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BusinessDay
Nigeria's leading finance and market intelligence news report.

BADMN stocks make up 50 percent of NSE total market cap

As the earnings season gathers momentum with every hour, some stocks are making up a bigger piece of the pie than ever before.

The BADMN (an acronym for the mentioned companies) block of BUA Cement Plc, Airtel Nigeria Plc, Dangote Cement, MTN Nigeria telecommunications Plc, and Nestle Nigeria Plc, now account for 52.43 percent of the Nigerian Stock Exchange (NSE) total market capitalization of N14.40 trillion.

The listing of MTN Nigeria, Airtel Nigeria, and BUA Cement added impetus to a beleaguered stock market as the country’s current economic fundamentals have failed to bolster investor confidence.

The BADMN have an attractive valuation that makes their stocks alluring to investors. They also have strong earnings and there are upside potentials in the various industries they operate in.

Dangote Cement, the largest producer of the building material and most capitalized firm in Africa’s largest economy, has a dividend yield of 9.41 percent and trades at a price to earnings ratio of 7.50 times earnings.

The cement maker has a market capitalization of N2.89 trillion, which is 20.44 percent of the total market capitalization of NSE ASI Index.

The country’s huge infrastructure deficit and the zeal of government to spend copiously to bridge it will spur demand for building material, hence adding impetus to Dangote Cement’s earnings.

While Nestle Nigeria operates in an industry vulnerable to the vagaries of macroeconomic uncertainties, it has been keeping staying afloat and refusing to sink as it continues to record double digit growth in earnings and margins.

The consumer goods giant’s arrays of market penetrating products have been supporting growth. Its market capitalization of N1.09 trillion is 7.56 percent of the total NSE ASI total market cap.

Airtel Africa has been recording strong growth in earnings since it listed on the Nigerian bourse last year, and its market capitalization of N1.12 trillion is 7.77 percent of the total market cap of the NSE ASI Index.

The telecommunication giant announced its audited financial statement for 2019 that saw earnings beat analysts’ estimates.

Revenue was up 12.40 percent to $2.52 billion as at nine month period 31 December 2019 from $2.29 billion as at December 2018.

The growth in revenue was largely driven by improved performance in Nigeria, East Africa and the rest of Africa. Revenue growth also got a boost from customer base, which was up 9.40 percent to 107.10 million, and ARPU growth of 2.20 percent.

MTN Nigeria, the country’s largest telecommunications company by mobile subscribers, has a trading multiplie of 13.91 times earnings while dividend yields stands at 2.52 percent.

The telecommunication giant has a market capitalization of N2.38 trillion, which is about 16.52 percent of the total market cap of the entire NSE ASI index.

After two consecutive runs of a bearish run in the equities market (2018-17.84 percent and 2019 -14.60 percent), this year has begun on a positive note as the NSE ASI returned 4.53 percent.

The impressive run so far is amid poor corporate earnings as companies are grappling with tough regulatory environment, while the foreign external reserves have been dipping on the back of unstable crude oil price.

The consumer goods industry, which was a major drag on the index last year, started the year on a wrong footing.

Unilever Nigeria, Guinness, UACN, and Nacon Allied Industries recorded a sharp drop in revenue and profit as HoneyWell Nigeria and International Breweries recorded losses.

Analysts say the key determinants of Nigerian capital markets remains oil price, the smooth running of the banking system, and the health of the economy.

Asides global risk, a major risk facing Nigerian capital markets in 2020 stem from recent policies of the CBN and their possible negative impact on banking sector profits,’’ said analysts at CSL Stock Brokers Limited.

‘’Oil price risk and in effect currency risks t and out as an extraneous factor that could deteriorate, hence, a sharp fall in the oil price would have negative implications,’’ adds analysts at CSL Stock Brokers Limited.

Oil prices have been dragged down by concerns over demand in China after the coronavirus outbreak that has killed over 300 people while 28,0123 have been hospitalized.

In order to bolster the price of the commodity, OPEC and its allies have been holdings meeting to discuss the possibility of an output cut. It could cut about 500,000 barrels a day.

U.S West Texas Intermediate (WTI) fell 0.49 percent to trade at $50.70 as of Friday, its lowest level in 5 months

Brent Crude was down 0.0.1 percent, trading at $54.92 per barrel as of Friday.

The volatility in global macroeconomic environment combined with lack of policy direction on the part of government is undermining the country’s foreign direct investment and external reserve.

Nigeria’s external reserves recorded a decline of $4.47 billion as of the beginning of 2019 $38.07 billion as of December.

The drop in reserves can be largely attributed to decline in oil receipt and the intervention of the CBN in the foreign exchange market.

 

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