The week-long positivity witnessed at the equities market from investors in the prior week could not be sustained, as the NSEASI waned on two (2) out of five trading days to settle the index level at 24,432.51 points (-1.04% WoW). The market breadth (0.62x) skewed in favour of the decliners, as thirty-seven (37) stocks plunged in value, while twenty-three (23) stocks advanced. Also, the volume and value of transactions declined by 14.56% and 44.20% accordingly.
SEPLAT led the advancers in the week, after the counter appreciated by 19.98% WoW to close at NGN302.48. Other top counters on the gainers’ list included, MAYBAKER (+17.50%), GLAXOSMITH (+15.70%), NAHCO (+13.88%) and NPFMCRFBK (+9.09%). Conversely, UNITYBNK, PORTPAINT, LEARNAFRCA, NNFM and CAVERTON led the laggards, with respective losses of 11.76%, 10.16%, 10.00%, 9.52% and 9.19% WoW.
In the week, African Alliance Insurance Plc. released a backlog of its earnings performance scorecards, with the most recent release 9M2015 indicating a growth of 30.49% in the Gross Premium Income (GPI) and 82.61% decline in Profit after Taxes (PAT).
We anticipate that trading activities in the coming week might be filled with bargain hunting actions, with pockets of profit taking setting in from investors. Also, we expect that investor sentiment in the new week might be swayed in the direction of positive news inflow from companies as financial scorecards continue to trickle in.
In this report, we review events in the economy, laying emphasis on the performances of different segments of the financial market, while presenting our expectations for the coming week.
Fixed Income Brief: Naira Hits Record Low
The interbank rates sustained a southward trend in the week, as rates declined across all tenors, save for the Call rate that appreciated marginally by 0.09%. NIBOR closed the week 0.87% lower on the average, to settle at 6.47%. Conversely, OBB and OVN rates advanced by 0.13% and 0.08% respectively, to peg the average money market rate at 0.82%.
The Treasury bills market witnessed mixed activities in the week, as equal (3) number of instruments recorded yield appreciations and declines respectively. The Treasury bills market review showed that investors’ appetite for short-termed instruments were weaker, as yields advanced across the 1M (+0.58%), 2M (+0.43%) and 3M (+0.08%) tenors. On a general note, average yield across T-bills pared by 0.07% WoW to settle at 5.83%.
The Treasury bonds market enjoyed positive investors’ sentiment in the week, with active demand pressuring average bond yield to 10.83%, down from 11.13% in the previous week.
The Naira remained resilient at the interbank market during the week, with mid-price sustained at prior week’s position of NGN199.30/USD. Conversely, the Naira marked a record low in the parallel market, after the local currency depreciated by c.25% WoW to close at NGN390/USD.
Agric. Sector: Lone gainer decide sector’s WoW performance
Measured by the MERI-AGRI index, the Agric. sector finished the week in the positive territory, advancing by 1.52% WoW on the back of a lone gainer, OKOMUOIL. This also pushed the sector’s Year-to-Date return (+1.17%) into the green zone.
At the close of the week, only OKOMUOIL recorded Week-on-Week price movement, gaining 3.45% to close at NGN30.00, while ELLAHLAKES, FTNCOCOA, LIVESTOCK, and PRESCO stayed flat over the course of the week. We opine that discerning investors should discount the prevailing short term sentiments in the equities market and make investment decisions based on stock fundamentals while holding a medium to long term investment horizon for their equity portfolios.
Banking Sector: Returns -0.89% WoW
The banking sector recorded its third straight week of decline, with our MERI-BNK index recording a fall back of 0.59% to peg the YtD return at -13.49%.
There were four (4) gainers, ten decliners (10) and one (1) stock trading flat to peg the sector’s breadth at 0.40x. ETI led the gainers after recording a price appreciation of 5.76%. The ticker was closely followed by UBA, GUARANTY, and STANBIC which recorded respective price appreciations of 3.09%, 1.93%, and 1.07% correspondingly. On the flip side, the losers’ list was populated by UNITYBNK (-11.76%), DIAMONDBNK (-7.74%), ZENITHBANK (-5.74%), FCMB (-5.43%), and FBNH (-3.56%).
We maintain our position that a few of the sector’s stocks will end up recording decent price returns in the near term following the release of results and declarations of dividend disbursements. However, in the meantime negative general market sentiments, and tempered expectations regarding financial results have continued to pressure performance and may be expected to do so in the coming week.
Consumer Goods: Negative sentiments prevail
The NSEFBT10, which tracks the performance of the consumer goods segment, showed that the sector remained the worst performing sector with a year to date return of -19.40%, despite a marginal positive WoW return of 0.21% at the close of the week. Sector breadth pegged at 0.42x, reflecting twelve (12) decliners, and five (5) gainers.
TIGERBRANDS (+5.00%), UACN (+4.97%), AGLEVENT (+2.67%), NB (+2.66%) and NESTLE (+0.72%) were the week’s sector advancers, having closed the week at NGN1.26, NGN20.47, NGN0.77, NGN99.99 and NGN700.00 respectively.
NNFM led the sector laggards, paring by 9.52% to settle at NGN6.65. The decliners’ list also featured HONYFLOUR (-8.05%), FLOURMILL (-5.64%), CHAMPION (-5.33%) and UNILEVER (-5.25%).
We maintain that we are not upbeat about our earnings expectations for companies within the sector owing to high importation costs which may have eroded income for most sector players in 2015. We opine that investor participation in the sector should be limited to companies with sound fundamentals and little or no FX exposure.
Industrial Goods: Negative sentiments stage comeback
The industrial goods sector failed to build on previous week’s momentum as the sector index declined by 4.09%, during the week ended, to drag YtD return to -17.28%. The segment’s downtrend was triggered by 4 decliners, which neutralized the positive return of the sector’s sole gainer.
CUTIX rebounded from negative investor sentiments in the previous week as the ticker grew its share price by 4.86% to NGN1.51.
On the other hand, PORTPAINT emerged as the biggest sector loser, having shed 10.16% of its share value in transactions worth over one hundred and eleven million Naira (NGN111mn) during the week. This surge of sell sentiments emerged, following the company’s announcement of a 3 for 2 right issue for existing shareholders as at 9th February, 2016. DANGCEM, ASHAKACEM and CCNN made up the list of decliners with respective price losses of 4.55%, 4.00% and 1.21%.
DANGCEM continued to dictate the direction of the sector’s return, following its poor showing this week and consequent WoW sector loss. Although we remain skeptic of equity market returns potential given the prevailing economic headwinds, we expect fair earnings announcements and corporate actions to prompt positive sector sentiments in the coming weeks.
Insurance Sector: NEM sustains leadership
The insurance sector fell further this week, with the NSEINS10 index closing 2.35% lower WoW, pushing the Year-to-Date (YtD) return to -9.52%. Sector breadth (0.33x) skewed in favour of decliners, following three (3) stocks that waned in value, as against a lone advancer.
NEM emerged the sector’s sole gainer for the second consecutive week, after the counter appreciated by 1.39% WoW to close at NGN0.73/per share. Conversely, CONTINSURE (-8.00%), MANSARD (-5.12%) and AIICO (-3.61%) featured as the week’s laggards. All other counters traded flat.
African Alliance Plc. (AFRINSURE) released its FY2014 to 9M2015 financial scorecards during the week. Gross Premium Earned (GPE) in FY2014 and 9M2015 grew by 48.49% and 30.49% YoY respectively. However, Profit-After-Taxes (PAT) pared in both periods by 65.40% and 82.61% YoY accordingly, to peg at NGN486mn and NGN143mn (vs. NGN1.41bn and NGN0.83bn respectively).
We anticipate that the weak appetite for insurance stocks might persist in the coming week, following the subsisting negative mood in the equities market.
Oil & Gas Sector: SEPLAT advances on
The oil & gas sector breadth settled at equilibrium, as the sector recorded equal number (3) of gainers and decliners in the week. The NSEOILG5 index advanced by 3.30% WtD.
SEPLAT blazed the trail by gaining 19.98%, in the week, to close at NGN302.48, followed by TOTAL (+3.57%) and CONOIL (+0.05%). On the flip side, OANDO, MOBIL, ETERNA and were the sector laggards, paring by 7.94%, 6.02%, and 3.83% accordingly. Other counters traded flat.
The price of crude oil, as measured by Brent, hiked marginally by 0.18% WoW to close at USD33.42pb. We note that the decision of Saudi Arabia, Russia, Venezuela and Qatar to freeze output at January levels, is largely dependent on Iran being a party to it, and as such, prices might remain pressured in the near term.
We advise investors to trade on fundamentally justified sector stocks with long term investment objectives.
Services Sector: Shakes off sour sentiments
The services sector year-to-date return as measured by our MERISER index climbed to 0.66%, following a +3.65% WoW change. Sector breadth (1.00x) settled at equilibrium, following value appreciations and declines amongst equal (2) number of stocks.
NAHCO was the weeks’ top gainer, advancing by 13.88% WoW to close at NGN 4.02. The counter was trailed by AIRSERVICE (+4.57% WoW) to close at NGN2.29. Conversely, LEARNAFRCA (-10.00%) and CAVERTON (-9.19) emerged the sector’s top underperformers, closing at NGN0.81 and NGN 1.68 respectively.
We opine that the current stability in the sector provides a fair entry point for the fundamentally justified stocks. On the back of this, we advise investors to take positions in stocks currently trading below their fundamentally justified prices.
