Investors who sold their stocks on the back of the suspension of the Central Bank of Nigeria (CBN) governor, Sanusi Lamido Sanusi, may be ruing their actions as stocks have recovered to levels preceding the Sanusi-induced sell-off.
The Nigerian Stock Exchange (NSE) All Share Index (ASI) closed trading at 39,397.09 points on Wednesday, February 19, 2014, a day before Sanusi was suspended as CBN governor by President Goodluck Jonathan.
The Index, which tracks the broad markets performance, fell by over 1,000 points in the two days following the suspension, and closed at 38,295.75 points on February 21. Stocks have, however, regained all their lost grounds as the NSE-ASI closed trading at 39,564.43 points on Monday (March 3).
“Investors’ panic selling, in reaction to the news of Sanusi’s suspension, drove stocks to relatively cheap levels, with some heavyweight counters, especially the Tier-I banks, such as FBNH, GUARANTY, and ZENITH BANK setting new-year lows as at the close of market on Thursday, February 20, as market valuation P/E dropped to 13.53x,” said research analysts at Meristem Securities Limited in a response to questions.
“With the acting CBN governor reassuring investors that the apex bank would continue to implement policies in accordance with the price and exchange rate stability objectives, investors took advantage of attractive stock prices. We note that impressive 2013FY results and corporate benefit announcements remain the major driver of stock returns for the weeks ahead.”
FMCG manufacturer, Nestle Nigeria plc, reported last week that full-year 2013 revenues grew by 14 percent to N133.08 billion, from N116.77 billion recorded in the earlier period of 2012.
Transnational Corporation (Transcorp), a diversified blue-chip company, reported last Friday that 2013 net income for the group more than doubled to N6.957 billion from N2.527 as at FY 2012.
Nigerian Breweries and Flour Mills Nigeria have also announced growth in revenues for the period ended December 2013.
Nestle approved a dividend payout of N24 per share, equivalent to a dividend yield of 2 percent at share price of N1,154; Transcorp approved a 5 kobo per share dividend, dividend yield 1.38 percent at share price of N3.61; and Nigeria Breweries N4.50 per share dividend, dividend yield of 3 percent at share price of N150.
The rebound in stocks may mean investors feel the fundamentals underpinning the economy are sound, as companies position themselves to benefit from the rising population and disposable incomes.
Nigerian companies are riding a growth wave that should positively affect the bottom lines, which saw them sign more than $13 billion of syndicated debt, four times the amount raised in 2012, according to data compiled by Bloomberg.
The economy grew 6.81 percent in the third quarter of 2013, figures from the National Bureau of Statistics (NBS) show, while gross domestic product will increase by 7 percent this year, according to IMF estimates. The population is growing at 2.8 percent per annum and may hit 200 million by 2020, while income per head may rise to $1,883 by 2015, according to Renaissance Capital.
“There is no crystal ball to clearly pinpoint a market bottom. Hence, a bargain hunter will buy the ‘Sanusi sell-off’ as soon as there appears to be a decent level of entry,” said Abiodun Keripe, head of research at Investment One Financial Services Limited, in an email response to questions.
“In fact, I did call this a ‘double dip’ because the market was just about recovering from a 5.01 percent dip the previous week (before the suspension) with a 1.62 percent gain by mid-week (February19) and a reversal to end at 1.22 percent loss.”
The rally in equities which has brought year-to-date losses down to -4.28 percent has legs to run, as stocks remain cheap in comparison to peers, say Meristem Securities research analysts.
“Market P/E currently at 13.81xs suggests the overall Nigerian equity basket is still cheap relative to 14.5x P/E in December and 20.05xs for major African markets,” Meristem analysts said.
PATRICK ATUANYA
