Out of the 30 most capitalised companies on the Nigerian Exchange Limited (NGX), three entities in which billionaire businessman Tony Elumelu has significant stakes have delivered the most returns to investors so far this year.
The companies and their returns so far this year are: Transcorp Hotels Plc, 720.8 percent; Transnational Corporation Plc (Transcorp), 515.9 percent; and United Bank for Africa Plc (UBA), 219.1 percent. Transcorp Hotels is the hospitality subsidiary of Transcorp.
Elumelu chairs Transcorp, UBA and Heirs Holdings Limited.
The increased buy-side activity seen at the Nigerian bourse recently was driven by investors who are positioning in value stocks ahead of their full-year financials and possible corporate rewards such as dividends.
“We anticipate investors’ sentiments in the local equities market to remain strong. We have observed significant interests in the banking sector, given the impressive performance across all banks and in anticipation of the full year 2023 earnings season,” analysts at Lagos-based United Capital Research said in a note to investors on Monday.
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“However, the downside risk to our prognosis is the likelihood of profit-taking activities following the new highs reached in the market.”
Transcorp Hotels, in its financial performance for the third quarter, reported strong year-on-year growth on all indices.
Its revenue was N29.9 billion, representing a 31.76 percent increase from N22.7 billion in the same period of 2022. Profit grew by 62 percent to N5.5 billion from N3.4 billion.
Transcorp is a conglomerate with investments in the power, hospitality, and energy sectors. It reported revenue of N128 billion in Q3 2023, compared to N96.2 billion in the same period of last year, while operating income also grew by 36 percent to N42.7 billion from N31.5 billion.
UBA, one of the tier 1 banks in the country, saw its gross earnings grow by 115.2 percent to N1.309 trillion in Q3 2023 from N608 billion a year earlier, while operating income rose by 146 percent to N1.018 trillion from N414 billion.
It posted a 262 percent rise in profit before tax to N502.01 billion in Q3, compared to N138.49 billion in the same period of last year.
Profit after tax rose by 287.2 percent to N449.29 billion from N116 billion recorded a year earlier, surpassing its annualised return on average equity for Q3’ 2023 at 131 percent to 44.37 percent.
Other NGX-30 member companies and their returns year-to-date (YTD) are: Access Corporation (158.8 percent), Dangote Cement (22.6 percent) Dangote Sugar (257.6 percent), ETI (114.2 percent), FCMB (83.1 percent), Fidelity (123 percent), Geregu (167.8 percent), Sterling Financial Holding Company (198.6 percent), MTNN (14 percent), Seplat Energy (110 percent), Lafarge Africa (24.6 percent), and United Capital (35.7 percent).
Driven majorly by investors who have been buying oil and gas, banking, consumer goods, and insurance stocks, the market recorded 41.27 percent return YTD, according to December 18 trading data.
“We anticipate continued positive trading, as sentiments from last week still prevail. We advise investors to invest in high-quality stocks with strong fundamentals backing them,” Futureview analysts said in a recent note to investors.
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Zenith Bank, another large-cap stock, has risen this year by 54.6 percent; Airtel Africa, 10.1 percent; BUA Cement, 0.8 percent; BUA Foods, 206 percent; Nestle, 4.5 percent, Okomu Oil, 45.5 percent; Presco, 38.1 percent; Stanbic IBTC Holdings, 94.3 percent; Total Energies, 99.5 percent; Flour Mills, 11.1 percent; GTCO, 72.2 percent; FBNH, 111.9 percent; and Guinness, 2 percent.
The significant returns notched by these firms and others as well as new listings this year on the NGX have pushed the market higher by over N11.69 trillion.
In their December 18 note, CardinalStone Research analysts who said they will continue to actively monitor their positions and take advantage of opportunities as they arise, acknowledged the continued rally in banking names, “driven largely by local participation and some foreign interest”.
“In addition, we saw some institutional demand for tier-one banks over the past week as portfolio managers actively rebalanced their positions ahead of the new year,” they said.
A further look at the performance of largely capitalised stocks this year shows International Breweries is down by 8.5 percent YTD, while Nigerian Breweries dropped by 7.6 percent.
