Twenty-five companies listed on the Nigerian Stock Exchange (NSE) have posted N107.06 billion as profit after tax (PAT) at the end of Q3 2014, on the back of the leadership and innovation provided by their CEOs, an analysis of stock performance and companies’ quarterly financial reports between January 1 and December 31, 2014 by BusinessDay Research and Intelligence Unit has shown.
The CEOs who made the list this year, also added N333 billion to their companies’ market capitalisation. The Top 25 CEOs is a yearly project of BusinessDay Research and Intelligence Unit, supported by BusinessDay Conferences and Enterprise Unit. It was introduced to highlight the positive developments in the Nigerian capital market in a particular financial year.
The parameters used in the selection of the eventual winners include company’s share price appreciation, which must have outperformed the NSE’s All Share Index and of which the worst case scenario is a neutral growth; timely release of quarterly financial reports, in line with the regulations of the SEC and NSE, as well as a positive growth rate in a company’s latest profit after tax.
Exactly 25 firms recorded share price appreciation at the end of the 2014 financial year, just as 70 remained neutra,l while 107 equities shed various amounts in their share prices. Only four banks are on the 2014 winners’ list.
Explaining why only a few banks made it on the list, Fatai Asimi, an investment analyst, attributed this to factors such as increase in CRR on public sector deposits from 12 percent to 50 percent and later to 75 percent, gradual phase out of COT, guidelines on computation of Capital Adequacy based on Basel II/III and increased AMCON sinking fund to 0.5 percent of total assets and 33 percent of off balance sheet item.
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“The privatisation exercise created an avenue for banks to participate by funding a number of acquisitions. There were also policies in the oil and gas industry and the lack of will of the Nigerian Government to see the PIB through, led IOCs to divest from the Nigerian market. This led to indigenous oil companies acquiring these assets. The prospect of all these increased the appetite of the banks to take more risk, and led to over-exposure to the power and oil &gas sectors, as these sectors are currently suffering from the lack of funding amidst declining oil prices” Asimi added.
Notwithstanding, not all the 25 firms that recorded appreciation in prices made the 2014 winners’ list, partly due to non-release of their quarterly financial reports and inability to pass other criteria. Consequently, Premier Breweries, Golden Breweries, Union Dicon Salt and Ikeja Hotels, which were on the overall gainers’ list in 2014 were not selected. The NSE Contact Centre, in a response to our enquiry, provided justification to why these companies recorded significant upward movement in their share prices.
“Please note that the three companies referred to in your enquiry(Premier Breweries, Golden Breweries and Union Dicon Salt) are presently undergoing restructuring, the movement in their share prices is nothing but speculative drive by the investors who might be hoping for a better future at the end of the exercise. Their desire is to take position now and reap later”, the email response said.
This year’s list has six companies from the insurance sector; four from the banking; three from healthcare, and two each from managed fund, industrial, oil and gas and IT. Others are a company each from the cement sector, food and beverages, microfinance and printing press.
Stanbic IBTC, Ecobank Transnational Incorporated (ETI), Sterling and Unity banks made it from the banking sector. Stanbic IBTC made N25.4 billion PAT in Q3 2014 compared with N17 billion in similar period in 2013. Unity Bank raised its PAT to N11.1 billion in Q3 2014 as against N1.1 billion in same period in 2013. Sterling and ETI realised N7 billon and N36.6 billion respectively, as against N4.8 billion and N28.9 billion in comparable period in 2013.
The Nigerian capital market presents a whole lot of opportunities to long term investors, the analyst said. “Key to winning in 2015 is focus on value and long term investment horizon. We expect major activity and preference in Tier 1 banks that have been battered by the recent downturn in the market.
“Why? They are resilient and sufficiently capitalised to weather the storm. Good dividend yield would serve as a cushion too (FBNH and UBA particularly). There is no fundamental problem with banks, other than the power sector and oil and gas sector loans and the threat of rising NPLs. Banks will bounce back once things settle. FMCG space is taking the heat of Boko Haram and it is impacting on both revenue and costs.”
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