Weak macros mar investor sentiments

The equities market closed last week in the negative zone following losses in three out of five trading days. The Nigerian Stock Exchange All Share Index (NSEASI), which measures the performance of the equities market, waned by 0.70% WoW to drag YtD return to -11.57%, even as twenty-seven (27) counters appreciated in value against forty-one (41) decliners.  Also, during the week in review, total volume and value of transactions diminished by 11.97% and 3.50% respectively.

ETRANZACT emerged as the top gainer for last week, following bullish investor sentiments which drove the share value up by 26.97% to NGN3.39.Other top advancers in the week were TIGERBRANDS, FCMB, CUSTODYINS, and ACADEMY, with respective gains of 11.76%, 10.11%, 8.87%, and 8.47% WoW. On the flip side,ASHAKACEM pared the most, having lost 14.21% during the week ended to close at NGN19.56. PORTPAINT (-14.06%), CCNN (-13.95%), OANDO (-11.57%), and ETERNA (-10.86%) also featured on the list of top laggards for the week.

Market activities appeared tempered last week, with few earnings releases and positive news flow to drive position taking. We believe the persistent fuel shortages amidst weak economic fundamentals may continue to impair investor sentiments, hence we do not anticipate a significant change in market performance in the coming week.

In this report, we review events from the week just ended, with emphasis on key drivers and drags of market performance, while presenting our expectations for the coming week.

Agric. Sector: Year-to-Date return climbs to 3.98%

Based on the movement of our MERI-AGRI index, the Agric Sector appreciated by 2.21% WoW, translating to a year to date return of 3.98% for the sector. Sector breadth closed the week at 1.00x, reflecting one advancer and one loser.

OKOMUOIL (+4.69%)recorded the sector’s only WoW positive movement, settling at NGN31.25 at the close of the week, while LIVESTOCK pared by 6.67% WoW bringing the counter’s price to NGN0.98. ELLAHLAKES, FTNCOCOA and PRESCO stayed flat over the week.

The Agric. sector remains an attractive sector for investors based on the relevance of the sector to economic growth, thus, we advise investors positioning in sector counters based on objective assessment of company fundamentals.

Banking sector: MERI-BNK Closes Red, Despite Buy Sentiments

The banking sector, measured by the MERI-BNK index, finished the week down, declining by 0.71% WoW to further pressure the year to date loss to -21.59%. Sector breadth (1.33x) skewed in favour of advancers, following eight (8) stocks that recorded value appreciations, as against six (6) decliners.

FCMB led the gainers, after the ticker advanced by 10.11% to close the week at NGN0.98. The ticker was followed by DIAMONDBNK, FIDELITYBK, SKYEBANK, and UBA which gained 8.33%, 4.55%, 3.30%, and 1.89% accordingly. Conversely, UNITYBNK, STANBIC, STERLNBANK, WEMABANK, and ETI recorded respective declines of 8.33%, 7.44%, 4.76%, 3.90%, and 2.63%.

FBN Holdings Plc notified the Nigerian Stock Exchange and investing public about the board’s approval of its 2015 audited financial statements which has been forwarded to the Central Bank of Nigeria (CBN) for further approval. The bank also noted that its quiet period will be lifted on filing the CBN approved accounts with the exchange.

In view of lack of drivers for performance, we expect the sector to trade sideways over the coming weeks. We advise investors seeking to take position to take advantage of the attractive market prices of some of the sector’s fundamentally justified stocks.

Consumer Goods: DANGSUGAR Sheds 10.83% WoW

In the week ended, the Consumer Goods sector returned -0.14% WoW pushing the year-to-date return to -18.01%, as measured by the NSEFBT10 index. We opine that the performance during the week was largely due to activities on heavyweights within the sector as the bearish momentum continues to mount.

TIGERBRANDS advanced by 11.76% week-on-week to emerge as the highest gainer in the week. The counter was trailed by AGLEVENT, NASCON, FLOURMILL, NB and CHAMPION with respective WoW returns of 8.11%, 5.64%, 4.86%, 3.30% and 0.65%.

Contrarily, the decliners for the week were DANGSUGAR, UACN, 7UP, NESTLE, INTBREW, HONYFLOUR and UNILEVER returning-10.83%, -5.27%, -4.55%, -3.57%, -2.39% -2.08% and -1.69% accordingly.

We do not foresee a departure from this trend in the mid-term, and expect increased sell–offs as closure dates of dividend payments draw closer. Thus, we advise investors with long term investment horizon to position in fundamentally justified counters currently trading below their intrinsic values

Health Sector: Sector Records No Advancer

Sell sentiments rocked the sector counters, as four (4) stocks waned in value, while other counters traded flat. Consequently, the MERI-HLTH index plunged by 0.07% WoW.

FIDSON (-5.26% WoW) pared further in the week, topping the laggards list, to close at NGN2.34. NEIMETH, PHARMDEKO, and GLAXOSMITH were the other decliners, trimming by 4.35%, 4.21%, and 0.04% WoW to settle at NGN0.66, NGN2.05, and NGN24.97 respectively.

We do not anticipate major activities on sector counters in the week, even as we expect the release of the remaining corporate scorecards from the sector companies.

Industrial Goods:In Line with Weak Economic Fundamentals

It was a generally negative week in the industrial goods sector as the Meri-Ind index closed the week 1.47% down, with none of the sector stocks recording price gains. Subsequently, YtD return settled at -2.97%.

ASHAKACEM, led the week’s eight decliners, having shed 14.21% WoW. PORTPAINT, CCNN, PAINTCOM, CUTIX, WAPCO, DANGCEM and BERGER were the other losers with respective price movements of -14.06%, -13.95%, -5.00%, -2.07%, -1.97% -1.17% and -0.44%.

Given the direct relationship between economic growth and industrial sector growth, we do not envisage a marked change in investor sentiments towards building material stocks in the coming weeks. We however acknowledge that the eventual passage of the 2016 budget, and expectations of increased economic activities may help to influence sector mood positively.

Insurance Sector: CONTINSURE Releases Impressive Scorecard

CUSTODYINS, CONTINSURE and NEM emerged as the top performing stocks in the week, after the respective counters advanced by 8.87%, 4.40% and 2.36% WoW. Conversely, AIICO (-9.52%) and MANSARD(-0.53%), having suffered some level of profit taking during the week, emerged as the top underperformers in the week ended.

Consequently, the NSEINS10 index pared by 0.15% WoW, pushing the year-to-date loss to -10.71%.

AIICO Insurance Plc (AIICO) and Continental Reinsurance Plc (CONTINSURE), among other insurers, released their FY2015 financial scorecards during the week. AIICO recorded year-on-year declines of 2.71%, 45.09% and 46.45% in gross premium written (GWP), Profit before Taxes (PBT) and Profit after Taxes (PAT) respectively. The company however declared a dividend of NGN0.05/share, implying a dividend yield of 5.95% as at declaration date. CONTINSURE on the other hand, reported impressive growths in GWP (+20.08%), PBT (+83.61%) and PAT (+150.43%).

Following the release of FY2015 results by key high-yielding sector stocks, we anticipate weak investment activities on the sector counters in the coming week.

Oil & Gas Sector:Sector Breadth Settles at Equilibrium

Positive investor sentiments outweighed negative sentiments in the week, as the NSEOILG5 index advanced by 0.24% WoW. The sector breadth settled at equilibrium as equal number (2) of counters gained and waned in value accordingly.

OANDO (-11.57% WoW) topped the laggards’ chartdue to profit taking activities, coupled with undesirable news flow during the week. The counter was joined on the losers chart by ETERNA(-10.86% WoW). TOTALand SEPLAT were the only advancers in the week, gaining 4.34% and 3.43% WoW to close at NGN160.50 and NGN310.30 correspondingly.

The price of crude oil, as measured by Brent, closed the week at USD41.26pb (+6.70% WoW), after dipping to its 26-day low of USD37.69 on Monday 4th April 2016.

We anticipate reduced levels of activities on the sector counters in the coming week, barring positive news inflow capable of spurring investor sentiments.

Services Sector: MERISER advances by 1.25% WoW

Following a 1.25% WoW rise, the year-to-date return of our MERISER INDEX rebounded within negative borders to -0.29%. Market activity saw three (3) gainers emerge against two (2) losers, placing the sectoral breadth at 1.50x.

ACADEMY emerged as the best performer, climbing by 8.47% WoW to close the week at NGN0.64. The counter was closely followed by CAVERTON with a gain of 8.27% WoW. NAHCO also marked an appearance on the gainers chart, appreciating by 4.57% WoW to close at NGN3.89. LEARNAFRCAemerged the worst performing stock in the week, paring by 10.00% WoW. The counter was followed by TRANSEXPR with a 4.81% WoW depreciation.

The services sector witnessed an uptick this week as investors took advantage of stocks trading at comparatively low prices. As we believe the prevalent trend to be bearish, we advise investors to take positions in undervalued counters with strong fundamentals.