allAfrica.com: Nigeria: Guinness Emerges Top Stock As Divergent Views Trail SEC's Reforms Programmes (Page 1 of 2)

Nigeria: Guinness Emerges Top Stock As Divergent Views Trail SEC's Reforms Programmes

Guinness Nigeria Plc emerged the stock of the week on the Nigerian Stock Exchange (NSE) last week. It achieved this feat by recording the least Price Earnings (PEs) ratio among all the companies that appeared on the price gainers' table. That is, companies that appear in the top five bracket of the share price gainers' chart. Its PE ratio stood at 17.63 as at Tuesday, March 18, 2008.

In its projections for its 2008 financial year, Guinness Nigeria Plc is projecting a profit after tax of N12.2 billion, Price Earnings ratio of 15.73, EPS of N8.48, a projected growth rate of 15 per cent. It is also projecting a dividend of N7.31 billion, representing a dividend per share of N4.96, which also represented a dividend yield of 3.81 per cent.

This may have been a major factor for investors' interest in the share of the company. The company is expected to surpass its projections for its 2008 financial year, going by its quarterly results released to the regulators and the investing public.

Meanwhile, calm seems to have returned to the Nigerian capital market following the suspension of the Securities and Exchange Commission's (SEC) directive to registrars to stop handling the registers of their parent companies and the seemingly suspension of the new capital requirement for capital market operators.

The Senate Committee on Capital Market had penultimate week, written to SEC, directing it to halt the implementation of its directive to registrars, and it also summoned the Director-General of SEC, Musa Al-Faki to appear before it, to explain the rationale behind its capital market reform programmes.

Subsequent to his appearance before the Senate Committee, SEC issued a statement where it suspended its earlier directive to the registrars. The directive issued by SEC on February 1, 2008, disclosed that registrars should stop administering the registers of their parent companies. It was slated to take effect from the 1st of April, 2008.

According to SEC, the reasons for suspending the directive to the registrars was due to the mandate it had given to a committee set up by it to review the operations of registrars, especially as it relates to acquisition and deployment of Information Technological infrastructures.

SEC disclosed that it has given the committee a new mandate to review the transfer of registers of parent or affiliate companies from in-house registrars.

It said, "Following strong appeals from registrars and some public companies, SEC has expanded the mandate of the committee to examine the issues which led to the directive and advise appropriately. The deadline of April 1, 2008 for compliance would no longer be feasible. The Commission would await the report of the committee after which a new date would be communicated to the market."

Defending the directive of transfer of registrars before the Senate, Committee on Capital Market led by Chief Ganiyu Solomon, Al-Faki disclosed that the directive was necessitated by the need to sanitise the market, ridding it of infractions committed by some in-house registrars on behalf of their parent companies.

He noted that its findings revealed that in-house registrars were being used by parent companies to perpetrate market abuses, and were also culpable of delaying the despatch of dividend warrants and share certificates to investors for selfish gains.

Concerning the issue of the new capital requirements for market operators, he said the unprecedented rise in the market capitalisation of listed securities from N2.1 trillion in 2004 to N13.3 trillion in 2007 necessitated the review of the capital requirements from N70 million to N1 billion.

He added that the level of risks carried by an average stockbroking firm, going by the increase in the turnover value of shares on the capital market also necessitated the review.

He said the commission had received a lot of complaints from investors indicting a number of stockbroking houses for unauthorised/unlawful sale of clients shares. He noted that the all the infractions he recorded in the market in the years past were perpetrated by fringe stockbroking houses with none of the major houses involved.

Meanwhile, divergent views have been expressed by stockbrokers on the new capital requirements for market operators. While some are in support of the new policy, others are opposed to it, calling for it to discarded.

A stockbroker, Mr. Chinenyem Anyanwu, Managing Director, Dependable Securities Limited, condemned the moves by SEC to up the minimum capital requirement for market operators, stating that it will further impoverish a lot of Nigerians.

He said: "The effect of N1 billion capital in my hand as own fund will make me to be preoccupied with how to effectively manage the money in order to ensure adequate returns to stakeholders. Stockbroking houses will have no time for small investors. In short, most of, if not all the stockbroking firms will put higher ceiling on the amount they will receive from prospective investors.

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