Consumer small-caps lead stock gains for 2014

Shares of small-cap consumer companies were the market leaders in 2014 as investors pulled money out of Blue chip names on negative sentiment from naira devaluation and the crude oil sell-off.

Smaller companies who are usually more domestically-oriented often have less institutional investor and foreign funds present in them, making their stocks less susceptible to global investor sentiment.

Only 25 out of the 206 stocks or 12 percent of shares traded on the Nigerian Stock Exchange (NSE) recorded gains last year, as equities ended 2014 down by 16.08 percent.

One hundred and seven stocks or 51.9 percent ended the year in the red, while 74 remained unchanged.

Eight out of the top 10 gainers were small caps with market capitalisation of less than N25 billion.

Premier Breweries, with a market capitalisation of N3.7 billion came out as the overall best performer, rising by 392.21 percent last year.

The next best performers in the top ten were Ikeja Hotels (+374 percent, market cap: N7.69 billion), Forte Oil (+133.15 percent, market cap: N246.1 billion), 7UP (+131.65 percent, market cap: N105.9 billion), Beta glass (+92.52 percent, market cap: N13.8 billion), Custodian and Allied Insurance (+74.04 percent, market cap: N21.2 billion), IHS (+40.74 percent, market cap: N16.7 billion), Fidson ( +39.78 percent, market cap: N5.8 billion), Golden Guinea Breweries (+35.29 percent, market cap : N250 million), and Union Dicon Salt (+33.49 percent, market cap : N5.02 billion).

The smaller capitalised companies’ performance compares to a sell-off in larger companies such as Flour Mills (-54 percent), UBA the worst performing lender on the NSE for 2014 (-51.69 percent), Seplat (-35.59 percent) and Nestle (-15.69 percent).

Apart from the consumer goods companies, shares of some financials (Sterling Bank, IBTC, ETI) and companies in the services sector (University Press, Trans Nationwide express) also recorded gains.

It is uncertain if investors will rotate into beaten down large cap stocks as negative sentiment remains, heading into the 2015 elections.

“The Nigerian financial market (Equities and fixed Income) experienced a fusion of hostile events in 2014 both in the global and domestic spaces. These ranged from the end of U.S Fed’s Quantitative Easing (QE) programme, suspension of the erstwhile CBN governor, intensified insurgency in North- East, incessant free fall in global oil prices, to Pre- election concerns, amongst other factors,” said Meristem Securities research analysts in a January 01 note.

“Looking forward, we are constrained to take a cue from the array of gains the market recorded towards the end of 2014…we expect that the first half of 2015 (H1:2015) may mirror the general trend of H2:2014, as risks from political space and declining global oil price still loom large,” Meristem said.

Further muddling the outlook is that Nigeria’s GDP which strengthened in 2014 should moderate this year, rising by only 5.2 percent, according to IMF estimates.

The sell – off in the NSE also represents strong bearish sentiment towards the banks.

The NSE – Banking Index tumbled 21.53 percent, underperforming the benchmark Index, as large caps Guaranty Trust Bank and Zenith Bank lost – 6.8 percent and -32.81 percent respectively.

About N2 trillion has been wiped out in stock values since June 2014.

Nigeria’s naira which shed around 13.5 percent last year, could prove negative in 2015 for companies which get the bulk of the raw materials for their operations outside the country.

“A quick look at the NSE with particular reference to food and beverage companies’ performance…shows that for the last three or four quarters, their published results have been worsening,” Keith Richards, Chairman of FMCG goods company, Promasidor said.

“Many (FMCG companies) have already started passing on a 20 percent increase in cost of imports onto consumers and this will escalate after Christmas.”

PATRICK ATUANYA