The equities market declined by 1.48 percent during the week’s trading, as the direction of market activities was greatly influenced by the activities of profit-takers. Consequently, the All Share Index YtD return pared to 0.49 percent, just as the volume and value of transactions traded in opposite directions, appreciating and declining by 7.53 percent and 11.46 percent Week on Week (WoW), respectively. There were 43 advancers against 34 stocks which declined in value, pegging market breadth at 1.26x, in favour of the advancers.
RTBRISCOE emerged as the top gainer for the week, with a 20.24 percent increase in share price. NEIMETH (18.95%), NPFMCRFBK (18.80%), PZ (15.67%), and PORTPAINT (15.32%) also featured on the top performers’ list. On the other side, IKEJAHOTEL led the laggards, after paring by 22.06 percent WoW. Other underperformers were COSTAIN (-16.00%), TRANSEXPR (-13.33%), LIVESTOCK (-11.15%) and FIDELITYBK (-10.80%).
Despite the recent moderation of risk factors, most notably the political headwinds, while global oil prices have recently spiked as Saudi Arabia persists with military action in Yemen, local market activities have been down-trodden.
We believe that this might persist in the short-term, before the new government takes office, as many foreign investors stagger their investments inflows, due to a view that the currency is not appropriately priced at the current level. Although we do not suggest that the entrance of the new government will result in a relaxation of the current currency management system, we anticipate that investors will react to their policy stance on the issue.
In this report, we review events in the economy, laying emphasis on performance of different segments of the financial markets, while presenting our expectations for the week ahead.
World economies threatened by high migration levels
During the week, Africans continued to speak up against the increased incidence of xenophobic attacks in South Africa, triggered by frustrated locals threatened by the growing number of foreigners in South Africa, especially with the weakening economy and diminishing standard of living. On the other side of the world, migration in search of better living situations, took another dangerous turn as numerous migrants from Africa, and war-torn countries in the Middle East, perished on the Mediterranean. The growing level of migration across the world, despite consistent growth of the global economy in recent times, may be an indication of the widening disparity in economies, as well as the resultant impact of war on affected nations.
We believe that the growing number of illegal migrants; mostly unskilled and uneducated, may increase crime levels, while also pressuring growth and development in the receiving countries, as scarce resources become further strained. This trend may affect net-export countries like Nigeria, which depend on the state of the global economy for its revenues.
In the local space, economic activities remained moderate despite the elimination of political headwinds. This, we believe may not be unrelated to pensive investors waiting to ascertain the direction of the nation’s economy following the commencement of the next regime on May 29, 2015.
Fixed income update… investors’ sentiments rally relatively
Rates at the interbank market trended upward on three of the five trading during the week, as demand outweighed supply earlier in the week given the moderate market liquidity. Nonetheless, rates closed the week southwards, pegging at 9.88 percent, 14.18 percent, 15.20 percent, 15.83 percent, 9.25 percent and 10.00 percent for the CALL, 1M, 3M, 6M, OBB and OVN rates, accordingly.
The Treasury bills market experienced mixed sentiments,asthe average yield declined by 0.64 percent, to peg at 12.55 percent across tenors. A Primary Market Auction (PMA) for 91-day (N38.71bn), 182-day (N45.00bn), and 364-day (N85.73bn) instruments, worth N169.44 billion was supposed to hold on Wednesday. This, was however, truncated as CBN payment website experienced some technical issues preventing settlement.
Enjoying an increased investors’ confidence, demand was heightened in the bond market, as the average yield for the Benchmark and Off-the-run bonds closed the week at 13.97 percent and 14.82 percent across instruments,representing a WtD average change of 0.31 percent.
The naira remained resilient in the week, with the domestic currency depreciating by 0.88 percent to closeat N/USD199.16, which indicates YtD depreciation of 7.34 percent.
Agric Sector… reeks of gloom
The positive mood which pervaded the sector in the preceding week, dissipated this week, as the MERI-AGRI index declined by -0.43 percent WtD to settle YtD return at 6.86 percent. A solitary stock recorded a price gain, as against two stocks which declined, to peg the sector’s breadth at (0.50x).
OKOMUOIL topped the gainers’ chart, with a marginal +0.22 percent change in value. Leading the pack of losers, was LIVESTOCK (-11.25%) which seemed to be taking a somewhat cyclical turn in the last three weeks. PRESCO also pared by 0.95 percent, while FTNCOCOA and ELLAHLAKES traded flat.
We believe that the lack of positive news flow into the agric sector contributed to the drab mood witnessed during the week. We opine that corporate releases, if positive, will serve as a catalyst to lure discerning investors.
Banking Sector…weak outing as MERI-BNK index declines 1.78%
The banking sector, as measured by the MERI-BNK Index, ended the week with returns of -1.78 percent, as investors took profits on sector heavyweights. Sector breadth favoured losers at 0.86x as there were six gainers and seven losers in the week. ETI traded flat while UNITYBNK, following its share reconstruction now trades at N5.00, as the bank’s shares outstanding reduced to 11.69 billion.
Top gainers for the week were FBNH, UBA, SKYEBANK, STERLNBANK and DIAMONDBNK with respective gains of 6.71 percent, 6.61 percent, 5.10 percent, 3.96 percent and 2.40 percent. Conversely, top losers were FIDELITYBK, ACCESS, ZENITHBANK, GUARANTY and FCMB, with losses of 10.80 percent, 4.97 percent, 4.35 percent, 2.56 percent and 2.32 percent, accordingly.
During the week, ETI released its FY2014 results, which showed respectiveYoY growths in gross earnings and profit after tax of 18.99 percent and 178.66 percent. Also, STERLNBANK, ZENITHBANK and FBNH released Q1:2015 results, which showed YoYgross earnings growths of 10.16 percent, 20.14 percent and 23.5 percent, respectively, while profit-after-tax YoY growths for the respective banks were 24.71 percent, 16.91 percent and 4.9 percent.
We expect increased buy sentiments in the sector during the coming week, as investors take position in stocks, given the long-term viability of the banks as they continue to partner with key sectors in the economy in spite of fundamental challenges.
Consumer Goods… DANGSUGAR declares N0.40 dividend
Consumer goods counters recorded a negative WoW return of 1.90 percent, with some of the heavyweights losing significantly, while most tickers recorded marginally positive returns.
The major gainers this week included; 7UP, DANGFLOUR, FLOURMILL, VONO, VITAFOAM, PZ, AGLEVENT and INTBREW with respective WtD gains of 4.70 percent, 4.30 percent, 8.79 percent, 6.93 percent, 4.76 percent, 15.67 percent, 9.15 percent, and 4.78 percent.
NNFM and PREMBREW, however, traded flat. On the flip side, UACN, CADBURY, UNILEVER, GUINNESS, NB, and CHAMPION all recorded respective WtD losses of 5.46 percent, 2.46 percent, 7.90 percent, 1.18 percent, 6.38 percent, and 3.95 percent.
DANGSUGAR released its 2014FY scorecard during the week, which showed an 8.04 percent YoY decline in revenue, while profit-after-tax (PAT) grew by 7.28 percent YoY, on the back of a reduced tax payable, which declined by 32.88 percent YoY. The company also declared a dividend of N0.40, which implies a yield of 5.53 percent at the current market price of N7.23.
Flour millers enjoyed positive sentiment this week, with the sugar and salt manufacturers also being beneficiaries. We do not expect the sentiment to persist, and so, advise cautious position taking in fundamentally justified companies amidst current market movements.
Healthcare Sector… Meri-Health index trailed the market
The Meri-Health index pared by 4.90 percent WoW, to settle the YtD return at +6.73 percent. Sector breadth pegged at 0.5x, in favour of decliners, as one stock appreciated against two stocks which shed points, while all other counters closed flat.
NEIMETHconsolidated on previous week’s gains to emergeas the top gainer for the week, after appreciating by 18.95 percent WoW to settle price at N1.13, representing the stock’s year-high price. On the other side, MAYBAKER and GLAXOSMITH declined, shedding 5.76 percent and 4.99 percent, respectively to peg prices at N1.80 and N53.45, accordingly.
The sector reversed the positive sentiment witnessed in the past few weeks, which we attribute to profit taking on stocks that have recorded substantial price appreciations. Subsequently, we imagine to see some levels of position-taking on stocks trading below their fundamental justified prices.
Insurance sector… Best performing sector for the week
Insurance stocks saw an increase in active bargain hunting during the week. Consequently, the sector recorded an impressive gain of 2.56 percent WoW, to trim year to date return to -0.09 percent. Six stocks recorded gains during the week, while a lone stock pared in value.
WAPIC returned the highest gain of 7.84 percent WtD to close at N0.55 (vs. N0.51 in previous week). Other top performers during the week were; ROYALEX (+5.77%), MANSARD (+4.93%), AIICO (+4.59%), NEM (+1.47%) and CONTINSURE (+1.15%). CUSTODYINS (-2.47%) was the sole decliner for the week, while other stocks traded flat.
In an attempt to remain competitive in the growing insurance sector, Union Assurance recently announced an additional capital injection of N3.7 billion ($21.8m). The CFO, Segun Adesanya, said this would enable the company operate beyond the stipulated solvency margin, whilst also positioning the company to better execute underwriting services.
Considering the recent undulating movement in the prices of insurance stocks, we do not expect the sector to sustain the positive momentum in the coming week. We envisage profit-taking on stocks that appreciated during the week, and therefore advise cautious trading.
Industrial goods … BERGER and CAP expand topline in Q1:2015
The mood in the sector was slightly upbeat during the week ended, as only one stock recorded negative WoW returns. The reversal of sentiments may not be unrelated to encouraging result releases during the week.
PORTPAINT emerged as the highest gainer, with a 15.32 percent WoW increase in share price to N3.84. BERGER, CCNN, WAPCO, ASHAKACEM and CUTIX made up the list, with respective gains of 5.16 percent, 4.04 percent, 3.33 percent, 2.75 percent and 0.58 percent.
DANGCEM, the only sector decliner for the week, was marked down for its N6/share dividend payment. Consequently, the stock closed 2.78 percent down relative to previous week.
Berger Paints plc recently declared it’s Q1:2015 result, showing an unexpected 20 percent YoY growth in revenue. PAT also increased by 46 percent from previous period, driven by improved production and operating cost management.
CAP, the paints industry giant, recorded slower topline growth of 3 percent YoY, although it managed to sustain its earnings growth momentum. PAT for the period came in at N485 million, representing a 21 percent YoY growth.
We expect other companies in the sector to release their 1st quarter scorecards in the coming week. We are however, not overtly optimistic about these earning releases significantly driving investors’ sentiment, as we do not anticipate surprises given the harsh operating environment.
Oil & Gas Sector… poor sector run results in 0.75% WoW decline
Investor’s bias was somewhat bearish on the sector’s stocks, as there was only one advancer in the week. Consequently, the NSEOILG5 index returned -0.75 percent WoW, to pare YtD retun to 7.98 percent.
OANDO witnessed a price appreciation of 7.93 percent to settle at N19.60, while TOTAL, ETERNA, MOBIL, CONOIL, FO, and SEPLAT recorded price declines of 9.75 percent, 7.35 percent, 4.97 percent, 4.71 percent, 3.26 percent, and 0.21 percent, accordingly. Other sector stocks traded flat.
Seplat Petroleum Development Company plc (SEPLAT) restructured its existing debt portfolio during the week, after securing a syndicated loan and a revolving credit facility from five Nigerian banks, and a consortium of international banks, respectively.
The value of the total facility is $1.7 billion, with $1.4 billion coming from the Nigerian banks, while the outstanding $300 million was sourced from the international banks. This, the company states will help in debt refinancing, whilst also putting the company in a vantage position for future acquisition opportunities in the Nigerian energy space.
We expect investor sentiments to tilt towards the buy side in the coming week, considering the fairly low prices of some of the sector’s counters.
Services Sector… RTBRISCOE advance by 20.24%
The services sector reversed last week’s gains, as the MERISERV index declined by -2.15 percent WtD to settle the YtD return at 1.11 percent. The sectoral breadth (1.00x) remained at equilibrium, as four stocks gained against four stocks that declined.
RTBRISCOE (20.24%), ABCTRANS (7.41%), UPL (5.15%), and LEARNAFRICA (3.45%) all advanced in that order. On the flip side, IKEJAHOTEL emerged as the biggest loser, dipping by 22.06 percent. Trailing the top loser were TRANSEXPR (-13.33%), NAHCO (-5.25%) and CAVERTON (-4.46%), while others traded flat.
The services sector has been in a state of inertia due to paucity of positive news flows, coupled with no so impressive corporate releases. And it is our expectation that this may persist in the short-term.
