The bears resurfaced after the holiday as the market shed a cumulative 1.60 percent at the end of third trading days week to peg YtD returns and the index level at -2.14 percent and 40,444.39pts, respectively. Negative mood permeated the market as all sectors posted losses during the week. A total of 20 stocks recorded price appreciation, 39 posted declines while 148 remained flat during the week.
Signaling the start of the earnings season, quarterly results of ACCESS, UBN, PZ, TOURIST, HMARKINS, INFINITY, THOMASWY and IKEJAHOTEL hit the market with companies performances largely mixed.
IKEJAHOTEL, CHAMPION, CONOIL, LEARNAFRICA and CUTIX led the gainers chart for the week with returns of 33 percent, 27.37 percent, 10.23 percent, 9.09 percent and 5 percent in that order. On the other hand, AGLEVENT, UAC-PROP, STANBIC, ZENITHBANK and UBCAP led the losers’ chart with respective returns of -13.64 percent, -8.52 percent, -8.49 percent, -6.17 percent and -5.96 percent.
Volume and value of transactions for the week were lower by 48 percent and 42 percent, respectively, due to lesser number of trading days and frailer buying sentiments.
We are of the opinion that the market direction will be largely determined in coming weeks by the nature of earnings scorecards posted by listed companies even though technical indicators point to a possible halt in losses for the coming week.
Banking Sector: Profit-taking ensues
It was a negative week for the banking sector as the sector breadth pegged at 0.2x, representing 2 gainers against 10 decliners. By and large, the sector ended the week with a WoW loss of 3.83 percent as investors booked their profits following gains posted last week. Access Bank and Unity Bank’s 9M:2014 results were released recently and both performed well.
ACCESS reported 17.3 percent and 18.1 percent growth in top and bottom lines in that order. The growth in gross earnings was driven by the 19.9 percent and 13.7 percent respective growths seen in interest and fees and commission income. The significant increase in interest income was consequent upon the 34.3 percent growth seen in loans to customers, as the bank shrank its investment securities holdings by 21.4 percent. Growth in earnings was supported by the 1.9 percent decline in operating expenses as well as the 14.2 percent decline in taxes during the period.
UNITYBNK reported growths of 6.1 percent and 858.8 percent in gross earnings and profit after tax, respectively. Interest income and non-interest income grew by 2.9 percent and 21.5 percent in that order. The astonishing 858.8 percent growth seen in earnings was largely due to the base effect of the bank’s N1.15 billion profit position as at 9M: 2013 (largely as a result of higher expenses in form of interest, personnel and other operating expenses).
However, the bank’s divestment from some of its subsidiaries has had a positive effect on its level of expenses in the year.
We expect a minimal rebound in coming weeks as gains from investors’ position-taking into companies with impressive 9M results is expected to outweigh the panic in the banking sector consequent upon banks’ adoption of Basel 2 risk weightings.
Oil & Gas Sector: Returns negative WoW as positive mood turns
The Oil and Gas sector returned marginally negative at the end of the week to peg the sector’s WtD return at -0.07 percent, thus paring Year-to-Date (YtD) return to 24.65 percent. The sector took a turn as all counters which returned positive in the previous week fell to the negative zone.
OANDO, which was one of the top gainers in the previous week, led the losers’ chart as the counter shed 4.06 percent to close at N25.30 (vs. N26.37 in previous week). FO also featured on the list with 3.31 percent loss to close at N217.55, while TOTAL and SEPLAT declined by 2.50 percent and 0.08 percent, respectively.
On the flip side, investors were bullish on CONOIL as it gained 10.23 percent to close at N51.82 compared with N47.01 in the previous week. ETERNA and MOBIL followed suit with 1.87 percent and 1.69percent gains in that order, while all other counter remained flat.
Industrial Goods: Bears continue to drag sector mood
In line with the general market mood for the week, the Industrial goods sector continued to shed points as the MERI-IND index closed -1.46 percent down, thus dragging returns so far in the month of October to -1.87 percent.
CUTIX generated the highest return for the week following a +5 percent change in price. WAPCO also defied general market sentiments to close trading for the week at N127.99, representing a 0.8 percent increase from previous week’s closing price.
Positive sentiments on CCNN, however, took a breather this week as the stock closed the week’s trading -4.8 percent down. DANGCEM, the other loser for the week, depreciated in value by 1.7 percent.
We believe that given the recent bearish mood in the market in general and the industrial goods sector specifically, the inflow of positive Q3:2014 earnings will help drive activities in the sector in coming weeks.
Insurance: No counter closed positive
The Insurance sector continued its losing streak, mounting on the loss recorded in the previous week with a 2.55 percent week-on-week (WoW) decline, as no counter in the sector closed positive. In spite of the recent profit-taking on large capitalisation stocks in the sector, the year-to-date (YtD) performance remains positive at 13.17 percent.
The performance for the week was largely dragged by MANSARD and CUSTODYINS, with respective prices declining by 4.83 percent and 2.69 percent, as investors took profit following the significant appreciation the tickers recorded two weeks ago.
Other underperformers for the week were INTENEGINS, WAPIC and NEM as they recorded price depreciation of 5.08 percent, 4.05 percent and 2.53 percent in that order.
We remain optimistic of a possible recovery for the sector in the coming week as we envisage position taking in counters that shed this week, even as we foresee a thug-of-war between the bulls and bears on MANSARD and CUSTODYINS as both tickers seek new support levels.
Agric: Sector posts -1.89% WtD return, as sentiments remain weak
Trading activities commenced on a weak note on Wednesday as all Agric. sector stocks traded flat on modest volumes (except for LIVESTOCK that posted mild decline of 1.33%). Trading activities continued on Thursday and Fridaywith LIVESTOCK closing 3.01 percent up at N3.08 to become the only stock in the sector to return positive in the week. FTNCOCOA on the other hand traded flat through the week to remain at N0.50. No trades was observed on ELLAHLAKES in the week while PRESCO and OKOMUOIL shed 1.07 percent and 2.91 percent, respectively, to settle at N37.10 and N33.01.
Commodities prices data from World Bank revealed that the average price of Palm Oil and Technical Rubber declined 12.97 percent and 5.70 percent in Q3:2014 relative to Q2:2014 prices. This brings the average changes in oil palm and rubber prices to 0.94 percent and -32.57 percent YtD, respectively, against earlier projections of +3 percent and -21 percent price changes for 2014. Maize and Wheat prices, major inputs for millers, have declined 32.54 percent and c.10 percent so far in the year.
We continue to await Q3:2014 earnings scorecards for the companies in the sector as major triggers to dictate the direction of trades in the coming weeks.
Consumer Good Sector … and the bears had it
While the bulls had an upper hand in previous week’s trading, the bears seem to have taken over within the consumer goods space as the sector shed 0.33% WoW (vs. previous +0.10%). This week, most of the companies had a negative run, though CHAMPION had a really good outing with a WoW gain of +27.37 percent.
PZ released its Q1:2015 results which showed a year-on-year decline in turnover of 0.31 percent, with a huge 30.31 percent cut in earnings which was as a result of 9.04 percent jump in operating expenses.
CHAMPION retained its position as the highest gainer for the sector while being trailed by NB and CADBURY with 1.89 percent and 0.58 percent gains, respectively. Some counters such as 7UP, NNFM, DANGFLOUR, FLOURMILL, VITAFOAM, NESTLE, and UNILEVER traded flat WoW.
On the other hand, PREMBREW led the pack of sector’s decliners, with -5 percent joined by DANGSUGAR, HONYFLOUR, NASCON, PZ, GUINNESS, and INTBREW with -0.86 percent, -4.25 percent, -1.17 percent, 0.72 percent, 3.93 percent and -1.29 percent WoW, respectively.
The conglomerate sector had a similar run with both UACN and AGLEVENT, shedding 0.84 percent and 13.64 percent WoW, respectively.
In anticipation of more corporate results in the coming week, we are of the view that the sector will likely remain subdued barring any fantastic third quarter results expectations from any of the sector heavyweights.
Healthcare sector: Losing streak continues
The sector continued its negative trend, shedding 2.52 percent to peg the YtD return at 10.24 percent. The week’s loss was driven by the 2.57 percent decline by GSK which accounts for c.82 percent of the sector’s market capitalisation. The sectoral breadth pegged at 0.33x as one (1) stock appreciated against three (3) that shed points while other stocks in the sector closed flat in the week.
FIDSON was the only stock that posted gains in the week, appreciating 2.10 percent to settle the price at N3.40. EVANSMED, GSK and MAYBAKER shed points, declining 2.57 percent, 2.38 percent and 1.69 percent, respectively.
The management of FIDSON agreed to issue a N2 billion secured fixed-rate bond to the market, the proceeds of which will be used to pay off outstanding loans (76.163%), as working capital (20.264%) and issue costs (3.573%).
The mood in the sector has remained dreary since the beginning of the year but we expect Q3:2014 numbers to trigger activities in the sector in subsequent weeks.
Services sector: Bullish trend continues
The Services sector closed in the negative zone for the week as it dipped -3.20 percent even though it posted more gainers than losers. Six counters gained, two stocks dipped while nine traded flat.
IKEJAHOTEL topped the gainers’ chart for the week with 23 percent returns which was however 8.58 percent lower than it posted last week. It was followed by LEARNAFRICA, ABCTRANS, RTBRISCOE, NAHCO and UPL with 9.09 percent, 1.47 percent, 1.18 percent, 1 percent and 0.97 percent, respectively.
Contrariwise, TRANSCORP led the decliners with 5.18 percent loss followed by CAVERTON (-3.20%), while ACADEMY, ASL, C&I LEASING, LENNARDS, NSLTECH, REDSTAREX, STUDPRESS, TANTALIZERS and TRANSEXPR all traded flat.
