In four months to April 30, Nigerian stock investors reaped in excess of N1.33trillion as capital appreciation from listed equities. Crude oil price at $75 per barrel on Monday continued its role as biggest catalyst for the rally in Nigerian stocks.
After an impressive 42 percent rally last year, many analysts have remained bullish that the Nigerian equity market space still offers pool of untapped potential for value hunters.
“Our outlook for the market in the near term remains largely positive. We anticipate more impressive first-quarter (Q1) 2018 earnings results and expect investors to react accordingly. In the coming week, we anticipate bargain hunting in mid cap stocks to buoy performance”, said Afrinvest in its recent stock recommendation.
Analysts premised their positives on findings that most stocks currently trading on Nigerian Stock Exchange (NSE) are priced below their book value, while many others trade at prices below analysts’ recommended target price (TP).
In first four months of 2018, returns from Nigerian equities market stood positive at 7.91percent; while the market’s benchmark performance indicator –the All Share Index closed at 41,268.01 points from 38,264.79 points as at January 2, 2018.
Likewise, the value of listed equities rose to a record high of N14.95trillion as at April 30 from N13.62trillion on January 2, 2018; representing an increase of about N1.33trillion.
BusinessDay trend watch reveals many stocks that have helped sustain the record N1.33trillion gain.
They include Cement Company of Northern Nigeria Plc (115.3percent), Unity Bank Plc (88.7percent), Skye Bank Plc (68percent), Caverton Offshore Support Group Plc (86percent), NEM Insurance Plc (68.7percent), Wema Bank Plc (61.5percent) and FCMB Group Plc (66.9percent) – all these stocks surpassed the NSE ASI recording returns in excess of 60 percent.
The recent rise in oil prices implies further accretion to the Central Banks dollar reserves and Nigeria’s Excess Crude Account (ECA), into which the difference between the market price of oil and the budget benchmark is saved to provide a cushion when oil prices fall or extra cash is needed for capital expenditure. This trend means well for expected earnings of many listed companies.
“In Frontier, we think Nigeria will grow at 3percent versus IMF expectations of 2percent. We outline our currency views – base line is Egypt, Russia, Nigeria, staying roughly stable (and all good value)”, said Charlie Robertson, Global Chief Economist at Moscow-based Renaissance Capital in their April 30 macro outlook for Frontier/Emerging Markets.
Ahead of this feat, many market operators and research analysts had expected equities to still hold the upper hand against fixed income securities. Inflation rate for the month of March 2018 moderated to 13.3percent year-on-year (y/y). With the expectation of further decline, analysts expect yields on Fixed Income securities to ease further going forward.
Aigboje Higo, Managing Director, Capital Bancorp Plc who led the company’s team at an economic review and outlook for 2018 noted ample opportunities for improved returns in some stocks in the banking sector, consumer goods sector and the industrial goods sector of the equities market.
Though Capital Bancorp is cautiously bullish in this first half (H1) of 2018 than in the second half (H2) of 2018, they believe the current prices of stocks still give room for ample upside and significant return to investors, advising that investment in the stock market be made mainly on fundamental analysis and not on the back of a band wagon effect which could fizzle out at any moment and keep the investor trapped in a wrong stock.
Others stocks in our watch list that have impressed the market with returns in excess of 50 percent include Beta Glass Plc (54.5percent), Eterna Plc (54.4percent), Learn Africa Plc (53.4percent), and Oando Plc (52.8percent).
“Kayode Tinuoye-led researchers at United Capital Plc had also said that strong returns can be achieved in 2018. “With a benign inflation outlook and lower debt burdens, consumers and businesses appear energized. Therefore, we expected the consumer goods sector to be the immediate beneficiary of these fundamentals,” United Capital analysts had said.
The cumulative transactions at the Nigerian bourse from January to March 2018 increased by 48.29percent to N878.97 billion as against N454.48 billion recorded in corresponding period of 2017.
Domestic investors who accounted for 56.56percent of total transaction from January to March outshined foreign investors who accounted for 43.44percent.
Trading figures from major custodians and market operators on their Foreign Portfolio Investment (FPI) flows show foreign transactions reached a high of N381.82billion as against N211.06billion in the corresponding period of 2017.
Foreign inflow stood at N206.35billion while outflow was N175.47billion. Domestic transactions increased to N497.15billion in the first three months of 2018, from N243.42billion in the corresponding period of 2017.
Iheanyi Nwachukwu
