The second half commenced on a positive note as the All-Share-Index hit a new 52-week high with the index level at 43,031.81pts at the close of the week. Nigerian equities market returned 2 percent week-on-week (WoW) to peg the year-to-date (YtD) return at 4.12 percent, the highest so far this year. Volume and value of transactions were however 21.48 percent and 4.67 percent, lower than the previous week’s figures.
While we cannot dissociate the influence of the market’s most capitalised stock (DANGCEM advanced 4.17%) from the week’s gain, general market mood was positive as measured by our indicator, which stood at +1.14x. Given the start of H2:2014 ushers in another earnings season, we believe investors’ appetite was driven by expectations of attractive Q2:2014 numbers. UNITYBNK, which set the earnings season in motion, posted 92 percent earnings growth in its Q2:2014 results.
We expect the uptrend to persist as more companies turn in impressive Q2:2014 results in the week. However, poor first-half performances, profit taking on some counters with significant gains and fears around the upcoming 2015 general elections remain possible drags to the current positive trend in the market.
Banking Sector: Earnings season to propel sector returns
The banking sector’s performance was fair as eight stocks appreciated during the week, bringing the sector’s YtD return to 0.70 percent. The major gainers were ETI (6.65%) and FCMB (3.81%), which are riding high on investors’ position taking in expectation of good H1:2014 results by the companies. On the other side, UBN and WEMABNK were the major losers, declining by 3.71 percent and 3.06 percent, respectively.
UNITYBNK topped the sector list of the first set of banks to release H1:2014 results, as it rolled in its Q2:2014 numbers during the week. UNITYBNK prides itself on the impressive quarter-on-quarter (QoQ) performance in which it generated N4 billion in after-tax earnings (N7bn; Q2:2014). The bank increased its gross earnings by 2 percent year-on-year (YoY) to N31 billion, supported by a marginal increase of 2 percent in both interest and non-interest income, while the bank’s improved operational efficiency allowed the trickle-down effect from the top-line, which facilitated an earnings growth of 92 percent YoY.
In our view, investors’ expectation of earnings scorecards is currently pushing the sector’s return. Following UNITYBNK’s performance, we expect positive sentiments in the coming week to further drive the sector’s returns northwards before earnings season gets into full swing.
Insurance Sector: Most capitalised stocks drive returns
The Insurance sector posted returns of 4.96 percent, which can largely be attributed to the gains by the heavily weighted stocks in the insurance basket: CUSTODYINS, MANSARD and WAPIC, which advanced 11.94 percent, 8 percent and 6.25 percent, respectively.
The sector’s underperformers for the week were AIICO, OASISINS and ROYALEX, which lost 7.14 percent, 5.66 percent and 5.66 percent in that order. The loss posted by AIICO may be connected with the release of its 2013FY financial statements during the course of the week. The company grew its top-line by 10.66 percent in spite of NAICOM’s enforcement of ‘No Premium No Cover’ during the year.
Despite the growth in gross premium earned, AIICO ended the year with a loss of N739 million owing to increased claims and management expenses.
As we await the release of more companies’ annual and quarterly results, we expect positive sentiments on companies that surpass investors’ expectations and vice versa.
Consumer Goods Sector: 7UP grew 2014FY PAT by 125.32%
Investors’ appetite for consumer goods stocks was fairly upbeat given the 0.22 percent gain during the week as measured by the NSEFBT10 index, which tracks the performance of top 10 stocks in the sector. Sector performance was dragged largely by WoW decline in prices of some sector heavy weights including NESTLE (-0.81%), CADBURY (-4.75%), GUINNESS (-2.89%), and VITAFOAM (-5.63%).
7UP appreciated the most in the sector with a 10.25 percent WoW return. This is largely attributed to the release of impressive 2014FY result that filtered into the market on Monday, June 30, 2014. The bottling company grew revenue, profit before tax (PBT) and profit after tax (PAT) by 21.53 percent, 133.44 percent and 125.32 percent, accordingly. The triple digit earnings growth was majorly driven by a 33.52 percent decrease in finance cost.
INTBREW advanced 10.11 percent, which is credited to aggressive buying ahead of the beer maker’s belated 2013FY result. UNILEVER (4.96%), PZ (1.53%), DANGFLOUR (1.23%), HONYFLOUR (0.75%) and NB (0.29%), are other advancers in the sector for the week.
