While large and medium-sized public companies have bled in the stock market this year, small companies have surprisingly thrived and there are no immediate signs of a reversal in fortunes ahead of elections in Nigeria next year.
According to a report by the Nigerian Stock Exchange, the aggregate market value of public companies that are worth less than USD 150 million (N54 billion) climbed by N262.5 billion to N1.15 trillion ($3.17 billion) as at the end of September 2018 compared to a year earlier, an increase of 22 percent.
Large caps and medium caps have not been as fortunate, as the report showed that companies valued at over $1 billion (N363 billion) saw N280 billion peeled off from their market capitalisation compared to last year, as their aggregate value slumped 3.54 percent to $21.78 billion (N7.92 trillion).
Medium-sized companies with a market value of between $150 million to $1 billion were down N171.4 billion or 5.91 percent to $7.96 billion (N2.90 trillion) over the same period, as companies struggle to shake off a raft of foreign exits from the Nigerian stock market which is down some 19 percent this year.
The market sell-off, triggered by rising interest rates in the US and political uncertainty as Nigeria returns to the polls in February 2019 to elect a leader, has been felt more by the large companies- which more foreign portfolio investors are exposed to- while the small companies appear relatively insulated from the rout.
The situation is worsened by the renewed decline in oil prices, with Brent down 34.5 percent from a peak of $87 per barrel to as low as $57 per barrel, as investor sentiments tend to turn sour towards the oil-fuelled Nigerian economy in a period of low prices.
It means there could still be room for small companies to pull farther away from the heavyweights.
The NSE report did not name the small companies leading the charge of bumper gains, but BusinessDay analysis of company stocks with the highest one year return provided some clues.
Each of the top 10 performers in the stock market this year are all valued at less than N54 billion, which validates the dominance of small companies over large ones in the period.
Cement Company of Northern Nigeria (CCNN) is the best performing stock this year with a return of 89.47 percent as at Friday, November 30, outperforming the broad market’s year to date loss of 19 percent by almost 600 percentage points.
The cement maker has a market capitalisation of N22.6 billion, which means it fits into the small company category.
The second-best performing stock this year is C & I leasing, which has a market value of N3.9 billion, meaning it also fits as a small company. The operating and financial leasing company has jumped 59.7 percent this year. The defunct Skye bank, now Polaris bank, continues as the third best performing stock two months after the lender’s sale by the Central bank to new investors.
Sterling bank, with a market value of N47.8 billion, is the fourth best performer having gained 52.78 percent.
Marine and aviation logistics company, Caverton Offshore Support Group ranks fifth with a gain of 47.29 percent. The company’s market value is N6.4 billion.
Insurance companies, NEM and Continental Reinsurance are in sixth and seventh place. NEM, which has a market value of N12.4 billion has jumped 44.58 percent this year, while Continental Reinsurance is up 42.86 percent, helping it to a market value of N20.7 billion.
In eight and ninth place are Unity bank and Custodian and Allied Insurance, which have both risen 37.74 percent and 36.25 percent respectively. While Unity has a market capitalisation of N8.1 billion, Custodian is valued at N28.8 billion.
Rounding up the ranking is Beta Glass which sits in tenth position. The glassware manufacturer is up some 33.11 percent this year and that has helped it to a market value of N34.14, which also remains within the category of small companies listed on the stock exchange.
However, the big companies from cement maker, Dangote Cement, to tier-one lender, Guaranty Trust bank, are all down this year.
The NSE 30, an index that tracks the performance of the country’s 30 largest companies by market value, is down 18.7 percent over the past one year, according to official data.
