Businessday’s year- todate analysis of the performance of 117 stocks listed on the Nigerian Stock Exchange (NSE) shows that LASACO Assurance Plc, Champion breweries, Royal Exchange Nigeria, Morison Industries Plc, and Linkage Assurance Plc topped the gainer’s chart.
Using the monthly data from January 1 to April 30 2021, the analysis of the best-performing stocks on NSE evaluates investors’ appetite for the different companies on the Exchange.
The stocks that topped the NSE gainer’s chart defied the 4.88 percent year-to-date loss reported by the Lagos Bourse. NSE’S 2020 record of the world’s best performer with 50 percent gain, the most since December 2007 failed to curb the Exchange from becoming one of Africa’s worst performers in the four months to April 2021.
The solid performance reported by most of the companies on the gaining list in 2020 is the key reason behind the rally enjoyed by their stocks, analysts said.
“Most of the top gainers are insurance stocks who recorded solid FY-2020 numbers with stocks like LASACO paying a decent dividend yield,” Ayorinde Akinloye, investment research analyst at United Capital, said.
Explaining why insurance companies reported good performance last year, Akinloye said as part of efforts to look attractive to investors following NAICOM capitalisation requirements, many of the industry players had strong premium generation and investment income gains because of the decline in yields.
Analysis of the stock performance between January and April 2021 shows that LASACO was the best performer on the Exchange in the review period. Its stocks stormed 306 percent higher from the beginning of the year to April 2021. The Insurance and Financial service company opened the year with a share price of N0.35 and rose to N1.42 as of April 30 2021.
Read Also: These ten stocks are NSE’s best performers since January
Champion breweries share price was also on fire during the quarter with 155 percent gain. The beer maker’s share opened the year at N0.86 and jumped to N2.19 as of 30 April 2021.
The surge came on the back of Heineken’s indirect acquisition of additional shares in Champion Breweries through Raysun Nigeria Limited on the 8th of January 2021.
Heineken purchased about 1.9 billion shares at N2.6 per share, raising the ownership of Raysun to 84.7 percent. Since then, buying interests by investors continue to prop the shares of the company.
Royal Exchange, one of Nigeria’s foremost financial services groups offering general and health insurance also found its way to the top five list with a return increase of 104 percent in the first four months of this year. The insurer’s share price opened the year at N0.26 and then surged to N0.53 in the review period.
Morison’s share price wasn’t too far behind also with a gain of 92 percent during the review period. Morison began the year with a share price of N0.49 per share and closed its last trading day in April at N0.94 per share, ranking it the fourth on the Businessday list of NSE top performers year-to-date. Morison Industries Plc specializes in manufacturing and marketing pharmaceutical, hygiene and care products.
With a 65 percent share price gain, Linkage Assurance secured its seat on the top five lists of NSE best-performing stocks between the beginning of the year and April 30.
Other stocks that, though did not make the top ten list but outperformed the NSE year-to-date return of -4.88 percent include UACN (42%), Seplat (42%), Livestock (38%), Academy Press (33%), Smart Product (30%), May & Baker (20%), Flour Mills (19%), United Capitals (18%) and among others.
Overall, Nigeria’s stock market is returning less for investors when compared to its peers in other Africa countries.
Yinka Ademuwagun, investment management analyst at Valualliance explained that the decline in the Exchange was because investors who initially trooped into the stock market as a result of the low yield environment experienced last year are moving out as the interest rate continues to rise this year.
After hitting a four-year low of nearzero percent in 2020, yields on the Federal Government risk-free treasury bills climbed to more than 17 month-high, as compiled from Nigerian Treasury bills primary market auction Results for May 14, 2021.
Market analysts link the increase in the stop rates to the hike in CBN’S OMO rates some weeks ago. Investors are bidding at higher rates and the Debt Management Office (DMO) also needs to raise the cut-off rate to fill some of the orders, an analyst noted.
Weeks after the CBN shocked the market with a 10.10 percent stop rate for the 362-day OMO bill, the highest levels seen in almost a year, fixedincome investors demanded higher rates for T-bills.
While investors bid at a rate as high as 5 percent for the 91-day bill, 7.5 percent and 12.9 percent for the 182-day and 364-day bills, respectively, the Central Bank of Nigeria settled at 2.5 percent, 3.5 percent and 9.75 percent, respectively.
Stop rates for the 182-day & 364day bills remain unchanged. However, the 91-day bill rose by 50bps to 2.5 percent.
Analysis of the T-bills auction result for May 14, 2021, showed that the CBN raised a total of N138.98 billion from the 91-day, 184-day and 384-day bills, N22.31 billion more than the initial N116.67billion the apex bank offered to raise in this week’s auction.
Investors were less interested in the shorter 91-day and 182-day bills as they attracted a lower interest rate but were willing to subscribe to the longer 364-day bill.
While the 364-day with a much higher interest rate was oversubscribed by N88.51 billion, the 182-day was oversubscribed by N2.91billion but the 91-day bill was undersubscribed by N490 million.
The CBN planned to raise N24 million for the shorter 91-day bill, investors were willing to subscribe with N8.93 billion. The apex bank was eventually able to allot N8.43billion, N8.19 billion more than its initial offer.
Investors were willing to subscribe with N10.89billion for the N10.0 billion offered for the 182-day bill. The apex bank eventually raised the initial 7.98 billion, N2.02 billion lower than what it initial offer.
While the CBN offered to raise N82.89 billion through the longer 364day Treasury bill, investors said they were willing to invest N211.07 billion. The apex bank later raised N122.56 billion, N39.69 billion more than its initial offer.
Though the recent uptick in T-bills rate to more than one year-high is good news for fixed income investors whose real return appreciated to -8.42 percent in May from -9.33 percent in March, the expected high inflation rate remains a challenge.
Even though a Businessday poll of five market analysts expect the rates on the less risky government Nigerian treasury bills to reach 14 percent this year, the country’s inflation rate, which is expected to maintain an upward trend, means investors are unlikely to get a real positive return this year.
Ayodeji Ebo, Head, Retail Investment, Chapel Hill Denham said he expects inflation to rise further in the coming months as the downside risk of fuel subsidy removal remained.
“The question is, as annual inflation moves above 18 percent, can one year (364-day) T-bills go as high 18-19 percent?” Ademuwagun asked.
Nigeria’s rising cost of goods and services, which does not have relief in sight puts the country’s local investors investing in government instrument at a disadvantage when compared with their African peers.
With 9.213 percent T-bill rates in Kenya, fixed-income investors in the country are enjoying a real return of 3.31 percent. March inflation in East Africa’s largest economy stood at 5.9 percent.
While interest rates in Nigeria have always been high due to the monetary systeminvoguesince2009,whichsought to use FGN bonds/t-bills and OMO bills asameansofattractingusdollarsintothe country to stabilise the naira, but October 23, 2019, OMO policy by the central bank, which prevents domestic investors from participating in the auction, drove rates to its record low levels.
From October 23, 2019, the apex bank banned non-bank locals (individuals and corporates) from participating in OMO auction at both the primary and secondary market. The CBN’S policy is largely in line with its drive to divert liquidity away from risk-free instruments to the real sector.
T-bills are short-term sovereign debt securities maturing in one year or less. They are sold at a discount and redeemed at par.
According to the FMDQ, the bills are by nature, the most liquid money market securities and are backed by the guarantee of the Federal Government of a nation.
The Federal Government of Nigeria, through the CBN, issues Nigerian Treasury Bills to provide short-term funding for government budget deficit. The T-bills are usually issued through a competitive bidding process, quoted and traded on FMDQ’S platform
