The Nigerian equities market was on a free fall for the week as the benchmark index plunged 11.52 percent for the week even as Year-to-Date (YtD) returns pegged at -19.61 percent respectively.
Market heavy weight DANGCEM dipped12.31 percent Week on Week (WoW) to peg its price at NGN188.53, (compared to NGN225.55 in the previous week). Volume and market turnover decline significantly by 80.17 percent and 32.18 percent respectively. BETAGLAS recorded the only gainer for the week, appreciating by 5.00 percent.
We attribute the sell-offs in the market to losses sustained by large cap stocks and the run to safety by foreign investors due to concerns about tacit devaluation of the Naira, as CBN banned the sale of dollars at its RDAS auction to importers of telecoms equipment, power generators and finished products during the week. This is happening amidst worsening oil prices in the global space and uncertainty about the 2015 election in the domestic economy.
Fixed Income: CBN moves to conserve reserves
Relative increase in liquidity compared to last week’s trade permeated the NIBOR space, as average change in rate across all offers WtD pegged at -0.33 percent. WtD change on the CALL rate halted at -0.61 percent, as the 1M, 3M, and 6M offers pared 0.42 percent, 0.27 percent, and 0.29 percent for the week in that order. After over a week of trading flat, the OBB and OVN rates witnessed activities as WtD for both dipped 1.17 percent and 0.05 percent respectively.
Same was seen in the Treasury Bills market as four out of six tenors pared yields for the week. The 1M and 2M increased yields by 0.07 percent and 0.05 percent, pegging yields at 10.78 percent and 10.97 percent respectively. Average yield on T-Bills for the week was -0.05 percent, as the 3M, 6M, 9M, and 12M had their yields drop to 10.99 percent, 11.03 percent, 11.21 percent, and 11.34 percent in that order.
Our market liquidity gauge puts liquidity in the system at 45.09, as WtD change on our Meri-Bond index pegs at 0.31percent.
A late minute rally on the Naira, coupled with the recent policy by the CBN stating that the importation of certain categories of items shall be funded from the inter-bank foreign exchange market saw the Naira bounce back by 2.59 percent, as YtD settles at -3.63 percent. Mid-quote for the Naira was NGN165.75. The policy is expected to help conserve fast depleting foreign reserves on the back drop of increasing FOREX demands.
Banking Sector: beset by reforms which compound sentiment
The sector’s performance closely mirrored that of the general market this week as a significant number of stocks in the sector declined. There were 13 decliners, while UNITYBNK and WEMABANK stayed flat. The sector’s YtD return now pegs at 23.34 percent.
The largest losers for the week were FBNH (20.03 percent), FCMB (17.22 percent), FIDELITYBK (15.38 percent), ACCESS (12.94 percent), UBN (11.77 percent), and DIAMONDBK (11.50 percent).
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The sector continues to be beset by new policy reforms from the CBN which are becoming ever more restrictive on the income generating abilities of the banks. The most recent of these policies relates to internal capital generation and dividend pay-out ratios, which limits some banks’ pay-out ratios dependent on their Credit Risk Ratings (CRR), or Non-performing loans (NPL’s) and Capital Adequacy Ratios (CAR).
Although we believe that many of the sector stock prices present attractive entry points, we advise investors to time their investments for the bottom of the market, i.e. the new support level before entry.
Industrial goods sector: Free fall, large cap stocks crash. The industrial goods sector closed the week 13.96 percent down having shed points on all days of the week.
The week began with the announcement by Dangote Cement plc, that the company would slash its cement prices to NGN1,000 (32.5-grade) and NGN1,150 (42.5-grade).
A strategy which we believe will significantly influence the outlook of individual companies in the sector, as well as the industry as a whole. DANGCEM further went on to declare its Q3:2014 scorecard, which showed a 7.35 percent growth in top-line and a 10.02 percent decline in profit after tax on the heels of increases in production costs, finance charges and taxation.
Also, during the week news of a disruption to ASHAKACEM’s operations in the north filtered into the market. Lafarge Africa Management however assured investors that the ASHAKACEM facility had been secured and would continue operations as soon as possible.
Given the general bearish trend in the market compounded by the news flows regarding the cement industry, Investors seemed to have dumped building material stocks during the week. WAPCO was the biggest loser for the week with a 30.14 percent decline in share price from NGN109.99 to NGN76.84.
ASHAKACEM closed the week 28.62 percent down at NGN22.37, while CCNN, CAP, DNMEYER and CUTIX shed 14.41 percent, 8.40 percent, 5.00 percent and 2.52 percent. DANGCEM, the most capitalised stock in the exchange was not unaffected by the negative sentiments as the stock closed the week at NGN188.53, losing 12 .31 percent WoW.
We anticipate that bargain hunters may see the inherent opportunities in the attractive market prices of the stocks in the industrial goods basket which are currently trading at their year lows. We however urge investors to balance optimism with caution given the extended bearish trend in the sector coupled with various happenings in the general market, and the domestic economy as noted above.
Consumer goods sector: Huge sell-offs on sector heavy weights
Sentiment on the consumer good stock remained negative as all counters in the sector had a negative run during the trading week. The decliners chart was led by DANGSUGAR, CADBURY and 7UP, shedding by29.00 percent, 18.61 percent and 18.18 percent WoW in that order, even as NB (-12.15 percent), NESTLE (-14.35 percent) and UNILEVER(-21.55 percent) follow suit.
DANGSUGAR, released an unimpressive Q3 result which showed a decline in top-line (NGN73.80bn vs. NGN77.70bn) and bottom line (NGN9.15bn vs. NGN9.63bn) of 5.03 percent and 5.02 percent respectively. NASCON (a sister company) had a similar run as revenue and PAT contracted by 0.26 percent and 23.72 percent accordingly in its latest 9months performance scorecard.
FLOURMILL Q2:2015 turnover softens by -1.45 percent as the company declared a 6months revenue of N165.54bn (vs. N167.98bn in corresponding period).PAT (NGN4.37bn vs. NGN5.83bn) was pressured by a massive rise(79.88 percent) in Finance expense, thereby weakening 25.09 percent.
Investors dumped UACN as the counter traded 15.7 percent down WoW to peg market price at a year low of NGN44.68, as the company UACN submitted its disappointing Q3:2014 result (revenue grew by 0.86 percent and PAT declined 20.48 percent).
We emphasis that key players such as NESTLE, NB, UACN, PZ and UNILEVER are trading at attractive prices the moment, but advise investors to tread with caution given the current atmosphere in the market.
Oil and Gas: OANDO Slides 21.98 percent, TOTAL declares NGN2.00 interim dividend.
In line with the discouraging mood noticed in the overall market during the week, the NSEOILG5 index traded below the water as sector heavy weight, OANDO tumbled the most by 21.98 percent, trailed by FO which declined by 17.07 percent while TOTAL appreciated marginally by 3.62 percent.
During the week, CONOIL declared a 14.43 percent decline in revenue (NGN104.22bn vs. NGN121.80 in September, 2013) for the nine month ended 30th September 2014. PAT dipped by 31.66 percent as a result of higher OPEX margin (7.04 percent vs. 6.22 percent in prior period).
TOTAL also declared an interim dividend of NGN2.00/share. Closure date for the dividend is 1st- 5th December 2014, while payment date is schedule for 15th December 2014.
Insurance sector: Sector reverse six week’s positive trend
The insurance sector reversed its six week gain to a negative mood, as a result of the general bearish market mode. WtD and YtD returns for the sector settled at -4.02 percent and 11.00 percent accordingly.
Despite interesting Q3: 2014 results released in the sector, no stock traded in the green zone for the week. CUSTODIAN, NEM, CONTINSURE and AIICO led the losers’ chart with 14.25 percent, 13.33 percent, 12.37 percent and 5.88 percent in that order, while majority closed flat.
We await more result to be released in the coming week and anticipate that good news will drive the sector index north,however we preach cautious trading to investors at this period.
Healthcare sector:Good earnings numbers yet closed negative
The Health sector index accelerated its losing streak, as key players had a negative run for the week. GLAXOSMITH, FIDSON, NEIMETH, PHARMADEKO and MAYBAKER shed points during the trading week losing 9.26 percent, 13.22 percent, 6.19 percent, 4.98 percent and 4.65 percent respectively, no counter posted gains. All other counters in the sector closed flat.
FIDSON and PHARMADEKO posted an interesting Q32014 results during the week. FIDSON’s revenue advanced moderately by 4 percent Year-on-Year(YoY), while the earnings hiked by 22 percent YoY. The earnings was pressured by a 70 percent YoY increase in finance cost, being interest paid on bank loan for construction of new factory at Ota in line with Good manufacturing Practice (GMP).
PHARMADEKO also posted an impressive result, as revenue advanced by 58.28 percent YoY while earning surged by 203.11 percent YoY. The significant Improvement in earnings was due to efficient direct cost management as cost to sales pegs at 44 percent compared to 69 percent in prior period. We expect to see similar performance from other companies yet to release their earnings to the market.
Services sector: TRANSCORP slips by 24 percent
The services sector did not fare well as no counter gained for WoW on the back of overall market bearish mood.
TRANSCORP led the laggards depreciating by 23.76 percent for the week. RTBRISCOE, IKEJAHOTEL, ACADEMY, CAVERTON, ABCTRANS, and NAHCO followed with 20.00 percent, 6.67 percent, 6.06 percent, 5.23 percent, 4.62 percent and 1.77 percent in that order.
ABCTRANS released its Q3:2014 result during the week showing a 5.82 percent increase in turnover while Cost of sales, OPEX, and Finance cost grew by 10.43 percent, 3.40 percent and 73.81 percent in that order thus dragging PAT down by 4.07 percent to NGN122m.
CAPHOTEL declared a turnover of NGN3.441bn representing a 0.82 percent Year-on-Year declined in revenue. OPEX by 36.18 percent while cost of sales reduced by 12.43 percent even as Profit after tax settled 20.31 percent up.
