Negative investor sentiments from the prior week lingered into this week, with the index paring on three (3) of five (5) trading days of the week. Subsequently, the NSEASI returned -2.69% WoW, dragging the year to date (YtD) market return to -13.79%.
Market breadth (0.20x) skewed in favour of the decliners, as 61 stocks waned in value, while 12 stocks advanced. Also, the volume and value of transactions advanced significantly by 217.21% and 60.71% accordingly. The upsurge in the volume and value recorded was largely due to the trade of 2.5bn shares of EQUITYASSUR, on the 20th of August. PAINTCOM led the advancers in the week, after the counter appreciated by 14.58% WoW to close at NGN1.10.
Other counters on the gainers’ list included, NESTLE (+12.59%), ACCESS (+7.82%), FO (+6.37%) and SKYEBANK (+5.29%). Conversely, EVANSMED, IKEJAHOTEL, CADBURY, SEPLAT and COSTAIN led the laggards, with respective losses of 27.17%, 22.13%, 14.23%, 13.93% and 13.64% WoW. The performance scorecards of ACCESS, GUARANTY, STERLNBNK, MULTIVERSE, and RTBRISCOE were released in the week.
GUARANTY and ACCESS both declared interim dividends of NGN0.25/per share, with closure and payment dates scheduled for the 8th and 21st of September for GUARANTY, and the 3rd and 10th of September for ACCESS. In this report, we review events in the economy, laying emphasis on the performance of different segments of the financial market, while presenting our expectation for the next week.
Fixed income: States debts restructured
The domestic currency amassed pockets of gains during the week, pushing the Naira’s YtD return to -6.41%, and settling the mid-price at NGN197.18/USD. The average NIBOR rates across tenors increased by 4.57% WtD, to peg at 26.90%.
Similarly, the OBB and OVN recorded an average WtD increase of 24.79%, to settle at 38.33% and 41.83% respectively. The Central Bank of Nigeria (CBN) held Primary market auction for the 91-day (NGN32.44bn) and 182-day (NGN30.00bn) Treasury Bills instruments, with respective stop rates at 10% and 13%. Average yield in the secondary market settled at 15.60% (+0.32%WtD) across instruments.
The longer termed bond instruments enjoyed a relative bullish run for most of the week, however, activities trended towards the negative region by week’s end, with the average offer yield within the space advancing by 3.54% WoW, to peg at 15.50%.
Efforts to alleviate portions of the financial obligations of some state governments continued during the week, as FGN bonds were issued to 14 commercial banks to assume the debt of 11 states.
This falls under the debt restructuring plan of the Federal government, following the June bailout discussions with the President, with the proposition made that states’ commercial bank loans be restructured either into FGN Bonds or into longer tenured 20 year, 16% interest rate loans.
Agric Sector: Sector index pares by -5.28% WoW
The agric sector moved in line with the the equities market this week, as MERI-AGRI index declined by 5.28% WoW, to peg the Yearto- Date return at +8.35%. There was no gainer during the week, while two stocks declined, and three stocks traded flat. OKOMUOIL pared the most, by 12.57% Week-on-Week to close at NGN21.71. The counter was trailed by LIVESTOCK, which waned by 7.98%. PRESCO, ELLAHLAKES and FTNCOCOA all traded flat.
We anticipate bargain hunting activities on the sector stocks in the coming week owing to the relatively low prices at which most of the sector’s counters are currently trading.
Banking sector: ACCESS & GUARANTY declare strong H1:2015 results
The week was largely negative for banking stocks, as only 2 stocks recorded positive returns. ACCESS and STERLNBNK appreciated in value, gaining 7.82% and 5.29% accordingly, while the top decliners’ for the week included FBNH (-11.35%), WEMABANK (-11.11%), FCMB (-10.93%) and DIAMONDBNK (-10.18%). ACCESS, GUARANTY, and STERLNBNK released their H1:2015 results during the week, which were generally good, as all the banks recorded both top and bottom-line growths.
ACCESS and GUARANTY both declared interim dividends of NGN0.25/share. ACCESS recorded Gross earnings, Earnings- before-Taxes and Earnings-after-Taxes growths of 43%, 44%, and 39% Year-on-Year (YoY) respectively. ACCESS also, declared an interim dividend of NGN0.25/ share, implying a dividend yield of 5.33%, based on today’s closing price of NGN4.69. STERLNBNK’s result, showed Gross earnings, Profit-Before- Taxes (PBT), and Profit-After-Taxes (PAT) YoY growths of 12%, 1%, and 7% respectively
. GUARANTY maintained its impressive 2015 performance, after the bank recorded YoY Gross earnings, PBT, and PAT growths of 15%, 21%, and 21% respectively. The bank also declared an interim dividend of NGN0.25/ share, implying a yield of 1.14%, based on today’s closing price of NGN22.00.
The recent earnings releases have been fairly good, and while we expect the financial performances of most banks will taper off as we go towards FY2015, we believe that a few banks will still report fairly strong FY performances, and declare attractive dividend disbursements.
Consumer Goods: VITAFOAM returns 43.92% YtD
The weekly performance of the Consumer goods sector stayed on its downward trend, as twelve stocks waned in value, while only four stocks recorded positive returns, and all other tickers traded flat. Consequently, the sector’s performance, as measured by the Nigerian Sector Exchange (NSEFBT10), pared by 0.39% WtD. NESTLE, VITAFOAM, 7UP and DANGSUGAR were the only stocks that recorded positive week-on-week performances within the sector, with their market prices advancing by 12.59%, 1.93%, 0.26% and 0.17% accordingly.
Conversely, CADBURY recorded the highest price decline of 14.23%, trailed by HONYFLOUR, which declined by 12.20% WoW. Also on the decliners’ list were FLOURMILL, PZ, NB, UNILEVER and GUINNESS with respective price declines of -10.56%, -9.74%, -5.54%, -2.24%, and -1.65%.
UACN, NASCON, INTBREW and PREMBREW traded flat during the week, retaining their respective market prices at NGN37.00, NGN6.30, NGN18.45 and NGN3.10. The component sector stocks have endured negative investors’ sentiments so far in the year, with most stocks trading at their year lows. We imagine that this trend might persist in the coming week, as stocks find new support levels. We however, advise investors to trade cautiously, while seeking value in cheap fundamentally justified counters.
Healthcare Sector: EVANSMED sheds 70.61% YtD
The weak performance of the previous week was sustained in this week, as the sector’s index, as measured by our MERI-HLTH index, pared by 9.82% WoW to drag the YtD return to -10.01%. Market breadth skewed in favour of decliners, as a lone stock recorded a price appreciation, while five stocks posted price declines during the week. All other counters traded flat. Profit taking ensued EVANSMED during the week, as the stock declined markedly by 27.17% to peg the price and YtD returns at NGN0.67, and -70.61% respectively. The decliners’ list also featured GLAXOSMITH, NIG-GERMAN and MAYBAKER with respective price declines of 10.00%, 9.63% and 4.44%.
Conversely, FIDSON emerged the only price gainer for the week, advancing by 4.69% WoW to peg its price at NGN3.35. The sector has been engulfed by the negative sentiments currently permeating the equities market, although some counters have shown some level of resilience over the past few weeks. We however, advise long term investors to take advantage of the low prices at which most stocks are currently trading, in anticipation of a more sustained market recovery.
Industrial goods: Profit taking activities ensue
The Industrial goods sector’s return, as measured with our Meri-IND Index, declined by 2.16 % WoW, pegging the YtD return at -8.92%. Sector breadth favored the laggards, as six stocks recorded price declines relative to one gainer. PAINTCOM reversed some of its accumulated losses after emerging as the highest gainer for the week, with a 14.58% rise in share price, to peg YtD return at -28.57%.
BERGER declined in value by 7.05% to NGN9.23, trailed by ASHAKACEM, PORTPAINT, WAPCO, DANGCEM and CAP with respective losses of 6.38%, 4.83%, 3.86%, 1.94% and 0.73% We ascribe the market price declines recorded to profit taking activities on stocks which accumulated gains following recent result releases. Subsequently, in the coming week we anticipate minimal position taking activities, and so our overall outlook remains tempered.
Insurance Sector: 2.5bn shares of EQUITYASSUR traded this week
The sector’s index pared by 4.41% WoW, as measured by the NSEINS10, thereby fixing the YtD return at -10.73%. The sector’s market breadth (0.50x) skewed in favour of decliners, as 2 stocks advanced, while 4 stocks waned in value. GNI emerged the top gainer in the week, after the stock advanced by 4.00% to record a year high price of NGN0.52. The counter was trailed by NEM, which recorded a 3.17% gain, to close at NGN0.65.
Contrarily, MANSARD led the losers’ chart, after paring by 12.32% to close at NGN2.42. Trailing the ticker on the losers’ path were AIICO, CONTINSURE and CUSTODYINS with respective losses of 5.62%, 5.56% and 4.76%. In spite of the weak activities on most insurance stocks, the Nigerian Insurance industry continues to garner keen interest from local and foreign players, owing to the untapped opportunities in the industry.
This interest led to the purchase of 28.59% (2.529 billion shares) of the total shares outstanding of Equity Assurance Plc. on a single trading day of the week. In our opinion, the decision to acquire this stake may be connected to NAICOM’s resolution to halt the issuances of new insurance licenses.
Oil & Gas Sector: Crude Oil Export Surges 27% in Q2:2015
The sector continued its negative run in the week, as the NSEOILG5 index returned -2.73% WoW. Similar to the prior week, five stocks waned in value this week, against a lone advancer, while all other counters remained flat. SEPLAT suffered the greatest loss, declining by 13.93% WoW to close at NGN245.30. OANDO, ETERNA, TOTAL, and MOBIL were the other laggards in the week, declining by 9.67%, 5.47%, 1.90%, and 1.82% respectively.
Conversely, FO emerged as the only gainer Week-on-Week, after appreciating by 6.37% to close at NGN228.70. According to National Bureau of Statistics (NBS), crude oil exports in Q2:2015 surged by 27% YoY to over NGN2.1tn, while India was the major export destination (crude oil trade valued at NGN352.32bn).
Also, Brent crude oil’s price declined by 6.10% WoW to settle at USD46.04pb. We expect a mixed bag of investors’ sentiments on the sector stocks in the coming week, while emphasizing the benefits of long term positioning.
Services sector: IKEJAHOTEL trades at 21-week low
The MERI-SER index declined by -0.61% WoW, to settle the YtD return at 0.41%. No stock gained for the week, while six stocks declined in value. All other stocks traded flat. IKEJAHOTEL emerged the top loser for the week, with a 22.13% WoW decline in its share price to close at NGN2.85. Other counters that featured on the losers’ chart were RTBRISCOE (-8.06%), TRANSEXPR (-7.45%), AIRSERVICE (-5.50%), ACADEMY (-5.00%) and NAHCO (-1.99%).
Given the dearth of positive news flows in the services sector, and also considering its ties with the activities in the economy which are weak at the moment, we do not foresee a resurgence in the short term.
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