Shares of largest cement maker, Dangote Cement Plc, Seplat Energy Plc, and Lafarge Africa Plc surpassed other premium stocks in returns for the eight months to August 30.
The NGX Premium companies are Access Holdings Plc, Dangote Cement Plc, FBN Holdings Plc, United Bank for Africa Plc, Lafarge Africa Plc, Zenith Bank Plc, MTNN Plc and Seplat Energy Plc.
Shares of largest cement maker, Dangote Cement Plc, Seplat Energy Plc, and Lafarge Africa Plc surpassed other premium stocks in returns for the eight months to August 30.
The NGX Premium companies are Access Holdings Plc, Dangote Cement Plc, FBN Holdings Plc, United Bank for Africa Plc, Lafarge Africa Plc, Zenith Bank Plc, MTNN Plc and Seplat Energy Plc.
Dangote Cement share price at N 532 at the end of the review eight months period grew by 66.3 percent. Likewise, Seplat Energy which stood at N3,730.10 per share as at August 30 rose in eight months by 61.5 percent.
At N 37.60 per share as at August 30, Lafarge Africa rose by 19.4 percent in eight months, underperforming the NGX-ASI which recorded positive return of 29.16 percent as at August 30.
The equities market’s value increased by N14.5trillion in the review period driven by a combination of listings and investors bargain appetite for stocks which pushed market’s value higher.
While the earlier mentioned premium stocks yielded positive returns, investors recorded negative returns in others premium companies like MTNN, Access Holdings, United Bank for Africa, FBN Holdings and Zenith Bank.
MTNN stood at N180 per share as at August 30, representing a decrease by 31.8 percent in eight months. Also, at N19 per share Access Holdings closed the eight months period, its share price decreased by 17.9 percent.
United Bank for Africa share price decreased by 10.5 percent in the review eight months period to N22.95. FBN Holdings share price at N 22.50 decreased by 4.5 percent in eight months. Zenith Bank which closed at N 38.25 as at August 30, was down by 1 percent in the review period.
Selloffs in the Industrial Goods sector a major drag in August – analysts
Nigeria’s equities market decreased by 0.80 percent month-on-month (MoM) in the month of August while investors lost about N33billion as sessions of profit taking in cement makers stocks on the Lagos Bourse outweighed that of bargains.
Dangote Cement (-10 percent) and BUA Cement (-20.46 percent) were major draggers of NGX Industrial Index which closed the month negative (-13.08 percent). The NGX Banking Index rose by 6.52 percent in August, NGX Consumer Goods Index (+4.88 percent), NGX Insurance (+11.67 percent), and NGX Oil & Gas Index (+22.45 percent).
The market’s record negative in the review month was driven by investors who sold mostly industrial stocks like Dangote Cement and BUA Cement despite increased bargain oil & gas, insurance, consumer goods and banking stocks. The market’s positive return as at August 30 stood at 29.16 percent.
“Looking ahead to September, we expect the banks’ H1’24 earnings and interim dividend announcements to improve market sentiment. In addition, the Oil and Gas sector is likely to see sustained bullish sentiment, following the positive momentum garnered by Oando’s acquisition and the positive impact of increased petroleum product prices on the earnings of downstream oil and gas players,” according to Adebayo Adebanjo’s team of analysts at Lagos-based CardinalStone Research.
Read also: Dangote Cement, International Breweries top firms with highest shareholders’ equity in H1
“In August, the local bourse saw mixed sentiments as investors treaded cautiously ahead of the release of banks’ H1’24 financial results and interim dividend announcements. This led to a 1.2 percent month-on-month (MoM) decline in the All-Share Index (ASI), with market capitalisation closing at N55.39 trillion. Consequently, the year-to-date (YtD) return settled at 29.2percent by the end of the month,” CardinalStone Research analysts further said.
They further noted in their September 5 note that selloffs in the Industrial Goods sector, “particularly Dangote Cement (-10 percent) and BUA Cement (-20.46 percent), emerged as the primary drag on the index, following the sustained negative impact of FX volatility on their H1’24 earnings”.
“Additionally, losses amassed in major stocks MTNN (-10 percent), Transcorp Power (-10.35 percent), Transcorp Hotel (-8.54 percent) and United Capital (-41.29 percent), masked gains in counters like Oando (+207.60 percent), BUA Foods (+3.95percent), Julius Berger (+75.77 percent) and Zenith Bank (+15.56 percent),” CardinalStone Research.
“Our conviction stocks closed higher in August, driven by gains in our agricultural, banking and consumer goods picks. The model portfolio yielded a return of 2.95 percent month-on-month (m/m), outperforming the ASI by 3.75 percentage points (ppts). All in, our conviction stocks have yielded a return of 17.4 percent YtD,” Vetiva research analysts said in their September 2 note.
“Our agricultural pick, Presco (+17.53 percent m/m) extended its rally in August. As a result, the sector contributed 1.58 percent to our model portfolio in the month. Meanwhile, in the banking space, we saw varying performances across our picks. Our Tier-1 picks – Zenith Bank (+15.56 percent m/m), and GTCO (+3.41 percent m/m), closed higher m/m.
“On the flipside, our Tier-2 picks – FCMB (-1.91 percent m/m), and Fidelity Bank (-0.47 percent m/m), closed lower. All in, their performances drove an aggregate return of 1.82 percent to our top picks. Similarly, mixed sentiments were witnessed among our picks in the Industrial goods space but with greater selloffs. While Lafarge (+2.17 percent m/m) notched higher, Dangote Cement (-10 percent m/m) declined in August following similar performances in July.
“Together, they drove an aggregate return of -0.30 percent to our model portfolio. Our picks in the Consumer Goods space reversed their prior month’s losses –International Breweries (+16.67 percent m/m), and Guinness (+2.58 percent m/m), both closed in the green. Together, they contributed a return of +0.66 percent to our top picks. Finally, in the Telcos space, we saw selloffs in MTNN (-10 percent m/m). This contributed a return of -0.80 percent m/m to our conviction stocks,” Vetiva research analysts further said in their August performance review.
Analysts at Financial Derivatives Company had during the LBS executive breakfast session in August noted that “negative performance of Dangote Cement affected the Industrial sector and the entire market”.
They linked the stock market plunge in August to interest rate hike as investors shifted to fixed-income instruments, exchange rate instability, and investors sentiments.
The market will continue to record negative sentiment as more corporate performance will be impacted by declining consumer purchasing power, rising cost of production, huge FX losses, and high borrowing costs.
These factors, according to the analysts were expected to result in disappointing corporate earnings, which will likely dampen investor sentiment and drive down share prices.
“Nigerian companies’ inability to pay interim dividends due to lacklustre earnings will prompt continuous exodus of investors from the NGX. Attractive fixed-income yields remain a major threat to Nigerian stocks. Strict regulations in the banking sector may also continue to exert pressure on banking stocks in the near term.
“Underwhelming corporate earnings further dampened investor sentiment and share price movement. High oil prices positively impacted the oil and gas sector,” the analysts at Financial Derivatives Company.
Corporate disclosure …a trigger for positive sentiment
Recently MTNN announced the successful renegotiation of its tower lease agreements with IHS, a move analysts anticipate will alleviate cost pressures associated with direct network operating costs. The management also projects that this move should enhance cashflows by about N75billion to N85billion for FY’24. BUA Foods announced plans to expand its manufacturing capacity in the signing of an agreement with a prominent Turkish flour equipment manufacturer. Following the release of Zenith Bank’s half-year (H1) 2024 results, the bank announced an interim dividend of N1 per share.
