22 June 2008

Nigeria: Apt Stock Market Scan

A turnover of 5.24 billion shares worth N42.5 billion exchanged hands in 82,791 deals during the week.

The Insurance sector emerged the most active in terms of turnover volume with 3.43billion shares worth N6.45billion exchanged hands in 14,521 deals. Shares of Investment and Allied Insurance emerged the most active stock in the sector for the week traded 2.6Million shares representing 75.44% of the sub sector's turnover.


The market commenced on a strong bearish note as the market witnessed a rush by sellers eager to take profits consequent upon the interim recovery recorded throughout the previous week. Short-term speculators who took part in the last bullish, saw a clear opportunity to capture short-term profit. This was witness on the first two trading days, where the bearish run was quite intensive, averaging 2.6% decline. By mid-week, the intensity of the decline had slowed a bit though amidst high volume. This trend which was envisaged to slow down further after mid-week only intensified with the NSE All Share Index shedding a further 2.3% on Thursday. This however slowed a bit as the week's trading session came to a close on Friday with a 0.96% dip in the Index. The market had in the last eight weeks availed short-term investors a tilted position of only loss cutting with absolutely no clear opportunities for profit taking, apart from the short opportunity of the previous week. Funds and portfolio managers have in the last 3months been reporting consistent losses. Thus the market witnessed a week of bearish activities with 14 equities recording appreciation in share prices as against 99 equities capturing price depreciation, most equities are currently at their 12month low prices. Consequently, by the close of trading on Friday, the market had lost over N1.1trillion in value representing 9.65% of its value as captured by the NSE all-share Index.

A sectorial analysis shows significant reversal in almost all the sectors. The banking and insurance sub-sectors were worst hit by this reversal with most equities in the sector losing an average 15-22%. The petroleum marketing, Agriculture and the Construction sectors exhibited fair stability with no strong bearish pull. The Conglomerate, Building material and Food/beverages sectors were also not left out with an average 5-10% decline. By and large, speculative activities contributed substantially to this reversal. Buyers kept retracting as prices came crushing. Declining Share holder value has intensified reversing all the gains recorded a week earlier and further southwards with the All-Share Index reverting to pre-December 2007 figure with a further plunge to close at 54,382.21points on Friday.


Generally, the market has in the last two months been characterized by declining shareholder value with buyers continuously retracting as panic selling was the order, with a slight respite experienced a week ago. Liquidity was a point of concern as some portfolio managers opted for the money market just to beat the waiting period when stability would have been achieved. The preceding week witnessed a complete erosion of all the value gained earlier on and a further dip with the All-Share Index reverting to its Pre- December 2007 figure, closing at 54,382.21 on Friday. With the further clarification by CBN on lending to Capital market Investors/Operators, we are optimistic this will gradually enhance liquidity in the market.

However with most of the stocks recording between 10 and 20% decline in one week, and considering the fact the most prices of listed equities had declined significantly to Pre-January 2008 level, this is likely to attract the attention of bargain hunters seek value to continue accumulating holdings. As short-term speculator renew their credit lines and with more Government spending, we are optimistic that liquidity position is likely to improve and at such a gradual recovery being envisaged.

The banking and insurance sub-sectors are not expected to continue on this path of price decline beyond Monday, this is because the sectors have always enjoyed the patronage of speculators, and coupled with the fact that most of the sectors' equity have recorded significant price declines attractive for position taking. The petroleum marketing, Agriculture, Building material sectors are likely to stabilize after Mid-week with increasing likelihood of bullish drive. The Construction and brewery sectors should sustain their current form while stability is expected in the Food/beverages sector.

Market statistic captured a significant decline in the intensity of the bearish drive on Friday June 20, indicating the likelihood of the bearish drive not lasting beyond Monday. Secondly, a good number of equities had depreciated in price to levels where resistance are gradually being formed and at such likely to curtail the intensity of further decline. Thus caution should guide investment decisions and the outlook should be medium to long-term. Investors should continue to anchor on a tenor of at least 6months and this is the period to accumulate holdings.



Sector: Banking

Nature of Business: Commercial Banking, Real Estate, Investment banking and Insurance brokerage services.

Year end: March 31

Date listed: October 29, 1993

Shares outstanding: 5,108,432,000units.

Afribank Nigeria Plc (formerly known as international bank of West Africa Limited IBWA) was licensed to carry on banking business in October 1959 and commenced operations on October 20, 1959, a year before independence. Originally owned by Banque de I' Afrique Occidentale (BAO). It is among the few banks that made the N25billion minimum capital requirement without any form of business combination or raising funds from the capital market. The bank has a relatively young and dynamic board of directors with strong determination to excel compared to its peers in the industry.

Afribank boosts of an array of subsidiaries, affiliates and associate companies among others are; Afribank Capital Markets Limited, Afribank Registrars Limited, AIL Securities Limited, Afribank Insurance Brokers Limited, Afribank Estate Company Limited, Afribank Trustees and Investment Limited and International Finance Company Limited Dublin in addition to affiliate companies, Consolidated Discount House Limited (24%), Electric Meter Company Zaria(17%), Niger Insurance Plc(10%) African Petroleum Plc(24%).


The Bank recently embarked on a recapitalization drive to strengthen its working capital requirement by going to the capital market to raise N100billion. The market reception though average, we are of the opinion that the reception was purely based on the past and not the inherent potentials of the future. The forecast which is achievable thus:

2008 2009 2010 N(M) N(M) N(M)

Gross Earnings 37,510 57,830 84,545

PBT 12,071 20,427 30,847

PAT 8,208 13,890 20,976

EPS(Kobo) 81 137 207

DPS(Kobo) 60 90 125

The Bank's un-audited result for the thirds quarter ended December 31, 2007 shows thus:

2007 2006 Change % N(M) N(M) N(M)


Earnings 29,314 14,673 14,641 99.78

PBT 11,040 3,598 7,442 206.84

PAT 7,511 2,448 5,063 206.82

The performance of the Bank is very Impressive far above the Industry average and forecasted figure.

Current market price N24

Earnings per Share N1.65

Target market price N32

The bank had monumental challenges in the past with declining earnings amidst ownership tussle. However, this is now history as earnings have shown consistent and steady growth. Investor confidence is gradually building and the balance sheet is among the best with going concern not in any way threatened. The bank currently has the least number of shares in issue, thus ideal for speculators who are looking for shore-term capital appreciation.





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