Nigeria’s stock buyers have recorded more capital appreciation this year in shares of Dangote Cement Plc, BUA Cement Plc and Transnational Corporation Plc (Transcorp) than in any other company in the league of the 30 most capitalised stocks.
The Nigerian Exchange Limited (NGX) 30 Index rose this year by 40.88 percent, according to trading data for the week ended February 2, surpassing the NGX All Share Index (ASI) at 39.65 percent. The NGX 30 Index tracks the top 30 companies in terms of market capitalisation and liquidity.
Dangote Cement Plc and BUA Cement are listed in the industrial sector of the market. In the trading week to February 2, the NGX Industrial Index was up this year by 108.92 percent.
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“The current enthusiasm for stocks is concentrated in a small number of the largest stocks by index weight, notably Dangote Cement, BUA Cement and BUA Foods, as well as Geregu,” the Guy Czartoryski-led team of Coronation Research analysts said.
They said: “In the review period, Transcorp was up this year by 77.8 percent, BUA Cement (+90.7 percent), while Dangote Cement rose by 138.5 percent.
“In addition, some small stocks are being marked up sharply. This has taken the traditional New Year rally to unprecedented levels, as we explained in last week’s Nigeria Weekly Update: but the rally at this stage is not as broadly based as it was three weeks ago.”
They said that their analysis suggested that investors were enthusiastic about the market in January, “though not as enthusiastic as the headline performance suggests.”
“Recent corrections (over the past two weeks) in the sub-index of banks suggest that at least some investors are taking profits. This January rally might prove to be similar to past ones. It may point to a positive return for the full year, but it may also be followed by a period of profit-taking and opportunities to buy later,” they added.
“And compare January’s 35.8 percent return (39.6 percent up until the end of last week) with the average return of a January rally (nine of them over the past 15 years) of 8.1 percent,” Coronation Research analysts said.
Access Corporation has risen same period by 16.6 percent; Dangote Sugar Refinery, 40.4 percent; ETI, 27.3 percent, FCMB, 38.5 percent; Fidelity Bank, 18 percent; Geregu, 42.4 percent; Sterling Financial Holdings Company, 53.8 percent; MTNN, 9.8 percent; and Seplat Energy, 33.1 percent.
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Coronation analysts said: “Was January 2024’s 35.8percent return truly representative of the market? Was it a good guide to most of the stocks in the market? We think not. The rally in January 2024 has been predominantly driven by significant gains in just three stocks: Dangote Cement; BUA Cement; BUA Foods. To understand the impact of these stocks on the overall market performance, we have constructed a synthetic index that excludes these three outperformers.
“This approach allows us to evaluate whether the market would have aligned with the typical returns seen in past January rallies, had these three stocks not performed exceptionally well. Our findings from this adjusted index provide a clearer perspective on the true market dynamics during this unusual January rally.
“Taking out the effects of these three big outperformer stocks on the index, our study shows the rest of the market would have delivered a 15.4 percent return in January. This, in our view, reflects the underlying performance of the market, reflecting the broad-based demand for a large number of different stocks. It is also a more compatible return with the average January rally of 8.1 percent than the headline figure of 35.8 percent.”
The share price of UBA also went up this year by 9.2 percent in the trading period to February 2, Lafarge Africa (+30.6 percent), United Capital (zero percent), Zenith Bank (+2.2 percent), Airtel Africa (+6 percent), BUA Foods (+47.4 percent) and Nestle (zero percent).
Futureview research analysts, in their January 26 note, said: “By exercising caution, adhering to sound investment principles, and conducting thorough due diligence, equities investors can position themselves for long-term success in the Nigerian market.
“Balancing optimism with a disciplined investment strategy is essential for resilience, ensuring a sustainable and secure journey amid the current market environment. Ultimately, staying informed and proactive remain key to navigating the dynamic landscape of Nigeria’s equities market.”
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Okomu Oil Palm was up same period by 3.8 percent, Presco (+34.2 percent), Stanbic IBTC (-6.7 percent), Total Energies (-10 percent), Transcorp Hotel (+38.8 percent), Flour Mills (+24.7 percent), GTCO (+2.6 percent), FBNH (+11.3percent), Guinness (-3.5 percent), International Breweries (+8.3 percent), and Nigerian Breweries (+8.3 percent).
