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Shares appreciation: Investors heave another sigh of relief …As Oando, Lafarge Wapco cement top gainers’ table

By on March 28, 2011

Why share price deepened
THE quest by investors to have the value of their equities in the positive territory was last week brought to bear, as market indicators took a new turn, following appreciation in prices of blue chip stocks which in the recent time had witnessed depletion.

The dip in the value of shares, which cut across all subsectors, penultimate week in the stock market, took many investors once again to the cleaners, causing serious panic, especially among local investors who are yet to recover from losses suffered between 2008 and 2010.

Most of the investors in the stock market had, earlier in the year at the commencement of transaction while seeking to leverage on the Asset Management Company of Nigeria (AMCON) Scheme, forecast that before the close of business in the first quarter investment, value in shares would  be tilting northward.

However, with the delay in AMCON scheme and coupled with the climatic bubble in the developed market like Japan and other African markets, investors, rather than wait patiently for the market to appreciate, embarked on massive sales of shares which resulted in the glut in the market.

The electioneering period, in which the nation finds itself presently, is another factor that is working against the prices of shares, as investigations have shown that most politicians, especially those seeking elective positions, offload their holdings in the market to prosecute their ambitions.

It would be recalled that the AMCON scheme was particularly geared towards making the stock market vibrant again after the stock crises, occasioned by the global financial contraption that hit the domestic Exchange between 2008 and 2009.

AMCOM was put up, specifically, to absorb the toxic asset of the entire listed banks in the market. The cumulative value of the toxic asset expected to be taken over was put at over N1.5 trillion and this, experts said, would drive the market to the positive territory.

Stock resistant level
With the depletion in the value of shares in the last couple of weeks, most stocks have hit a resistant level in prices.

At this level, prices of stocks cannot go below the penny status level but rather northward, otherwise, the stocks in itself would lose its intrinsic value and per value it was listed in the market.

Financial reports from banks drive up prices
Financial reports from Guaranty Trust Bank, Zenith Bank and Access Bank is indeed a pointer to the fact that things are really up the sleeves of the banks in the coming months and year.

Investors, both local and institutional, have positioned themselves to take advantage of the capital appreciation that may likely arise from the positive financial reports the banks will be releasing to the market.
The banks, it will be recalled, control about 64 per cent of market activities, both in value and turnover terms.

Against analysts’ expectations, the three banks that released their full year financial results for the uniformed period ended December 2010 all recorded impressive pre-tax profits, ranging from 42 per cent to 564.46 per cent.

Although earnings dropped in all the three banks, Zenith Bank recorded a 42 per cent increase in its profit before tax from N35.9 billion in 2009 to N50.03 billion in 2010. GTBank’s earnings rose by 73.28 per cent from N27.96 billion in 2009 to N48.46 billion in 2010, and Access Bank went up by 564.46 per cent from a loss of N3.48 billion in 2009 to a profit before tax of N16.17 billion in 2010.

The banks recorded impressive growth in their pre-tax profits, even as growth in loans and advances, one of the core businesses of banks, was marginal. Loans and advances by Zenith Bank only grew by 2.14 per cent from N698.33 billion in 2009 to N713.29 billion in 2010. GTBank’s loan portfolio went up by 5.34 per cent from N563.49 billion in 2009 to N593.56 billion in 2010, while that of Access Bank went up by 11.99 per cent from N383.78 billion in 2009 to N429.78 billion in 2010.

Chief executive officer of the Financial Market Dealers Association of Nigeria (FMDA), Mr. Wale Abe, said “what is happening is a sign-posts of better things to come.” According to him, “when the financial institutions are strong, it is good for the economy because banks, anywhere in the world, are the drivers of the economy.”

On the fall in banks’ gross earnings, Abe said earnings had reduced because the volume of business banks had reduced.

In his own comment, an analyst with Afrinvest, Mr. Victor Ndukauba, said the spike in both pre-and post-tax earnings, which were 10.0 per cent below and 1.0 per cent above their  forecasts respectively, was pretty much in line with their expectations.

Ndukuaba said Access Bank had been able to achieve decent growth in gross earnings (6.0 per cent below 2010 full year forecasts) based on its drive to sustain a circa 10.0 per cent growth in credit, albeit with enhanced focus on only top-notch borrowers and, by extension, asset quality.

An analyst with RenCap Group, Adesoji Solanke, said he saw the logic in the banks finalising their balance sheet cleansing in the aftermath of the crisis, with the full financial year 2010 results, as this would place the banks on a clean pedestal going into 2011.

Another analyst with Vetiva Capital Management Limited, Abiola Rasaq, said that the banks’ financial statements were in order, adding that the market would continue to react positively to the results.

Access Bank is the only bank among the three that witnessed growth in gross earnings. Its earnings went up 7.25 per cent from N84.98 billion in 2009 to N91.14 billion in 2010, while Zenith Bank’s earnings fell 30.58 per cent from N277.3 billion in 2009 to N192.49 billion in 2010, and GTBank’s earnings fell 5.32 per cent from N162.55 billion in 2009 to N153.91 billion in 2010.

Zenith Bank is proposing a dividend of 85 kobo per share, while GTBank is paying a dividend of 75 kobo per share and a bonus of one share for every four shares held by shareholders. Access Bank is paying 30 kobo per share to its shareholders.

Transaction last week
Trading activities on the floor of the NSE opened the week in the green, resulting to the appreciation of market capitalisation by N56 billion.

The market had rebound at the close of trading on Friday gaining N14 billion to what market watchers believed might be sustained going by the current low prices of stocks.

The market capitalisation of equities appreciated by N56 billion or 0.71 per cent to close at N7.845 trillion while the All-Share Index equally added 0.71 per cent or 176.28 basis points to close at 24,555 index points in contrast to the opening index of 24,378.72.

Further analysis of the day’s trading show that 29 stocks appreciated in price as against 30 others that shed value.

Zenith Bank, Diamond Bank and GT Bank led the percentage gainers table with a gain of 5 per cent each to close at N14.70, N7.35 and N1.68 respectively.

Stanbic IBTC and FirstBank followed with a gain of 4.99 per cent each to close at N8.83 and N13.46 respectively while UBN added 4.93 per cent to close at N2.98.

On the other hand, PZ Cussons and Total led the pack of losers with a loss of 5 per cent each to close at N31.92 and N216.92.

Vono Paint followed with a loss 4.97 per cent to close at N3.25 while May and Baker shed 4.91 per cent to close at N4.65.

The banking sub-sector fuelled by the activities in the shares of FCMB and GTB maintained its dominant in terms of volume with a turnover of 135.1 million shares valued at N1.1 billion in 2,870 deals.

Insurance sub-sector buoyed by the transactions in the shares of Custodian and Allied Insurance trailed behind with a turnover of 75.8 million shares worth N180.7 million in 189 deals while Conglomerates boosted by the activities in the shares of Transcorp recorded a turnover of 22.2 million shares valued at NN42.6 million in 189 transactions.

In all, investors staked a turnover of 279.9 million valued at N2.4 billion in 4,904 deals.

Tuesday’s trading continued on the positive note as both market indices appreciated considerably by 1.7 per cent.

The market capitalization at the close of trading in the day appreciated by N138 billion or 1.7 per cent to close at N7.983 trillion while the All-Share Index equally grew by 1.7 per cent or 432.14 basis points to close at 24,987.14 index points in contrast to the opening index of 24,555.

Further analysis showed that 43 stocks recorded price appreciations as against 15 others that shed value. Cadbury Nigeria, Oando and GTB led the gainers chart with a gain of five per cent each to close at N26.25, N59.43 and N19.95 respectively.

Dangote Flour, FirstBank and UACN followed with an equal gain of 4.98 per cent to close at N16.65, N14.13 and N32.91.

On the other hand, Costain led the losers’ table with a loss of five per cent to close at N6.27. PZ Cussons followed with a loss of 4.98 per cent to close at N30.33 while Vono Paints shed 4.92 per cent to close at N3.09 among other losers’.

The banking sub-sector buoyed by the activities in the shares of Diamond Bank and Skye Bank maintained its dominant as the most active in terns of volume with a turnover of 149.5 million shares value at N1.3 billion in 2,634 deals.

Insurance sub-sector motivated by the transactions in the shares of AIIC O followed with a turnover of 27 million worth N22.8 million in 264 deals while other financial institutions recorded a turnover of 9.6 million shares worth N4.8 million in 8 deals.

In all, investors exchanged a turnover of 224.4 million shares valued at N1.8 billion in 5,4t62 deals.

Investors’ appetites for blue chip stocks continued unabated Wednesday in anticipation of good results from more companies during the end of the first quarter of the year.

The bull had maintained its stronghold on the stock market since last Friday leading to the appreciation of market capitalization by N302 billion.

Consequently, the market capitalization at the end of the trading on Wednesday appreciated by N94 billion or 1.16 per cent, bringing the entire market capitalization to close at N8.077 trillion.

The All-Share Index equally rose by 1.16 per cent or 293.89 basis points to close at 25,281.03 index points from the opening index of 24,987.14.

45 stocks appreciated in price as against 18 that shed value, ABC Transport and Vitafoam led the percentage gainers’ chart with a gain of five per cent each to close at 63 kobo and N5.25 respectively.

Dangote Flour, IBTC, Red Star Express and WAPCO followed with a gain of 4.98 per cent each to close at N17.48, N9.27, N2.95 and N39.03 respectively.

In all, investors staked a total of 280 million ordinary shares worth N2.5 billion in 6,800 transactions.

Profit taking by investors on Thursday depressed transactions on the NSE as market capitalisation fell by N68 billion.

Specifically, at closed of transactions in the day, the All-share index shed weight by 213.95 basis points or 0.8 per cent from 25,281.03 recorded on Wednesday down to 25,067.07 while market capitalisation

decrease by N68billion from N8,077trillion to N8,009trillion .

Analysts attributed the decline in value of equities in the day to investors who are leveraging on the capital appreciation to recoup their investment.

On the price movement chart, West African Portland Company (WAPCO) traded high with five per cent to close at N40.98 per share. Cement Company of Northern Nigeria followed with 4.99 per cent increase to close at N11.58 per share.
Other gainers include Transnational Corporation, Union Bank of Nigeria, First Aluminium, adding 4.71, 4.70 and 4.55per cent to close at N0.89, N3.34 and N0.69 per share.

Afribank added 4.52 per cent close at N2.08 per share while Stanbic IBTC gained 4.10 per cent to close at N9.65 per share.

Eternaoil and NEM insurance also gained 3.96 per cent and 3.77 per cent to close at N4.73 and N0.55 per share.

However, AIICO Insurance topped the losers chart with five per cent to close at N0.95 per share while Honeywell Flourmill trailed with 4.90 per cent to close at N5.24 per share.

First City Monument Bank lost 4.89 per cent to close at N6.42 per share while Constain West Africa shed 4.87 per cent to close at N5.67 per share.

Nigerian Bags Manufacturing Company, ABC Transport, Red Star Express shed 4.81,4.76 and 4.71 per cent to close at N2.57, N0.60 and N2.81 per share.

Bank PHB also shed 4.64 per cent to close at N1.44 per share while Fidelity Bank lost 4.48 per cent to close at N2.77 per share.

With transactions exchanged in 3,167deals, the banking subsector remains the most active stock in volume terms with 111.8million shares worth N977million followed by the insurance subsector which traded 15million units worth N12million in 207deals. The conglomerates ranked third with 5.5million units worth N41million in 191deals.

Trading in the shares of Zenith Bank and Guaranty Trust Bank enhanced activities in the banking subsector with 15million and 11.5million shares worth N229million and N228million.

The market further went down on Friday by a market capitalisation dip of N66 billion while the All-Share Index fell by a 203.69 basis point respectively.

Cumulatively, a turnover of 1.16 billion shares worth N9.9 billion in 29,577 deals was recorded last week, in contrast to a total of 1.1 billion shares valued at N9.85 billion exchanged previous week in 35,401 deals.

All the four sectorial indices appreciated during the week compared with all four that so depreciated during the preceding week. The NSE Food/Beverage Index appreciated by 2.95 points or 0.39 per cent to close at 810.19, the NSE Banking Index appreciated by 18.49 points or 5.02 per cent to close at 395.44, the NSE Insurance Index appreciated by 0.09 points or 0.1 per cent to close at 171.13, the NSE Oil/Gas Index appreciated by 4.17 points or 1.34 per cent to close at 328.87.

Source : Tribune