing integrated financial solutions along the financial services value chain to governments, corporates and individuals. We have a wide range of services for all our different categories of clients. Our investment banking business has a proven track record of raising capital for governments and corporates and we intend to scale up on that with more bespoke, innovative solutions for each client. We will also scale up on our play in the Small and Medium Enterprises space with our services in the structured finance space. In our asset management business, we offer customised portfolio management services for corporates.We also have a wide range of mutual funds for individuals looking to invest. We intend to grow our funds with the use of our online investment platform, InvestNow.Ng ,which we launched last September. Our wealth management business is also strategically positioned to provide top notch wealth management services for our ultra-high net worth and high net worth clients. We will partner institutions in Nigeria and abroad to ensure that we provide world-class wealth management services to them.

    For our securities brokerage business, we expect that, after the elections, the pre-election bearish sentiments will simmer and the stock market will gradually recover. We plan to power our play in this space. We won the Pearl Award for the Stockbroking firm of the year 2018 and the team is ready to top this performance in the coming year.  Our Trust business is a market leader in the trust space and we will not rest on our oars. When we launched InvestNow last September, we also introduced Online Wills, which allow users to write a will easily on the platform. We will continue thinking up ways to make life easy for our clients through innovative thinking. One key strategic priority for us in the coming year is to power up our play in the retail space which we will do with the use of technology. We already launched a much-improved version of our online platform and we will continue building on it as well as develop other digital channels to make investing much easier for our clients. This is also in line with our unwavering commitment to financial inclusion, not just in Nigeria, but also in Africa. Also, we have had pan-African aspirations for a while and we expect to gain some more traction in this space in the coming months. We will also continue scoping the market for emerging opportunities and we hope to add a few innovative products to our repertoire in the coming year. In a nutshell, we will hit the ground running in 2019 as we take more deliberate steps towards the achievement of our corporate goal of being the financial and investment role model across Africa, deploying innovation, technology and specialist skills to exceed client expectations while creating superior value for all stakeholders.

    Are we likely to see a new area of focus in United Capital, especially in expansion in new market segments?

    Over the years, we have largely focused on institutional and retail clients. We intend to significantly scale up our service offering the retail segment using digital and non-digital channels in response to changing consumer preferences and emerging lifestyles. Nigeria’s teeming youth population provides a huge market and we are interested in helping young people develop a culture of investing by offering products in a way that suit their needs and lifestyle while guaranteeing significant returns on investment. In September 2018, we launched InvestNow (Investnow.ng and InvestNow Mobile app) our flagship digital channel which offers diverse financial and investment solutions to a fast growing client base across multiple geographies. We will continue to launch new offerings on this platform to bring more players into the capital market while enjoying the benefits of scale.

    What are your thoughts on the state of the naira, including regulatory policies, to keep it stable? Do you foresee the local currency doing weakening in the year and what should be further done to protect it against other world currencies?

    Currency market conditions were mostly stable in 2018 on the apex bank’s commitment to Naira stability via frequent interventions at the interbank and BDC segments of the market. Although this has pressured the external reserves significantly, the naira has been relatively stable compared to peer economies. The CBN also commenced the sale the Chinese Yuan in H2-2018, following the currency swap agreement signed with the Peoples Bank of China in April-2018. We expect the naira to remain relatively stable in first half of this year, considering Emefiele’s obvious resolve to defend the local unit supported by a strong dollar reserve position. Things might change in H2-2019 considering the change at the CBN from Jul-2019. Overall, Nigeria is still in a good position considering the size of the reserves at over $40 billion.

    What are your views on the inflow of hot money into the economy, and what can be done to achieve a more stable investment climate for the country?

    Inflow of funds into the Nigerian economy is not expected to improve significantly in first half of 2019 amid election uncertainties as well as an Emerging market wide rout. However, we expect a net capital inflow in H2-19 regardless of the election outcome. Downside risk to this outlook includes changes in the policy environment due to possible changes at the apex bank as well as the overall development in the polity. Increased pressure forex and net capital outflow in first half of 2019 points to further depletion of the external reserves; we imagine another $5billion to $7 billion decline, if recent trend is anything to go by. If this holds true, the CBN should be left with $38billion-$40 billion  reserves going into second half of 2019. Nonetheless, we expect pressure on the reserves to ease in second half of the year on the back of increased capital inflow. That said, in the absence of a profound changes in the policy environment, FPIs funds in search for cheap naira assets will dominate capita importation into Nigeria. FDIs, on the other hand, may remain on the side line, as the await policy signal from the authorities to make their move.

    Tell us United Capital areas of strength and impact it has made in building sustainable wealth for its clients?

    As a financial services group listed on the Nigerian Stock Exchange, we are held to the highest governance standards. This ensures, among other things, that we operate a credible and resilient organisation focused on value creation for all stakeholder groups including our clients. We pride ourselves as being the intelligent choice for every financial and investment decision by our various clients. This means that we are able to provide top notch services to clients based on the client’s investment objectives and we have consistently done this over the years and we intend to do much more. We were awarded “Best Money Market Fund” at the 2018 Businessday Awards

    What is the biggest challenge you see confronting the investment industry and how can that be addressed?

    As noted above, the uncertainties around the election and transition period, who become the next CBN governor and the need to implement bold policy changes are the biggest issues for investors. Uncertainties around election and key appointment at the CBN are dependent on political actors. On the other hand, the only way to address the badly needed policies changes is to take bold decision and implement them. Now this will include a review of the multiple forex regime, the necessary reforms in the oil and gas sector as well as the power sector. If these are done, we expect the investment climate to feel the impact significantly. This is because reforms in these sectors can boost Foreign Direct Investments into the economy and trigger massive capital market activities.

    Are you worried by the level of bad loans in the industry? What should be done for banks to create better loans?

    The banking sector was hugely impacted by the 2016 recession, which resulted in a spike in non-performing loans, especially in the oil sector, yet banks have shown resilience owing to strong regulations by the CBN and risk diversification strategies employed by most banks. The improvement in data collection capabilities, Bank Verification Number, advancements in digital platforms and development of analytical competencies should translate towards better decision making in the loan process.

    However, an accelerated recovery of the domestic economy would drive down the rate of non-performing loans in the banking industry, as the credit profile of both consumers and businesses improves under favourable economic conditions.

  • Investors up stakes as equities sustain rally

    The momentum of activities at the Nigerian stock market increased considerably yesterday as quoted equities sustained a third consecutive day of price appreciation. Turnover volume and value rose by 88.3 per cent and 65 per cent respectively, underlining the bargain-hunting that had marked transactions in recent days.

    Benchmark price indices indicated average gain of 0.16 per cent, equivalent to net capital gain of N18 billion. Average year-to-date return, though still negative, improved to -1.94 per cent.

    Investors staked N4.83 billion on 359.09 million shares in 3,319 deals yesterday as against total turnover of 190.32 million shares valued at N2.93 billion traded in 3,183 deals on Tuesday.  The All Share Index (ASI)- the main value-based index that tracks share prices at the Nigerian Stock Exchange (NSE), rose from its opening index of 30,773.57 points to close at 30,821.80 points, an increase of 0.16 per cent and almost a double of 0.09 per cent recorded in the previous day.

    Aggregate market value of all quoted equities also increased from its opening value of N11.476 trillion to close at N11.494 trillion. There were 19 gainers to 17 losers. The overall market position was boosted largely by gains recorded by large-cap banking and manufacturing stocks.

    Most sectoral indices also closed on the positive. The NSE Consumer Goods Index rose by 1.2 per cent. The NSE Banking Index appreciated by 0.6 per cent while the NSE Insurance Index rose by 0.5 per cent. On the downside, the NSE Industrial Goods Index declined by 0.6 per cent while the NSE Oil & Gas Index slipped by 0.1 per cent.

    Nestle Nigeria, NSE’s highest-priced and second most capitalised company, led the gainers with a gain of N40 to close at N1,460. Guaranty Trust Bank, Nigeria’s most capitalised financial institution, followed with a gain of 60 kobo to close at N34.70. Flour Mills of Nigeria appreciated by 45 kobo to close at N19. Berger Paints Nigeria added 40 kobo to close at N7.40. Dangote Flour Mills rose by 30 kobo to close at N6.35 while Learn Africa chalked up 13 kobo to close at N1.50 per share.

    On the negative side, Dangote Cement, NSE’s most capitalised company, led the losers with a drop of N1.50 to close at N188. Custodian Investment followed with a loss of 60 kobo to close at N6.20. International Breweries and Lafarge Africa lost 25 kobo each to close at N30 and N12.15 while May & Baker Nigeria slipped by 11 kobo to close at N2.34 per share.

    Banking stocks dominated the top activities chart. FBN Holdings was the most active stock with a turnover of 88.57 million shares valued at N659.97 million. Zenith Bank followed with a turnover of 55.74 million shares worth N1.27 billion while Japaul Oil and Maritime Services placed third with 36.16 million shares worth N7.23 million.

    “Following the positive performance of the market since the start of the week, we anticipate profit taking in counters that have enjoyed buying interest till the close of the week,” Afrinvest Securities stated.

  • Investors await banks’ dividends as earnings season begins

    Leading first-tier banks are expected to announce dividends and audited report and accounts for the 2018 business year in the next few days, kick-starting the much-awaited earnings season for more than 95 per cent of companies quoted at the stock market.

    Regulatory filings and traditional practices at the Nigerian Stock Exchange (NSE) indicated that Nigeria’s two largest banks- Guaranty Trust Bank (GTB) Plc and Zenith Bank International Plc and two other leading banks- United Bank for Africa (UBA) Plc and Access Bank Plc are set to announce their final dividends and full-year earnings for the 2018 business year.

    The boards of directors of the four leading commercial banks had met and approved the audited reports and accounts for the year ended December 31, 2018. The board also deliberated and approved final dividend recommendations.

    Under the three-step final process for the release of dividend recommendations and audited reports, the board of directors meets to consider and approve the audited financial statements as well as dividend recommendation, then authorises the transmission of the signed reports to the primary regulator, in the case of financial institutions and other regulated entities and with the receipt of the approval of the primary regulator, transmits the dividend recommendation and audited report to the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) for announcement to the investing public.

    The Nation’s check at the weekend indicated that the four banks have completed the first two steps and are currently awaiting the final approvals of the Central Bank of Nigeria (CBN) to transmit the results and dividend recommendations to the NSE. The boards of Access Bank and UBA met last week while the boards of GTB and Zenith Bank had met earlier in the month.

    Sources in the know of the approval processes said the four banks might have a smooth sail at the apex bank as the apex bank had earlier approved their half-year audited reports. While quarterly audit is not a requirement at the stock market, the four banks traditionally audit their half-year accounts and pay interim dividend on the six-month report.

    Afrinvest (West Africa) said the release of dividends and full-year earnings might moderate the negative trend at the equities market. Nigerian equities had lost N326 billion in January 2019.

    GTI Capital Limited Chief Operating Officer  Mr Kehinde Hassan, said the banks may set the trend for the earnings as investors look up to the large companies to determine the outlook for the earnings period.

    The first-tier banks are expected to be among early filers of dividends and results at the Exchange. Non-bank early filers in the immediate past year included Nigerian Breweries, Transcorp Hotels Plc, Total Nigeria Plc, Africa Prudential Plc, United Capital Plc and Seplat Petroleum Development Company Plc.

  • Investors in last-minute rush as SAHCO’s N1.89b IPO closes

    Application for subscription to the N1.89 billion initial public offering (IPO) by Skyway Aviation Handling Company (SAHCO) Plc closes today.

    Stockbroking firms and other receiving agents are expected to collate and forward subscriptions to the issuing houses within the next two weeks. Discerning investors could still use the two-week window to submit their applications to their stockbrokers.

    Receiving agents have reported a quantum leap in the number of submitted applications in recent days as the IPO heads to its formal closure.

    SAHCO is offering 406.074 million ordinary shares of 50 kobo each through an IPO at N4.65 per share.  Application list for the N1.89 billion IPO, which opened on November 12, 2018, closes today, Wednesday, January 09, 2019. Ten per cent of the shares being offered for sale would be reserved for staff of SAHCO under an Employee Stock Ownership Plan to be set up and administered by a Trustee.

    Minimum subscription to the IPO is 500 shares and thereafter in multiple of 100 shares. This implies that any Nigerian with N2, 325 will be able to be part of owners of the company, thus realising one of the objectives of privatisation of creating and distributing wealth to Nigerians.

    SAHCO was privatised by the Federal Government in 2009. Sifax Group acquired the entire share capital of the company, but the Share Sale Purchase Agreement (SSPA) mandated the majority core investor to partially divest the shares of the company to the general Nigerian investing public.

    Many analysts said SAHCO has potential to deliver significant capital appreciation and dividend over the years. Analysts at leading investment firms including Vetiva Capital Management Limited and Cordros Capital Limited said the post-IPO performance would create values for shareholders.

    Analysts at Cordros Securities Limited stated that SAHCO has strong potential to sustain growth in the years ahead given its exposure to long-term expansion of air traffic, improvement in macro environment, relatively under-geared balance sheet and its competitiveness enhanced by IATA Safety Audit for Ground Operations (ISAGO) registration.

    According to the investment analysis, a valuation shows a target price of N5.97 per share for SAHCO in the immediate future, representing an upside of 28.44 per cent on its IPO price of N4.65 per share.

    “We have valued SAHCO using a pure-Discounted Cash Flow (DCF) valuation methodology, evaluating the company’s assets across its ramp and cargo handling business, in addition to future investments. Our positive investment case for SAHCO centres on the fact that the company represents a long-term play on air traffic and aviation industry growth and benefits from high barriers to entry,” Cordros Securities stated.

    The report noted that SAHCO has become somewhat of the ‘poster-child’ for privatisation, stemming from its incredible turnaround in performance in a short period since the government’s divestment.

    According to the report, management of SAHCO has stated its intention of sustaining the company’s impressive post-privatisation performance, listing key strategic goals to include expansion of revenue, cost control and reduction, customer satisfaction and stability and sustainability.

    The report pointed out that SAHCO has a positive long-term growth outlook citing the transformation in the market, which appears to be promising for SAHCO.

     

     

    According to the report, Nigeria’s aviation market is the third largest in Africa. Although relatively cyclical, the sector has a recorded a 10-year GDP CAGR of 9.0 per cent, almost double the national GDP CAGR of 5.0 per cent. Nigeria has huge potential to become an aviation hub for Africa, using its natural advantages such as its central location on the continent, huge population and a growing middle class.

    “As the second largest aviation ground handling service provider in Nigeria, SAHCO is well positioned to benefit from the expected long-term expansion of air traffic growth and demand for travel to, from and over Nigeria and the West African region. With respect to Nigeria air traffic trends, growth is expected to rebound after a more depressed period reflective of macroeconomic development,” the report stated.

    The Nigerian Bureau of Statistics (NBS) expects air traffic growth of 20 per cent for 2018 compared to 2017, on the back of improving business confidence, positive policy reforms – ease of doing business, visa on arrival – as well as development of infrastructure.

    “In our view, the Nigerian market is transitioning, from an economic standpoint – following three challenging years – and 2018 and beyond appear to be promising years for SAHCO to take advantage of. Firstly, we see economic growth benefitting from higher government and private sector spending, both riding on improved revenues from crude oil. Secondly, improved oil earnings should further improve FX liquidity and sustain stability, after the volatile era,” Cordros stated.

     

  • Investors lose N295b in opening trades at stock exchange

    INVESTORS lost N295 billion in the first three consecutive trading sessions of the New Year as political risks continued to moderate investors’ appetite for quoted shares.

    The All Share Index (ASI) – the value-based common index that tracks share prices at the NSE, dropped consecutively from its year’s opening index of 31,430.50 points to close weekend at 30,638.90 points.

    Aggregate market value of all quoted equities also declined from its 2019’s opening value of N11.721 trillion to close weekend at N11.425 trillion.

    With this, the average year-to-date return for the three-day trading session so far in 2019 stood at -2.52 per cent, equivalent to a loss of N295 billion.

    Sectoral analysis showed a market-wide sell pressure as fund managers rebalanced their portfolios.

    The NSE Industrial Goods Index recorded the steepest decline of 4.48 per cent. The NSE Banking Index followed with a drop of 2.98 per cent. The NSE Consumer Goods Index declined by 2.41 per cent.

    The NSE Insurance Index depreciated by 1.41 per cent. The NSE Oil and Gas Index posted a negative return of -0.79 per cent while the NSE 30 Index, which tracks the 30 most capitalised companies at the exchange, dropped by 2.70 per cent.

    There were 45 losers against 22 gainers during the week compared with 52 gainers and 18 losers recorded in the previous week.

    FCMB Group led the decliners with a drop of 16.49 per cent to close at N1.62. GlaxoSmithKline Consumer Nigeria followed with a loss of 15.86 per cent to close at N12.20. Access Bank declined by 14.71 per cent to close at N5.80. Stanbic IBTC Holdings dropped by 12.68 per cent to close at N46.50 and Dangote Flour Mills declined by 12.41 per cent to close at N6 per share.

    On the positive side, Custodian Investment led the advancers with a gain of 16.19 per cent to close at N6.10. Julius Berger Nigeria followed with a gain of 15.67 per cent to close at N23.25. Vitafoam Nigeria rose by 12.50 per cent to close at N4.50, Niger Insurance and Linkage Assurance chalked up 9.09 per cent each to close at 24 kobo and 72 kobo respectively.

  • Investors lose N65b on N14.76b deals

    The momentum of activities at the Nigerian stock market improved last week but the market remained under sell pressure as investors lost N65 billion in the five-day trading sessions.

    Total turnover at the Nigerian Stock Exchange (NSE) stood at 1.17 billion shares worth N14.76 billion in 14,554 deals last week as against 1.11 billion shares valued at N11.19 billion traded in 14,430 deals in the previous week.

    The All Share Index (ASI)-the benchmark index that tracks share prices at the Exchange, declined by 0.63 per cent from its week’s opening index of 30,866.82 points to close at 30,672.79 points. Aggregate market value of all quoted equities also depreciated from N11.269 trillion to close at N11.204 trillion. The average year-to-date return worsened to -19.80 per cent.

    The financial services sector led the activity chart with 983.374 million shares valued at N9.358 billion traded in 8,484 deals; thus contributing 84.15 per cent and 63.39 per cent to the total equity turnover volume and value respectively. The healthcare sector occupied a distant second with 44.802 million shares worth N183.753 million in 253 deals while consumer goods sector placed third with a turnover of 42.758 million shares worth N3.553 billion in 2,227 deals.

    Banks dominated the activities chart with the trio of Zenith Bank Plc, FBN Holdings Plc, and United Bank for Africa Plc emerging as the most active stocks. The three most active stocks accounted for 438.938 million shares worth N 5.691 billion in 2,962 deals, contributing 37.56 per cent and 38.55 per cent to the total equity turnover volume and value respectively.

    Also traded during the week were a total of 316 units of Exchange Traded Products (ETPs) valued at N849,000 executed in five deals compared with a total of 84,714 units valued at N1.219 million that was traded in 10 deals two weeks ago.

    In the sovereign bond market, a total of 10,934 units of Federal Government bonds valued at N10.746 million were traded in 31 deals compared with a total of 2,908 units valued at N2.516 million traded in 11 deals penultimate week.

    There were 34 gainers as against 37 losers last week compared with 30 gainers and 38 losers recorded in the previous week. Forte Oil led gainers with a gain of 33.89 per cent to close at N24.10 while 11 led the losers with a drop of 10.41 per cent to close at N156.60 per share.

  • Investors in last-minute rush for N100b sovereign Sukuk

    Investors are in last-minute rush for Nigeria’s second sovereign Sukuk as application period ends by the close of business today.

    There was increase in average submission of applications over the past few days, with many agents expressing optimism that the N100 billion Sukuk might be oversubscribed, it was learnt at the weekend.

    The Federal Government, through the Debt Management Office (DMO), is raising N100 billion through a seven-year tenored Sukuk Al Ijarah (Lease) with annual rental rate of 15.743 per cent. The rental rate is payable twice a year while the bullet sum will be paid at maturity. The rental rate is 12.45 per cent above the 14.0 per cent Monetary Policy Rate (MPR) of the Central Bank of Nigeria (CBN).

    Application list for the Second Sovereign Sukuk opened Thursday, December 6, and is scheduled to close today Monday, December 17, 2018. Minimum subscription is N10,000 at N1,000 per unit and in multiples of N1,000 thereafter. The second Sukuk, like the maiden issue, will be listed on the Nigerian Stock Exchange (NSE) and FMDQ OTC Securities Exchange.

    The Nation had earlier reported that a non-interest financial institution had indicated interest to take up to 10 per cent of the issue size immediately after the opening of the offer. With the DMO insistence that the Sukuk will not overshoot its N100 billion target, many non-interest financial institutions had called on the DMO to give preference to them as the Sukuk is a one-off opportunity for them to invest in long-term liquid government instrument.

    The Federal Government in September 2017 floated its first sovereign Sukuk, a N100 billion seven-year issue with a rental rate of 16.47 per cent. It was oversubscribed by 5.8 per cent.

    Most investment pundits considered the 15.743 per cent N100 billion Sukuk as attractive. Capital Bancorp Plc at the weekend urged investors to take advantage of the Sukuk.

    According to Capital Bancorp, the Sukuk bond offers competitive returns as FGN bonds of same tenors in addition to other benefits including exception from companies income tax, capital gains tax and value added tax on returns and assurance of a fixed rental returns over the seven-year period.

    Analysts noted that the Sukuk is backed by the full faith and credit of the Federal Government, which makes it technically a risk-free investment.

    GTI Asset Management & Trust Limited noted that the Sukuk is acceptable as collateral for loans by banks and can be sold for cash in the secondary market before maturity.

    “The bond will be listed on the Nigerian Stock Exchange and FMDQ OTC Securities Exchange for trading, which provides liquidity for investors who want to exit before maturity,” GTI Asset Management & Trust Limited stated in an investment advisory note.

    The Director-General, Debt Management Office (DMO), Mrs. Patience Oniha, said the Sukuk model started off to a huge success and has become a win-win instrument for all stakeholders.

    She said while government will not be able to exceed the issue size of N100 billion for the second sovereign Sukuk, the enthusiasm shown so far has further strengthened government’s confidence on the depth of the demand for Sukuk bonds.

    According to her, government will consider increasing the issue size in its future calendar as well as the utilisation of the Sukuk model for funding of other critical infrastructures such as power projects.

  • Fed Govt, investors in talks over 2,100Mw hydropower projects

    The Federal Government yesterday said it was in talks with some unnamed investors for some hydropower projects.

    The government said the projects, which are located in Gurara II, Kaduna, Lokoja and Makurdi, can generate 2,100 megawatts of electricity.

    Minister of Water Resources, Suleiman Adamu said the ministry has made progress with the concessioning of Gurara and Kashimbila hydropower plants.

    The minister said: “The National Water Resources Materplan and our Roadman identified that Nigeria has a hydro power potential of 12,200Mw. Only about 1, 930Mw of this potential has been developed at Kainji, Jebba and Shiroro dams.

    “We are currently making progress for the concessioning of 30Mw Gurara hydropower plant which is planned to come into full operations soon.

    “We are also progressing on our collaboration with Federal Ministry of Power, Works and Housing to concession the 40Mw Kashimbila hydropower plant, recently completed. However, Both concessions are being delayed due to non-completion of the transmission lines that will evacuate the power by Transmission Company of Nigeria and FMPWH.

    “In addition, we are in advanced discussions with potential investors for other hydropower projects including Gurara II (350Mw), Lokoja (750Mw) and Makurdi (1000Mw), among others.”

    He also said seven dams, irrigation and water supply projects had been completed and were ready for inauguration.

    The minister said there are plans to complete another set of seven water supply projects and 13 dams/irrigation projects between 2018 and 2020.

    He outlined the seven completed projects ready for the inauguration to include Kashimbila Dam in Taraba State; Ogwashi-Uku Dam, Delta State; Shagari Irrigation Project, Sokoto State; Galdam Dam, Kaduna State; and Ekeremor Water Supply Project, Edo State.

    Others are Mangu Water Supply Project, Plateau State; and Federal University of Agriculture, Makurdi Water Supply Project, Benue State.

    According to Adamu, only two new projects were initiated by his ministry since the inception of the current administration in 2015.

    He said: “We are committed to completing all ongoing viable projects in the ministry to derive optimum benefits for government’s investments. It is instructive to note that since the inception of this administration, my ministry has initiated only two new major projects.

    “This underscores our emphasis on completion of the numerous ongoing and abandoned projects we inherited.”

    As earlier announced in 2017, the minister again said the World Bank was supporting the implementation of the Transforming Irrigation Management in Nigeria Project with a credit facility of $495million.

  • Investors’ loss hits N2.34tr in 11 months

    Investors in equities recordeda net loss of N582 billion in November, bringing total net loss over the 11-month period to N2.34 trillion.

    After losing N109 billion in October, the equities market was mostly suppressed last month as investors appeared to focus on macroeconomic and political risks, notwithstanding attractive valuations of most equities.

    The equities closed weekend with average decline of 4.90 per cent in November, 433 per cent worse than 0.92 per cent recorded in October. Average year-to-date return for Nigerian equities closed weekend at -19.27 per cent, implying that an average investor in Nigerian equities has lost nearly one-fifth of his portfolio so far this year.

    “The market does not exist in isolation. The political atmosphere is not engendering confidence and investors are bailing out to wait for more conducive time to return,” Mr Patrick Ezeagu, Chairman, Association of Stockbroking Houses of Nigeria (ASHON) said.

    Ezeagu, a senior investment banker and dealer at the Nigerian Stock Exchange (NSE), said the continued decline of the equities market was a reflective of the uncertainties and heightened fears of political risks, citing the continuous brickbats between the major political parties and candidates that tend to overheat the polity.

    Aggregate market value of all quoted equities at the NSE closed weekend at N11.271 trillion as against N11.853 trillion recorded at the beginning of the month. The All Share Index (ASI)- a value-based common index that tracks share prices of all quoted companies at the NSE, trended downward to close the month at 30,874.17 points compared with 32,466.27 points posted as index-on-board at the beginning of the month.

    The ASI had opened 2018 at 38,243.19 points while aggregate market value of all quoted equities had opened at N13.609 trillion.

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) had during the month held its last meeting for the year, voting unanimously to retain all policy rates. The MPC retained Monetary Policy Rate (MPR) at 14.0 per cent with the asymmetric corridor of +200 basis points and -500 basis points, Cash Reserve Ratio (CRR) at 22.5 per cent and Liquidity Ratio (LR) at 30.0 per cent.

    Ezeagu noted that the pricing trend at the stock market belies the stable corporate performance, citing impressive third quarter earnings and interim dividends by major quoted companies, most of which failed to lift the companies.

    He said the outlook for the market in the next few months will depend on the smoothness of the political transition and the immediate economic direction after the election.

    Chief Operating Officer, GTI Capital, Mr. Kehinde Hassan, said the outlook for the market in the new month remains negative as there are no positive drivers to jumpstart a recovery.

    Citing key economic indicators including the pressure on national revenue as crude oil price plummets, Hassan said the tensed security situation and macroeconomic uncertainties have compounded political risks.

    Quoted equities had traded this year largely on the negative as Nigeria prepares for the February 2019 general elections. President Muhammadu Buhari is seeking second term on the platform of the ruling All Progressives Congress (APC). The main opposition party- Peoples Democratic Party (PDP), which had ruled for 16 years before the 2015 victory of the APC, has picked former Vice President Atiku Abubakar in an epic fight for a comeback.

    Quarter-on-quarter, the market has failed to respond to somewhat steady corporate earnings and dividend recommendations. Investors lost N1.90 trillion in the third quarter, wiping off the modest gain of N257 billion recorded at the end of the first half, leaving investors with a nine-month net capital depreciation of N1.65 trillion.

    From a net capital gain of about N1.7 trillion at the height of its rally in the first quarter, Nigerian equities had closed the second quarter almost flat with average gain of 0.09 per cent for the six-month period ended June 30, 2018, compared with average gain of 8.53 per cent recorded at the end of first quarter. Nigerian equities had recorded average loss of 7.77 per cent in the second quarter, equivalent to net capital depreciation of N1.13 trillion compared with capital gain of N1.384 trillion recorded by the end of first quarter.

    Nigerian equities had in January 2018 hit all-time high with market capitalisation of N15.3 trillion while the ASI had risen to 43,041.54 points, its highest index points since October 2008. However, profit-taking fluctuations that started in March 2018 worsened considerably into a swinging selloff in May 2018.

    The decline in 2018 appears set to halve the gain recorded in the previous year. Nigerian equities closed 2017 with full-year average return of 42.30 per cent, ranking within the top 10 best-performing equities across the world. Aggregate market value of quoted equities had closed 2017 with net capital appreciation of N4.36 trillion.