Here’re Nigeria’s underperforming stocks

With 30.40 percent return recorded as at eleven months ended November 30, many listed stocks in the market no doubt have defied effect of Nigeria’s constant raise in benchmark interest rate, but worthy of note is that some others have also underperformed.

From consumer goods stocks sector to banking sector, industrial sector to oil & gas sector, insurance sector to construction/real estate sector, ICT sector to healthcare sector, and telecoms sector to natural resource/utilities sector, many stocks have underperformed the NGX benchmark indicators this year, according to equities price list as at last trading day in November.

UPDC is the major laggard this year with -76.72 percent return, followed by Multiverse (-68.23 percent). MTNN has underperformed the market this year with negative return of -35.61 percent, Daar Communications (-32.22 percent), Thomas Wyatt (-29.26 percent), CWG (-28.31 percent), Secure Electronic Technology Plc (-25.68percent), Omatek (-19.74percent), and Tripple Gee (-12.56percent).

In their November 29 note, Futureview Research analysts said they expect a mixed performance this week, “with investors adopting a cautious stance post-MPR hike, focusing on undervalued stocks with strong fundamentals”.

In the healthcare sector, Fidson stock price has decreased this year by 12 percent, while in the banking sector, Stanbic IBTC Holdings underperformed the market with negative return of -22.47 percent as at Friday November 29.

Dangote Sugar Refinery underperformed most in the consumer goods sector of the NGX with negative return of 38.60 percent.

Another stock in the consumer goods sector that has also underperformed year-to-date (YtD) is Nascon with negative return of 38.52 percent.

Likewise, other underperforming stocks in the same sector are: Nigerian Breweries (-21.57percent), International Breweries (-16.67 percent), Nestle (-22.73 percent), Norther Nigeria Flourmills (-25.82 percent), PZ (-17.42 percent), and Guiness (-6.06 percent).

Ahead of year-end, some analysts retained their cautious outlook on the equities market following consistent hike in MPR. Recently, the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) raised its benchmark interest rate by 25 basis points to 27.50 percent as it continued fight against rising rate of inflation.

The CBN had in September raised the Monetary Policy Rate (MPR) by 50 basis points to 27.25 percent despite concerns around petrol price increase, which has been triggering renewed surge in prices of goods and services after two consecutive declines in commodity prices.

Read also: Oando, VFD Group, Dangote Sugar, others dip NGX-ASI by 0.12%

“This week, we anticipate that mixed investor sentiment will continue, with a predominant sell bias. In our view, trading activities will primarily involve market participants looking to capitalise on gains from their positions as we closely approach the end of the year,” according to research analysts at Lagos-based Meristem in their December 2 market preview.

They however noted that any price dip in strong performing stocks may present attractive buying opportunities and can potentially lead to an appreciation bias.

“On the other hand, we expect investors to closely monitor the Treasury bills auction this week to assess movements in yields in the fixed-income market, as a possible uptick in Treasury rates could subtly fuel a risk-off bias in the domestic equities market,” Meristem analysts further said.

In the oil & gas sector, newly listed Aradel has decreased by 26.43 percent since its listing. Looking at industrial goods sector, Beta Glass yielded negative YtD return of -16.41 percent, Austin Laz (-3.4 percent), and BUA Cement (-2.06percent).

“Looking forward, the equities market is expected to retain its buy interest as investors cherry-pick undervalued stocks. However, given the high interest rates in the fixed income and money markets, we expect some bearish undertone to persist in the equities market as fixed income biased investors take advantage of the high yields in the fixed income space,” according to Lagos-based United Capital research analysts in their December 2 note.

Nevertheless, the analysts said “the Bulls will remain incentivised to persist in bargain hunting, given the tremendous mid-long-term opportunities in the equities market.

“Fund managers and businesses may entertain mid-long-term (≥3 months) investment objectives, cherry-picking only sound equities with strong fundamentals and ongoing/pending corporate actions”.

“This strategy will maximise market opportunities, thereby optimising portfolio returns,” United Capital research analysts further said.

Royal Exchange decreased by -1.59 percent YtD according to market’s price list as at Friday November 29. NPF Microfinance Bank has decreased this year by 19.07 percent, while VFD was down same period by 0.20 percent.