Following the decision of Morgan Stanley Capital International (MSCI) to maintain status quo on equities in the MSCI Nigeria index, or composite indices which Nigeria is a component, the Nigerian Stock Exchange All Share Index (NSEASI) hiked by 2.55% WtD in the 4-trading day last week. Volume and value of transactions declined by 24.72% and 9.92% WtD accordingly, while there were forty-one (41) gainers as against twenty-five (25) laggards in the week under review to peg the market’s breadth at 1.64x.
TIGERBRANDS led the advancers in the week, after the counter appreciated by 31.68% WtD to close at NGN3.99. Other top counters on the gainers’ list included, AIRSERVICE (+20.41%), ETERNA (+17.39%), STERLNBANK (+16.31%) and NEIMETH (+13.04%). Conversely, PORTPAINT, TRANSEXPR, CCNN, NASCON and FIDSON led the laggards, with respective losses of 9.58%, 8.85%, 6.17%, 6.09% and 5.14% WtD.
Earnings releases continued to trickle in, with Ashaka Cement Plc. and Vitafoam Plc., amongst other companies, filing performance scorecards. ASHAKACEM reported its 3M2016 result, indicating Revenue and Profit-After-Tax (PAT) declines of 20.69% and 75.10% YoY respectively; while VITAFOAM’s 6M2016 scorecard showed Revenue and PAT drops of 23.42% and 26.39% YoY correspondingly.
We anticipate that trading activities in this week might sustain the current momentum, given that the much awaited 2016 Budget has been signed by the President. We expect investors to key into the counters of companies that are positioned to benefit from the infrastructural and developmental investments of the federal government.
This report reviews events last week, with emphasis on different segments of the financial market, while presenting our expectations for this week.
Fixed Income: Naira holds value at NGN197.33/USD
The average Nigerian Interbank Offer Rate settled at 8.92% mid-week, indicating a year-to-date change of 2.79%, -0.29%, 0.20% and -0.40% for the CALL, 1M, 3M and 6M rates accordingly. The average Money market rate in the week advanced by 0.29% to peg at 3.83%, as the financial system liquidity remained depressed, following the sustained frequency of OMO auctions by the CBN.
Also, as at mid-week, the average yield across Nigerian Treasury Bills instruments pegged at 8.23% (-0.20%), following the mixed sentiments that prevailed during the first two trading days of the week. This could be related to the Primary Market Auction that was held during the week in review.
The Treasury bond space opened last week on a relatively weak note, as average yield advanced northwards across most instruments. At the close of the week, the average offer yield across instruments pegged at 12.57%, implying a week-on-week change of 0.36%.
The domestic currency held steady across board, fixing at NGN322/USD at the parallel market, and NGN197.38/USD at the Inter-bank space.
We opine that the currently weak sentiment towards fixed income assets might persist this week, thus further pressuring the yield on fixed income instruments northward.
Agric. Sector: Records Negative WoW Performance
The Agric sector closed the week in the negative territory, as measured by our MERI-AGRI index which waned by 0.07% week-on-week, to peg the year-to-date return at 2.49%. Sector breadth settled at 0.5x on the back of a lone gainer and two (2) decliners.
The sectors’ showing during the week was largely due to the negative WoW performances recorded by LIVESTOCK (-1.23%) and PRESCO (-0.17%), which tempered the positive impact of OKOMUOIL’s 0.38% WoW return. ELLAHLAKES and FTNCOCOA stayed flat week-on-week retaining respective market prices of NGN4.26 and NGN0.50 accordingly.
During the week, FTNCOCOA released its Q1:2016 performance scorecard which revealed declines in revenue and profit-after-tax of 11.99% and 1,793.32% respectively. This unimpressive bottom line performance was due to the 22.29% rise in Operating Expenses, combined with 93.10% hike in finance costs.
We remain upbeat on the performance of the sector over the short to medium term, given the relevance of the Agricultural sector to economic growth and the increased focus of the current administration on same. However, we reiterate that investment decisions should be based on critical evaluation of company fundamentals.
Banking sector: Positive Return Supported by Sector Heavyweights
The banking sector advanced this week, gaining 2.92% WoW to bring the YtD return to -9.48% as measured by our MERI-BNK index. There were seven (7) gainers and seven (7) decliners, pegging the sector’s breadth at 1.00x.
STERLNBANK led the gainers after recording a 16.31% price appreciation. The ticker was closely followed by ZENITHBANK, UBN, and GUARANTY which recorded respective gains of 7.09%, 6.52%, and 4.99%. On the other side, FIDELITYBK (-5.83%), UNITYBNK (-5.71%), ETI (-3.33%), and FCMB (2.94%) populated the decliners list.
We see the momentum garnered by a few of the sector heavyweights being maintained over the first few trading days of next week, which may be sufficient to push the sector to a positive return in the coming week. Thereafter, we anticipate that some investors will take profit, which would consequently result in prices falling back by the end of the coming week.
Consumer Goods: TIGERBRANDS Returns 253.10% YtD
The Consumer Goods sector of the Nigerian Stock market returned 3.26% gain WoW, pushing the year-to-date return to -15.44%, as measured by the NSEFBT10 index. This performance was buoyed by the nine (9) advancers recorded as aginst five (5) decliners, with sector breadth at the end of the week pegging at 1.80x.
The advancers’ chart featured TIGERBRANDS, NESTLE, FLOURMILL, CADBURY and UNILEVER, which recorded respective gains of 31.68%, 12.15%, 6.38%, 6.19% and 4.98% WoW. Contrarily, the highest decliners were NASCON (-6.09%), HONYFLOUR (-3.85%), PZ (-3.46%), NB (-0.70%) and UACN (-0.11%).
Nestle Nigeria Plc released its 3M2016 result which indicated a 31.12% YoY growth in revenue, and 150.23% YoY and 126.16% YoY hikes in Profit-Before-Tax and Profit-After-Tax accordingly. Contrarily, Vitafoam Nigeria Plc recorded year-on-year declines of 23.42%, 56.50% and 26.39% in revenue, profit before tax and profit after tax accordingly.
We do not anticipate a sustenance of the current positive trend, though we acknowledge that investor’s skepticism towards the sector continues to over shadow the fundamentals of the component companies.
Health Sector: Sector Breadth Settles at Equilibrium
The sector breadth settled at equilibrium in the week, as equal (2) number of stocks appreciated and declined amongst the sector counters. Performance of the sector settled at -4.80% WoW as measured by the MERI-HLTH index.
NEIMETH (+13.04%) and MAYBAKER (+5.00%) were the two advancers in the week, while GLAXOSMITH and FIDSON waned by 4.97% and 5.14% WoW accordingly.
Investors’ bias for the sector have, thus far, been largely skewed towards companies with fair quarterly earnings performances. We nonetheless envisage bargain hunting activities on some sector stocks in the week ahead.
Industrial Goods: Sector Remains Resilient
The industrial goods sector continued to witness mixed investor sentiments during the week ended. Three stocks apiece recorded gains and losses, resulting in a WoW gain of 2.87% and YtD return of -3.83%.
WAPCO rebounded from heightened investor sell sentiments in the previous week, with a 5.16% gain in share price to NGN71.50. CUTIX and DANGCEM were the other advancers, with respective gains of 4.86% and 2.82% WoW.
PORTPAINT emerged as the worst laggard for the week having shed 9.58% WoW to close its share price at NGN2.17, CCNN and BERGER made up the decliners’ list with respective losses of 6.17% and 3.51%.
We envisage that investors will react positively to the recent passage of the 2016 budget in anticipation of increased demand for building materials, as the federal government commences its infrastructural development drive.
Insurance Sector: MANSARD Mars Sector Performance
In spite of the positive outing for most sector stocks, with four (4) counters appreciating in value against a lone decliner, the NSEINS10 Index waned by 0.78% WoW, pressuring the sector’s year-to-date return to -7.69%.
Following a 4.91% loss WoW, MANSARD emerged the lone laggard in the sector, trimming its share price to NGN2.13 at the close of the week. Conversely, AIICO led the gainers chart, after the counter appreciated by 2.60% WoW to close at NGN0.79. The counter was trailed by CUSTODYINS, LAWUNION and CONTINSURE, which recorded respective gains of 2.43%, 2.00% and 1.98%.
Custodian and Allied Plc (CUSTODYINS) released its 3M2016 performance scorecard in the week. Gross Premium Income grew significantly by 44.73% YoY to NGN6.91bn, with Profit-After-Tax also advancing by 3.38% YoY to NGN1.54bn. The significant climb (206% YoY to NGN2.91bn) in claims during the period, was responsible for the marginal growth in bottom-line.
Given the news inflow regarding the eventual signing of the 2016 budget, we expect investors’ optimism to be steered in the coming week, thus bolstering investor activities in the week.
Oil & Gas Sector: Sound Cost Management Salvages ETERNA’s Bottom-Line
The NSEOILG5 index hiked by 1.66% WoW as bargain hunting activities spurred FO’s performance at the end of the week, after several days of profit taking. Five (5) stocks appreciated in value against a lone decliner, with the sector breadth pegging at 5.0x.
ETERNA (+17.39% WoW) steered the advancers in the week, to close at NGN2.70. CONOIL (+4.98% WoW), MOBIL (+4.93% WoW), FO (+2.60% WoW) and TOTAL (+1.82% WoW) were the other gainers. Conversely, OANDO (-0.22% WoW) was the only decliner.
ETERNA reported its 3M2016 performance scorecard during the week, indicating a YoY Revenue decline of 53.86% to NGN18.34bn, as import allocation implemented during the first quarter by the PPPRA did not favour the company’s volume sales. However, the cost-to-sales ratio for ETERNA trimmed by 2.94% YoY to 95.77%, following sound cost management practices from the company. Consequently, gross profit for the company grew by 51.97% YoY, while Profit-After-Tax for 3M2016 settled at NGN291.15mn (+58.50% YoY).
We anticipate fair levels of bargain hunting activities by investors in the coming week.
Services: AIRSERVICE Stages Comeback
The mood in the services sector swung positive during the week as the Meri-Services index appreciated by 1.31% WoW. This drove YtD return to -0.67%, even as five stocks recorded price gains versus two decliners in the week.
AIRSERVICE reversed the loss from last week, having gained 20.41% to close its share price at NGN1.77. TRANSCORP, REDSTAREX, ACADEMY and NAHCO with respective WoW gains of 6.06%, 5.00%, 4.69%, and 3.83% completed the gainers list.
TRANSEXPR recorded an 8.85% decline in share price to NGN1.03, while CAVERTON, following its 4.62% price decline, emerged as the other loser for the week.
Against the backdrop of the recently signed 2016 budget, we expect improved investor perception of the services sector in the coming weeks. We also anticipate that the expected government spendings will help to drive consumer spendings and general economic activities.
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