Three stocks, from three different sectors of the Nigerian economy now have market values in excess of N1 trillion each, making them the most valuable companies on the Nigerian Stock Exchange (NSE).
The fact that the three largest listed stocks come from a diverse range of sectors showcases the evolution of the bourse from its financial or banking dominated days.
Dangote Cement, with a market value of N3.2 trillion, Nigerian Breweries with a market value of N1.25 trillion and GTBank with a market value of N1.001 trillion, as at June 7, 2017 are now Nigeria’s most valuable companies listed on the Exchange.
At the end of 2008 just before the onset of the global and home-grown financial crisis, the largest listed stock by capitalisation, was First Bank at N524 billion.
Back then four of the five largest stocks by market capitalisation were banks.
Today, only two of the top five are banks with Nestle (market cap N697.5 billion) and Zenith Bank (N627.9 billion) rounding up the top five.
“The change in the composition of the market, when measured by market capitalisation, is a reflection of the changes in the broad economy and the banking industry,” said Olutola Oni, head of research WSTC Financial Services Ltd.
“The increase in the number of non-bank entities on the large cap list is indicative of the fact that some companies in the other sectors have also consistently delivered value over the years, and this has reflected in their valuation.”
The trillion-naira firms have also diversified operations outside Nigeria, in a bid to boost revenues.
Dangote Cement the largest listed NSE firm operates in 14 other African countries and earned around 32 percent of its revenues outside Nigeria at the end of 2016.
Nigerian Breweries exports some of its products to the rest of Africa and the U.K, while and Guaranty Trust Bank (GTB) operates about nine subsidiaries outside Nigeria, mostly in Africa.
Dangote Cement’s revenue increased by 25.1 percent to N615 billion, last year, as after tax earnings grew marginally by 2.9 percent to N187 billion.
Nigerian Breweries reported a 6.7 percent year on year (YoY) increase in revenue to N313.7 billion, as after-tax profits declined 25 percent to N28.4 billion in 2016, while GTB’s gross earnings increased sharply by 37.4percent to N414.6 billion, and the tier – one lenders after tax profits grew by 33 percent to N132.3 billion.
Analysts say a lot has changed in the Nigerian equity market over the last ten years, leading to the change in leadership.
“Pre-2008 events in the Nigerian stock market were broadly driven by speculation, rather than fundamental performance, with domestic investors dominating daily transactions, amid strong appetite for banking stocks,” said Wale Olusi, a research analyst at United Capital.
“Events in the aftermath of the 2008 crisis have however redefined demand for equities in Nigeria and have ushered in the era of research and analytics-based demand decision making.”
Improved valuation and changes in investor sentiment are also factors at work, as portfolio investors look for quality blue chip names to put money to work in.
All N3 trillion stocks are up this year.
Dangote Cement stock has climbed 14 percent , NB has returned 5.4 percent and Guaranty Trust bank has gained 37 percent. The NSE main share index has gained 19 percent year to date, by comparison.
Analysts say the diverse nature of the large cap stocks is a positive development for the Nigerian bourse.
“The present composition is similar to what obtains on the London Stock Exchange and the New York Stock Exchange. However, it is important to also note that the decline in the number of banks on the list is not unrelated to the impact of the last financial crisis on most of the players in the banking industry,” Oni of WSTC Financial Services, said.
PATRICK ATUANYA
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
