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NSEASI sheds 0.17% week-on-week, NB releases H1:2016 scorecard

By on July 18, 2016

The equities market closed the week slightly in the negative zone, following losses on three (3) of five (5) trading days in the week. The Nigerian Stock Exchange All Share Index (NSEASI), which measures the performance of the equities market, waned by 0.17% WoW to drag the Year-to-Date (YtD)market return to +0.57%, with twenty-three (23) counters appreciating in value against forty (40) decliners.  Also, during the week ended, volume of transactions declined by 5.47%, while the value of transactions increased by 1.80% WoW.

HONYFLOUR emerged as the top gainer for the week, following bullish investor sentiments which drove the share value up by 14.79% to NGN1.63.Other top advancers in the week were UCAP, NEWGOLD, ZENITHBANK, and LIVESTOCK, with respective gains of 7.69%, 6.74%, 6.02%, and 4.90% WoW. On the flip side, SKYEBANK pared the most, declining by 31.03% during the week ended to close at NGN0.60. NPFMCRFBK (-21.01%), TRANSEXPR (-18.55%), OANDO (-14.53%), and GLAXOSMITH (-13.14%) also featured on the list of top laggards for the week.

Nigerian Breweries PLC (NB), released its H1:2016 performance scorecard during the week, which showed a 3.76% growth in revenue to NGN151.37bn and an 11.23% decline in Profit after Tax (PAT). The lower level of profit, despite the growth in revenue, could be attributed majorly to the 187.69% rise in finance charges during the period. The management attributed the rise in finance expenses to exchange loss resulting from the depreciation of the Naira against the US Dollar.

Market activities appeared tempered during the week ended, as earnings releases began to trickle in, with investors reacting accordingly. We expect more quaterly results in the coming week and therefore do not anticipate strong positive investor sentiments, given our expectations of weaker company performances in 2016 relative to the prior year.

This report reviews events in the current week, with emphasis on different segments of the financial market, while presenting our expectations for the coming week.

Fixed Income: Demand Wanes Through the Week

Demand forTreasuryBond instruments was quite weakin the secondary marketduring the week, resulting in the average bond yield advancing by 0.92% to close at 14.48% for the week. Activities in the Treasury Bills market were quite similar to the Treasury Bond market, resulting in a 2.68% WtD increase in average yield to peg at 13.05% across all tenors as ofthe penultimate day of the trading week.

We opine that the low demand in the secondary market was related to the re-scheduled Primary Market Auction which held on Thursday due to technical glitches. The Debt Management Office (DMO) auctioned the JUL-2021 instrument and re-opened the 12.50-JAN-2026 and 12.40-MAR-2036 instruments with marginal rates of 14.50%, 14.90% and 14.98% correspondingly.

Also, owing to the relatively low financial system liquidity, the average rate across the Money market instruments advanced by 12.58% to close the week at 21.79%. Similarly, average NIBOR advanced by 4.96% WtD to peg at 16.63% at the end of Thursday’s trading session.

The mid-price of the Naira pegged at NGN283.77/USD on Thursday to bring the week-to-date depreciation to 0.62% against the US Dollar, and peg the YtD depreciation at 29.77%. However, the domestic currency closed the week at NGN365/USD at the parallel market. Also, the average Forward Quotes value across the all contract tenors closed at NGN297.62/USD.

Agric. Sector:Sector Records no Laggard

The sector recorded a positive outing during the week, appreciating by 0.38% WoW as measured by the MERI-AGRI index. There were two (2) advancers in the week, while other counters traded flat.

LIVESTOCK (+4.90% WoW) advanced the most to close at NGN1.07, trailed by OKOMUOIL (+0.84% WoW) which settled at NGN31.28.

We anticipate cautious investor sentiments on the sector counters in the coming week, as investors await the release of financial scorecards for the quarter.

Banking Sector: Investors Continue To React To News on SKYE Bank

The banking sector finished the week in the positive zone after advancing by 0.20% to peg YtD return at 10.62%. Market breadth (0.40x) for the week, skewed in favor the ten (10) decliners against four (4) advancers.

ZENITHBANK led the gainers with a 6.02% change in price to peg at NGN16.38. UBA, STERLNBANK and FBNHfollowed on the advancers list after appreciating by 3.14%, 0.72% and 0.53% in that order.  On the other hand, SKYEBANK led the laggards, as its share price plunged by 31.03% to peg at NGN0.60. Other top decliners were WEMABANK, DIAMONDBNK, andUBN as their prices slumped by 10.71%, 10.45%, and 7.22% respectively.

Following the restructuring of SKYE bank’s board of directors by the apex bank due to the bank persistently failing to meet statutory limits for prudential ratios (specificallycapital and liquidity), investors sold down on the counter and the sentiments extended to other banking stocks. While we expect continued fluctuations in the sector, we are of the opinion that the fundamentally sound counters in the sector will  continue to drive gains.

Consumer Goods:NSEFBT10 Advances by 0.95%

The Consumer Goods sector closed the just concluded week in a positive territory, as measured by the 0.95% WoW return of the NSEFBT10 index. There were eight (8) advancers and eight (8) decliners in the week to peg the sector breadth at 1.00x.

The advancers chart featured HONYFLOUR, UNILEVER, FLOURMILL, DANGSUGAR, NB, NASCON,UACN and NESTLE with respective week-on-week gains of 14.79%, 3.77%, 3.67%, 3.23%, 3.09%, 2.55%, 1.25% and 0.24%. Contrarily, the week’s decliners were PZ, TIGERBRANDS, VITAFOAM,CHAMPION, AGLEVENT, INTBREW, GUINNESSand CADBURY returning -10.43%, -9.00%, -6.20%, -5.71%, -4.12%, -4.04%, -2.78% and -2.40 respectively.

Nigerian Breweries released its Q2:2016 scorecard which showed 3.76% YoY growth in revenue to NGN157.374bn, however,the7.67% YoY increase in cost of sales resulted in 0.33% YoY decline in gross profit to NGN73.983bn. Also, the 187.69% surge in Net Finance Charges resulted in Earnings-After-Taxes declining by 11.23% YoY to NGN19.067bn.

We are not optimistic of a sustenance of this positive outcome in the coming week, especially as scorecards for the concluded quarter trickle in.

Healthcare Sector: Profit Taking Ensues on GLAXOSMITH.

Investor activities in the healthcare sector appeared weak, as the index closed 12.64% down to peg YtD return at -46.25% in the week, based on our MER-HLTH index. The sector breadth pegged at 1.00x, representing a lone advancer and decliner apiece.

The gainers’ chart featured only FIDSON which recorded a week-on-week gain of 0.47% to peg at NGN2.16, while GLAXOSMITH was the only decliner in the week, with a WoW decline of 13.14% to NGN 18.05. Other stocks in the sector traded flat in the week.

The sector performance was dragged by GLAXOSMITH, which pared under the pressure of profit-taking activities of investors after recording two weeks of consecutive gains. In the coming week, we expect a reversal of this trend, as investors take positions in well priced tickers.

Industrial Goods:Sector Declines Marginally by 0.47%

The Industrial goods sector ended the week in the negative zone as it declined by 0.47% to drive the YtD return to 7.93%. Market breadth (0.66x) for the week, showed a prevalence of negative sentiments, as three(3) stocks declined in value as against two (2) gainers.

WAPCO led the gainers pack with a 4.63% increase in price to NGN66.60 with PORTPAINT following closely with a 1.09% WoW growth in share price.  On the other hand, DNMEYER, CUTIX and DANGCEM recorded losses of 7.78%, 1.82% and 0.78% respectively.

We expect the performance of the industrial goods sector in 2016 to be limited by the outlook for the Nigerian economy. We therefore anticipate a  continuation of the recent bearish trend in the sector.

Insurance Sector:Index Trims by 1.80% WoW

The sector’s performance, as measured by the NSEINS10 index, showed a 1.80% decline WoW, thereby extending the sector’s YtD loss to -5.79%. Sector breadth (0.67x) signaled the direction of trading on the sector’s tickers in the week, after three (3) counters recorded declines in value, as against two (2) stocks that appreciated in prices.

CUSTODYINS led the gainers chart, after the counter appreciated by 2.31% WoW to close at NGN3.99. The counter was accompanied by AIICO, which recorded a 1.35% gain to close at NGN0.75. On the flip side, MANSARD, LAWUNION and NEM emerged as the worst performing sector stocks, after the respective counters pared by 7.49%, 3.23% and 0.99% to close at NGN2.10, NGN0.60 and NGN1.00 accordingly.

We expect bargain hunting activitiesto dictate the general market and sector performance in the coming week, following the dearth of positive news inflows.

Oil & Gas Sector: Bearish Sentiment Lingers on

The NSEOILG5 index pared by 1.31% WoW., with five (5) decliners in the week, compared to two (2) advancers; pegging the sector’s breadth at 0.40x.

OANDO,MRS, MOBIL, ETERNA, and CONOIL, were the laggards in the week, declining by 14.53%, 8.01%, 4.41%, 1.50%, and 0.90% WoW respectively. FO (+4.87% WoW) and TOTAL (+0.29% WoW) were the only advancers.

The price of crude oil, as measured by Brent oil, increased by 2.01% WoW to USD47.70pb. Also, Nigeria’s average crude oil production figure for June 2016, according to OPEC, was 1.52MMbpd; 98,000bpd higher than the May figure. We note that the continued spate of oil and gas assets bombings by militants will further affect the earnings capacity of the government.

Baring any news inflow capable of spurring investor sentiments, we anticipate reduced level of trading activities on the sector counters, as investors await the inflow of Q2:2016 financial earnings releases.

Services:Sector Closes Flat

The services sector closed the week marginally flat, as measured by the Meri-Ser index. No stock recorded positive returns while three stocks depreciated in value.

TRANSEXPRrecorded an 18.55% decline in share price to NGN1.01, while TRANSCORP and AIRSERVICE, declined by 1.25% and 1.10% respectively.

The performance of the services sector, as observed over time, depends largely on the state of the Nigerian economy. Given our outlook on the Nigerian economytherefore, we are not bullish on the financial or share price performance of the sector’s companies.

 

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