Shares of Dangote Cement Plc, Lafarge Africa and Seplat Energy Plc surpassed other premium stocks in returns between January and August, 2024.
The NGX Premium companies are made up of Access Holdings Plc, Dangote Cement Plc, FBN Holdings Plc, United Bank for Africa Plc, Lafarge Africa Plc, Zenith Bank Plc, MTNN Plc and Seplat Energy Plc.
Dangote Cement share price of N532 at the end of the eight-month period grew by 66.3 percent. Similarly, Seplat Energy, which stood at N3, 730.10 per share as at August 30, signified a 61.5 percent increase over the period.
At N37.60 per share as at August 30, Lafarge Africa rose by 19.4 percent as at August 30.
The equities market’s value increased by N14.5 trillion in the review period under review, driven by a combination of listings and investors’ bargain appetite for stocks which pushed the market value higher.
While the three premium stocks yielded positive returns, investors recorded negative returns in other premium companies such as MTNN, Access Holdings, United Bank for Africa, FBN Holdings and Zenith Bank.
MTNN stood at N180 per share as at August 30, representing a decrease of 31.8 percent in eight months. Also, at N19 per share, Access Holdings’ share price signified a decrease of 17.9 percent in the eight-month period.
United Bank for Africa’s share price decreased by 10.5 percent in the review period to N22.95.
FBN Holdings’ share price of N22.50 was a decrease of 4.5 percent. Zenith Bank, which closed at N 38.25 as at August 30, was down by 1 percent in the review period.
Read also: Dangote Cement takes shine off premium stocks in 8 months
Selloffs in Industrial Goods sector, major drag – analysts
On the other hand, Nigeria’s equities market decreased by 0.80 percent month-on-month (MoM) in August while investors lost about N33 billion as sessions of profit-taking in cement makers’ stocks on the Lagos bourse outweighed bargains.
Dangote Cement (-10 percent) and BUA Cement (-20.46 percent) were major laggards of NGX Industrial Index which closed the month on the negative (-13.08 percent). The NGX Banking Index rose by 6.52 percent in August, while NGX Consumer Goods Index (+4.88 percent), NGX Insurance (+11.67 percent), and NGX Oil & Gas Index (+22.45 percent) closed on the positive.
The market’s record negative in the review month was driven by investors who sold mostly industrial stocks such as Dangote Cement and BUA Cement amid increased bargain oil & gas, insurance, consumer goods and banking stocks. The market’s positive return as at August 30 stood at 29.16 percent.
“Looking ahead to September, we expect the banks’ H1’24 earnings and interim dividend announcements to improve market sentiment. In addition, the oil and gas sector is likely to see sustained bullish sentiment, following the positive momentum garnered by Oando’s acquisition and the positive impact of increased petroleum product prices on the earnings of downstream oil and gas players,” said Adebayo Adebanjo’s team of analysts at Lagos-based CardinalStone Research.
“In August, the local bourse saw mixed sentiments as investors treaded cautiously ahead of the release of banks’ H1’24 financial results and interim dividend announcements. This led to a 1.2 percent month-on-month (MoM) decline in the All-Share Index (ASI), with market capitalisation closing at N55.39 trillion. Consequently, the year-to-date (YtD) return settled at 29.2percent by the end of the month,” CardinalStone Research analysts further said.
They noted in their September 5 note that selloffs in the Industrial Goods sector, “particularly Dangote Cement (-10 percent) and BUA Cement (-20.46 percent), emerged as the primary drag on the index, following the sustained negative impact of FX volatility on their H1’24 earnings.”
“Additionally, losses amassed in major stocks MTNN (-10 percent), Transcorp Power (-10.35 percent), Transcorp Hotel (-8.54 percent) and United Capital (-41.29 percent), masked gains in counters like Oando (+207.60 percent), BUA Foods (+3.95percent), Julius Berger (+75.77 percent) and Zenith Bank (+15.56 percent),” CardinalStone Research analysts said.
According to Vetiva Research analysts’ September 2 note, “Our conviction stocks closed higher in August, driven by gains in our agricultural, banking and consumer goods picks. The model portfolio yielded a return of 2.95 percent month-on-month (m/m), outperforming the ASI by 3.75 percentage points (ppts). All in, our conviction stocks have yielded a return of 17.4 percent YtD.”
Vetiva analysts said in terms of agricultural pick, Presco (+17.53 percent m/m) extended its rally in August.
As a result, the sector contributed 1.58 percent to their model portfolio in the month. “Meanwhile, in the banking space, we saw varying performances across our picks. Our Tier-1 picks – Zenith Bank (+15.56 percent m/m), and GTCO (+3.41 percent m/m), closed higher m/m.
“On the flipside, our Tier-2 picks – FCMB (-1.91 percent m/m), and Fidelity Bank (-0.47 percent m/m), closed lower. All in, their performances drove an aggregate return of 1.82 percent to our top picks. Similarly, mixed sentiments were witnessed among our picks in the Industrial goods space but with greater selloffs. While Lafarge (+2.17 percent m/m) notched higher, Dangote Cement (-10 percent m/m) declined in August following similar performances in July.
“Together, they drove an aggregate return of -0.30 percent to our model portfolio. Our picks in the Consumer Goods space reversed their prior month’s losses –International Breweries (+16.67 percent m/m), and Guinness (+2.58 percent m/m), both closed in the green. Together, they contributed a return of +0.66 percent to our top picks. Finally, in the Telcos space, we saw selloffs in MTNN (-10 percent m/m). This contributed a return of -0.80 percent m/m to our conviction stocks.”
Analysts at Financial Derivatives Company had, during the LBS executive breakfast session in August, noted that “negative performance of Dangote Cement affected the industrial sector and the entire market.”
They linked the stock market plunge in August to interest rate hike as investors shifted to fixed-income instruments, exchange rate instability, and investors sentiments.
Financial Derivatives Company’s analysts said: “Nigerian companies’ inability to pay interim dividends due to lacklustre earnings will prompt continuous exodus of investors from the NGX. Attractive fixed-income yields remain a major threat to Nigerian stocks. Strict regulations in the banking sector may also continue to exert pressure on banking stocks in the near term.
“Underwhelming corporate earnings further dampened investor sentiment and share price movement. High oil prices positively impacted the oil and gas sector.”
