The Nigerian equities market could not sustain last week’s positive note, as it closed negative in all the five trading days of the week. Against this backdrop, the NSEASI recorded a 3.93 percent dip WoW as market capitalisation pegged at NGN12.437trn having lost NGN469bn for the week.
Year-to-Date (YtD) market return slipped further in the negative region to close at-9.14 percent, while volume and value traded WoW surged by 48.41 percent and 18.74 percent respectively.
Equities market trading for the month largely portrayed investors’ reactions to mixed Q3:2014 earnings reported by companies amidst growing security and political uncertainties, as most positive flashes in trading activities resulted from bargain hunting on the part of investors.
Given the general bearish mood witnessed in the market in October and the consequent attractiveness of the market, we suspect that whiles the bearish trend may still be noticeable in November, barring any positive news to drive the market upwards, support from bellwether and defensive stocks may keep the market upbeat. We therefore advise investors to balance optimism with caution.
Fixed income market: Still offers a better alternative.
READ ALSO: FG commences electrification of 5m households, targets 25m Nigerians in solar connections
Amidst investors’ concerns around country risk necessitating funds outflow from Nigeria’s investment space, the fixed income market still tends to offer a safer return options. The treasury bills market declined by 0.08 percent to peg average yield at 11.10 percent compared to 11.18 percent in the previous week. The 1M and 3M tenors appreciated by 0.09 percent and 0.04 percent, while the 2M, 6M, 9M and 12M tenors declined by 0.11 percent, 0.16 percent, 0.25 percent and 0.08 percent respectively for the week.
NIBOR across tenors declined by 0.03 percent on the average as the CALL rate and 1M tenor rates decline by 0.31 percent and 0.06 percent. While the 3M and 6M tenors had increases of 0.16 percent and 0.33 percent WoW respectively. OBB and OVN rates also lost 0.33 percent apiece WoW while closing at 10.25 percent and 10.50 percent respectively.
Yields on fixed income instrument for the week inched higher for the week on the back of increased demand as mid yield settled at 12.48 percent relative to previous 12.10 percent. The MERI-Bond index gained 0.08 percent WoW while it lost 1.26 percent in October.
Naira continues to respond to the dwindling oil prices depreciating by 3.54 percent YtD against the greenback despite the Monday auction to close at an equal ask and bid price of N165.65 for the week. We however project relative stability of the Naira in the near term given the CBN’s commitment to continuous defence of the currency.
As the bearishness of equities market persists, we advise investors to consider an optimal portfolio mix skewed towards fixed income securities even as tension and uncertainties around 2015 general elections build.
Banking sector:Drags despite myriad of generally positive results.
It was a lacklustre performance for the sector even as a substantial number of banks released generally positive results, as the sector remains weighed down by investors’ sentiments regarding the regulatory climate. There were only 3 gainers, while 11 stocks lost, and UNITYBANK stayed flat.
The gainers included ETI (4.05 percent) as the market seemingly reacted to the bank’s strong Q3:2014 in which they grew the top line by 16.57 percent while the bottom line grew by 31.33 percent. The WoW gainers list also included STERLNBNK (+5.83 percent) and WEMABANK (+1.06 percent), while the top decliners for the week were UBA (-16.08 percent), UBN (-12.80 percent), and SKYEBANK (-12.73 percent).
Q3:2014 earnings results for 10 banks were released this week: DIAMONDBANK, ZENITHBANK, STERLNBANK, FBNH, FCMB, UBN, STANBIC, ETI, FIDELITYBK, SKYEBANK.
STANBIC consolidated on its performance thus far in 2014 by recording gross earnings and Profit after Tax growth of 14.13 percent and 57.32 percent respectively. ZENITHBANK recorded top and bottom line growth of 7.22 percent and 5.60 percent respectively. STERLNBANK recorded gross earnings growth of 12.11 percent and earnings growth of 39.19 percent as the bank recovered strongly from a lacklustre half year.
Also, FCMB grew gross earnings by 10.43 percent YoY, while profit after tax increased by 11.26 percent YoY. DIAMONDBANK grew top line by 14.68 percent, while Profit after Tax grew by 0.65 percent as the results were once again weighed down by an exponential increase in OPEX.
On the flip side, FBNH grew gross earnings by 12.65 percent, while earnings declined by 5.85 percent, just as SKYEBANK recorded declines in top and bottom line of 4.82 percent and 15.31 percent respectively as the negative 2014 persisted.
We are of the opinion that the negative sentiments causing a drag in the performance of sector stocks provide an opportunity for investors to take position, although it should be noted that we expect these negative sentiments to persist in the near future and so a medium to long term horizon is a necessity.
Industrial goods: Bearish trend persists
Sell sentiments prevailed in the sector in line with general market mood as the Meri-IND index declined by 0.52 percent. The negative mood was prevalent in October as evidenced in the 6.47 percent decline recorded during the month.
CUTIX was the biggest loser for the month as the stock shed 16.3 percent to close the month at NGN1.59. CCNN, WAPCO and BERGER also recorded share price declines of 14.3 percent, 13.2 percent and 7.0 percent. DANGCEM the largest cap stock in the basket was a major contributor to the sector’s gloomy performance as the stock closed the month at NGN215, 3.2 percent down MoM.
In line with the general sector mood, CAP emerged as the only price gainer for the month having appreciated in value by 7.4 percent largely driven by an impressive two-digit top and bottom line growth as seen in the paint maker’s Q3:2014 result.
Lafarge Africa (WAPCO) released its first consolidated result showing a 3.39 percent increase in top line and 37.14 percent decline in bottom line while ASHAKACEM recorded 3.03 percent growth in revenue and a 103.39 percent increase in PAT.
Consumer goods sector: GUINNESS announced new leadership
The sector index, NSEFB10 declined by 4.85 percent, despite corporate releases. 7UP had the most impressive outing this week, being the only gainer with 1.31 percent, week on week (WoW) increase. The WoW decliners’ chart had CADBURY, DANGSUGAR, HONYFLOUR, declining by 14.25 percent, 9.09 percent, and 0.75 percent in that order.
NESTLE posted an impressive result showing a growth in revenue by 7.60 percent YoY. This however did not translate to growth in bottom-line as PAT declined by 1.38 percent. UNILEVER 2014Q3 revenue declined by 7.08 percent QoQ and yet again, increase in operating expense and finance charges dragged earnings as PAT contracted by 47.97 percent (YoY).
In the Breweries space, GUINNESS announced new leadership, John O’Keefe, is to take over from Seni Adetu who steps down after two and half years. Against our expectation, the beer maker recorded another revenue decline (6.07 percent) in its first quarter result, despite recent strategic initiatives into the value segment of the beer market.
Oil and Gas: SEPLAT, TOTAL and MOBIL declared 9month result
The NSE oil gas sector index slipped 4.76 percent WtD on the back of overall market bearish mood, as well as generally unimpressive Q3:2014 corporate releases from MOBIL, TOTAL and SEPLAT during the week.
MOBIL declared NGN60.72bn revenue, a 3.4 percent growth compared to NGN58.74bn in the prior period. After tax profit (NGN5.99bn) recorded a 135.2 percent growth on the back of a massive income from asset sales worth NGN2.78bn.
TOTAL grew turnover (NGN177.81bn) by 1.99 percent, while earnings were depressed by finance costs which rose by 26.68 percent, despite a 7.70 percent decline in operating expense.
Also, SEPLAT’s revenue (NGN92.01bn) declined 8 percent, while earnings declined at a faster pace, declining by 24 percent as a result of huge OPEX which grew 153 percent. The company declared an interim dividend of NGN9.90(USD0.06)/share.
We believe there are upside potentials in ETERNA and TOTAL and maintain our overvalued position on FO and MRS.
Insurance Sector: Impressive results inform sector gain
The sector continues to enjoy positive sentiments as NSEINS10 index gained 0.98 percent for the week to peg YtD return at -3.21 percent.
AIICO released its Q3:2014 result with its top-line and bottom-line appreciating massively by 49.87 percent and 256.70 percent respectively. This impacted positively on the counter as it gained 6.25 percent week on week (W-o-W) to top the gainers’ chart. ROYALEX, CONTINSURE, PRESTIGE and MANSARD followed suit with 3.77 percent, 2.11 percent, 2.00 percent and 0.67 percent gains accordingly.
MBENEFIT and NEM dipped by 3.70 percent and 1.32 percent, as CUSTODYINS also shed 0.79 percent, despite growth in top and bottom lines of 14.04 percent and 53.42 percent respectively in recently released Q3:2014 result.
LASACO and CONTINSURE released Q3:2014 result with top-line decline of 35.74 percent and 0.86 percent, albeit bottom-line surged by 13.02 percent and 0.84 percent respectively. NEM Q3:2014 top-line grew by 7.20 percent while bottom-line dipped 21.99 percent, LINKASSURE also released Q3:2014 result, growing both top and bottom-line by 34.67 percent and 49.47 accordingly.
Healthcare Sector: rebounds despite the market mood
The MERI-HLTH index rebounds after several weeks of negative turn, gaining 0.02 percent to peg the YtD at -20.35 percent. The sector breadth (4x) favoured the position takers as four counters gained against one stock that shed points during the week.
EVANSMED, FIDSON, PHARMADEKO and MAYBAKER posted gains during the trading week advancing 13 percent, 5 percent, 5 percent and 1 percent respectively, on the flip side, only NEIMETH lost during the week shedding 8 percent. All other counters in the sector closed flat.
GLAXOSMITH released its Q32014 result to the market, showing moderate revenue increase by 8.81 percent (NGN23.212bn vs. NGN21.332bn), while the earnings dipped by 23.29 percent( NGN1.482bn vs. NGN1.932bn), owing to the 18.63 percent increase in cost of sales which increased cost to sales to 66.04 percent compared to 60.57 percent in prior year. All other companies in the sector are yet to release their Q3 results, but we await these results and their expected effects on healthcare stocks.
Services sector: Hospitality stocks takes a plunge
The services sector closed with a market breadth of (0.80x) as four stocks gained as against five stocks that declined WoW.
RT BRISCOE led the gainers with +7.14 percent price change followed by LEARNAFRICA, NAHCO and UPL which advanced by 4.14 percent, 1.60 percent and 0.24 percent respectively. On the flip side, TRANSCORP led the losers with 19.20 percent, trailed by IKEJAHOTEL,with its first WoW loss in five weeks,ABCTRANS ,ACADEMY and REDSTAREX with respective losses of 13.46 percent, 5.80 percent, 4.35 percent and 3.61 percent while all others traded flat.
TRANSCORP, STUDPRESS and RT.BRISCOE released their Q3:2014 results. TRANSCORP had quite an impressive result with growths in Turnover and PAT of 166.57 percent and 130.78 percent despite having increases in cost of sales and operating expenses of 299.02 percent and 40.25 percent.
STUDPRESS recorded a sterling turnover of 70 percent YoY even though a combination of a 131 percent upsurge in finance charge and 246 percent growth in OPEX by 131 percent and 246 percent caused an abysmal decline in PAT by 615 percent.
RT BRISCOE recorded a 5.66 percent decline in turnover from NGN 15.792bn to NGN14.861bn while cost of sales declined by 6.94 percent. Respective growths in OPEX and finance cost by 14.97 percent and 12.73 percent respectively resulted in a 764.17 percent decline in profit after tax.
Olusegun Abisoye,
BusinessDay Media Limited,
The Brook, 6, Point Road,
GRA, Apapa, Lagos
