Market hits year high

The Nigerian equities market enjoyed bullish investor sentiments last week, as the NSEASI advanced on all five (5) trading days of the review week. Against this backdrop, the NSEASI advanced by 6.57% WoW, pushing market capitalization to N8.88tn.

The persistent gains during the review week, is credited to the bullish rally on DANGCEM, following a dividend declaration of NGN8.00/per share, implying a yield of 4.76% at current market price.

Market breadth (1.50x) skewed in favour of advancers as 36 stocks appreciated in value, against 24 decliners. Volume and value of transactions however waned by 67.01% and 31.93% respectively, due to the transaction volume on TIGERBRANDS last week.

TIGERBRANDS emerged the week’s top gainer, after the counter appreciated by 30.30% WoW to close at NGN1.72/per share. The counter was followed by AFRIPRUD (+27.73%), DANGCEM (+24.44%), ETI (14.35%) and DIAMONDBNK (+12.50%). Conversely, FO (-14.26%), FCMB (-10.13%), CONOIL (-9.71%), IKEJAHOTEL (-9.60%) and WEMABANK (-8.33%) were the top underperformers in the week.

Dangote Cement Plc released its FY2015 financial result during the week. Revenue grew by 25.56% YoY to NGN491.73bn and subsequently, Profit after Taxes (PAT) surged by 13.68% YoY to settle at NGN181.32bn.

African Prudential Registrars Plc also released its FY2015 financial scorecard, reporting a 38.79% and 40.31% YoY growth in Revenue and PAT respectively. The company also proposed a dividend payout of NGN0.43, which implies a yield of 15.87% at a share price of NGN2.71.

In anticipation of an influx of earnings releases and dividend declarations in the coming week, we anticipate a soar in investor’s appetite. While we expect the market to sustain the current trend in the coming week, we opine that plausible profit taking on counters that gained in the week could stem positivity.

In this report, we review events in the economy, laying emphasis on the performances of different segments of the financial market, while presenting our expectations for the coming week.

Fixed Income Update: Naira returns 0.01% YtD at the Interbank

Investor’s activities on the Nigerian fixed income instruments was tempered during the week, as yields hiked across instruments. The average yield on Treasury Bills climbed by an average of 0.49% WoW to close at 6.25%. The Central bank during the week, auctioned T-bills worth NGN329.93bn, with stop rates pegged at 5.186%, 7.57% and 9.00% for the 91-day, 182-day and 364-day instruments accordingly.

Contrary to the trend in the T-Bills space, average offer yield across bond instruments declined marginally (-0.19% WoW). The instruments enjoyed some days of positive outing, albeit, demand was largely bearish. The average offer yields on the Benchmark and Off-the-run bond closed the week at 10.39% and 10.58% accordingly.

Influenced by the undulating liquidity at the Nigerian financial market, the average NIBOR hiked by 0.49% WoW to peg at 7.55%. The money market rates – OBB and OVN closed at 3.17% and 3.58% repectively, implying a 2.17% and 2.25% hike accordingly.

The domestic currency recorded a positive WoW return (+0.01%) at the Interbank market, to close at a mid-price of NGN199.28/USD. However at the parallel market, the Naira closed at NGN325/USD against the week’s opening price of NGN320/USD.

We anticipate that the relatively higher yields on T-Bills and FGN bond instruments will drive some demand at the secondary market in the coming week. We do not however see a rebate for the Naira in the near term especially at the Parallel market.

Agric. Sector: Leading the pack on a YtD basis

Measuring with the MERI-AGRI index, the sector closed the week in the positive territory with a WoW appreciation of 0.41%. This outcome saw the sector’s YtD return peg at 1.56%, outperforming other MERI indices on a year-to-date basis.

Mirroring prior week’s showing, ELLAHLAKES, FTNCOCOA and OKOMUOIL recorded zero price movements during the week, while all other counters in the sector, PRESCO and LIVESTOCK gained 0.74% and 6.14% WoW to settle at NGN34.25 and NGN1.21 in that order.

The buy sentiments that dominated the equities market in the just concluded week, appears to have rubbed off on the Agric sector, given that no counter pared in the week. We anticipate that news inflows relating to release of performance scorecards of sector participants will influence price movements in the coming weeks.

Banking Sector: Posts Positive WoW Return as Investors Await Results

The banking sector returned positive this week to halt the largely bearish run of four (4) consecutive weeks of losses. Consequently, our MERI-BNK index advanced by 3.04% to push the YtD return of the sector to -13.28%. There were nine (9) advancers, six (6) decliners, and one (1) non-mover to peg the sector’s breadth at 1.50x. ETI led the gainers, after appreciating in value by 14.35% to peg its trading price at NGN15.99. The ticker was followed by DIAMONDBNK, ZENITHBANK, UBA and UBN, which recorded respective price appreciations of 12.50%, 7.22%, 6.87%, and 4.91%. On the other side, the decliners list was populated by FCMB (-10.13%), WEMABANK (-9.38%), FBNH (-7.89%), UNITYBNK (-5.97%), and STERLNBNK (-4.12%).

The positive returns of the market might be attributed to the Industrial goods sector, however, the general positivity pervaded the banking sector, as investors seemingly positioned for the impending earnings releases and corporate actions.

We anticipate that this trend may be maintained into the coming week as investors continue to take position, and barring further profit warnings which could reverse sentiments.

Consumer Goods: TIGERBRANDS Gains 30.30% WoW

The sector index, measuring with the NSEFBT10, closed the week negative after declining by 1.36% WoW, to peg the YtD return at -19.80%.  The component equities of the Consumer Goods sector recorded a largely tempered outing in the week, as most counters retained the previous week’s close prices, while seven (7) counters gained and six (6) counters declined.

TIGERBRANDS topped the advancers’ chart for the week, with a return of +30.30%. The counter was joined on the chart by PZ, DANGSUGAR, NASCON HONYFLOUR, UACN and GUINNESS which recorded respective price appreciations of 10.05%, 7.45%, 5.00%, 3.60%, 1.21% and 0.44%.

INTBREW, however, endured significant negative investor’s sentiments, as the counter closed as the week’s highest decliner with a WoW return of -6.92%. Other decliners for the week included FLOURMILL, VITAFOAM, 7UP, UNILEVER and NB with respective WoW returns of -6.87%, -5.22%, -5.00% -1.68% and -1.06%

We opine that the bullish run recorded by the Dangote Group affiliate companies in the week was largely due to the FY2015 numbers released by the Group’s Cement subsidiary. We are not optimistic about a positive close for the coming week, although we acknowledge that company and sector specific news may keep the general market mood positive.

Health Sector: Sector Breadth Settles at Equilibrium

Activities in the sector were tempered in the week, with the MERI-HLTH index trading flat in the week. There was a solitary advancer and decliner respectively, while all other stocks traded flat.

MAYBAKER was the only advancer, appreciating by 6.38% WoW to close at NGN1.00, while FIDSON was the sole laggard, after the counter pared by 5.74% to NGN2.30.

We note the skepticism on the part of investors towards sector’s counters recently, as earnings releases by sector companies draws near. Nonetheless, we advise value seeking investors to trade only on fundamentally justified stocks capable of delivering value in the event of a market rebound.

Industrial Goods:  Investors Seek Alpha in Sector

Following the release of DANGCEM’s FY2015 result, the industrial goods sector soared, as the sector index returned 21.06% during the week ended to drive YtD performance to -2.39%.  Key indicators such as sector breadth, turnover and volume of transactions all reflected positive trends.

DANGCEM, which opened the week at NGN135.00 enjoyed bullish investor sentiments, as the ticker rallied to NGN168 by the end of the week, representing a 24.44% WoW change in price. CAP, CCNN and BERGER also recorded positive WoW returns with respective price gains of 4.97%, 3.45% and 1.29%. WAPCO, on the other hand, failed to capitalize on positive sector waves, as the stock depreciated by 2.39% during the week ended.

As noted earlier, DANGOTE CEMENT PLC released its FY2015 result. Revenue came in at NGN491.73bn, representing 25.56% growth from FY2014 numbers. In the same vein, Profit after Tax (PAT) increased year-on-year by 13.68% to NGN181.32bn. The cement market leader also proposed a dividend of NGN8.00, implying a yield of 4.76% at current market price of NGN168.00

The strong wave of positive investor sentiments during the week is an indication of investors longing for value. We believe that the market will continue to seek alpha returns in companies’ with good capital and dividend return potentials. Against this backdrop, we expect the building materials sector to remain investor’s delight, even as the federal government ramps up infrastructural spending. Nonetheless, we note the possibility of profit taking activities which might deter sector returns.

Insurance Sector: MANSARD takes the Lead

The insurance sector recovered slightly from the backlog of losses recorded in the prior week, after the sector index, as measured by the NSEINS10, advanced by 1.42% WoW, trimming the sector’s year to date losses to -9.28%. The sector breadth (1.50x) favoured gainers following three (3) advancers and two (2) decliners.

MANSARD staged a comeback after consecutive weeks of losses, advancing by 4.62% WoW to close at NGN2.04/per share. The counter was trailed by NEM and CONTINSURE, after the counters advanced by 4.17% and 3.33% respectively. On the flip side, CUSTODYINS and AIICO emerged the week’s laggards, having pared by 7.25% and 1.25% accordingly. All other counters traded flat.

A total of 5.9bn ordinary shares at 50 kobo/share were added to the outstanding shares of Cornerstone Insurance Plc to serve as purchase consideration for acquiring 96.68% stake in FIN Insurance Company Plc. Consequently, total outstanding share of the company settled at 14.73bn.

Considering the impressive 9M2015 performance of consistent ‘dividend paying’ insurance companies and the relatively attractive prices of some sector counters, we anticipate some bullish rally within the sector in the coming week.

Oil & Gas Sector: NGSEOILG5 Index Declines by 6.10% WoW

The NSEOILG5 index pared by 6.10% in the week, as investor’s sentiments appeared mixed on the sector’s counters. The sector breadth (0.75x) skewed in favour of the laggards, with three (3) advancers against four (4) laggards.

OANDO outperformed its peers, advancing by 9.06% WoW to close at NGN3.49. MOBIL and SEPLAT were the other advancers, appreciating by 6.63% and 2.94% accordingly. On the flip side, FO, CONOIL, TOTAL and ETERNA featured on the laggards’ list, after declining by 14.26%, 9.71%, 5.00% and 2.11% correspondingly.

We anticipate that the Direct Sale-Direct Purchase as announced by the NNPC to replace crude swaps in March, will further help plug losses to the federal government, as well as engender ample supply of petroleum products in the nation going forward.

We expect that investor bias in the coming week will be dictated by anticipated corporate actions from the companies in the sector.

Services Sector: NAHCO Outperforms Peers

The Year-to-Date return of our MERI-SERV Index settled at 1.25%, following a 0.73% WoW increase witnessed in the week. The sector breadth pegged at 0.50x, as four (4) stocks declined in value against two (2) stocks that gained.

NAHCO led the sector’s gainers’ chart, up by 2.50% WoW to settle at NGN 4.10. The stock was followed by REDSTAREX, with a marginal rise of 0.26%. IKEJAHOTEL (-9.60% WoW) which settled at NGN 2.87 was at the helm of the losers’ chart, accompanied by AIRSERVICE (-8.30%), LEARNAFRCA (-4.44%) and TRANSEXPR (-2.48%).

With a relatively stable sector performance thus far, we advise position taking in stocks trading below their fundamentally justified prices.