30 July 2012

Nigeria: Equities in Moderate Growth Despite Impressive Results

The stock market managed a growth of 0.86 per cent last week despite impressive results declared by banks and manufacturing firms for the half year ended June 30, 2012.

A development, market operators linked to the relative decline in investor confidence in reaction to the management crisis at the Securities and Exchange Commission (SEC).

The Federal Government had penultimate week reinstated the Director-General of SEC, Ms Arunma Oteh, who resumed last Monday.

Although the protesting staff members of the commission were pacified by the Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, it was gathered that the events that preceded Oath's eventual return affected the perception of foreign investors who are the major players in the market currently.

Ordinarily, the improved financials released by listed firms ought to have led to a significant growth. But that was not to be as the Nigerian Stock Exchange (NSE) All-Share Index appreciated by 0.86 per cent to close at 23,095.31 compared with a growth of 1.56 per cent the previous week. Market capitalisation witnessed the same level of growth to close at N7.41 trillion, from N7.35 trillion the previous week.

A further analysis of the market performance for the week showed that Bloomberg NSE 30 index rose by 0.57 per cent.

However, Bloomberg NSE Banking Index depreciated by 0.27 per cent, Bloomberg NSE Insurance Index and Bloomberg NSE Oil/Gas Index depreciated by 0.95 per cent and 0.84 per cent respectively. The market appreciated only one(Monday) day out of the Friday trading days. The rest days were negative performance.

In terms of trading volume, investors exchanged 1.639 billion shares worth N11.869 billion in 20,989 deals last week compared with 1.634 billion shares valued at N11.897 billion exchanged hands in 22,412 deals the previous week.

As usual, the financial services sector accounted for 1.058 billion shares valued at N6.821 billion traded in 11,583 deals dominated by the banking subsector of the with 950.455 million shares worth N6.754 billion exchanged by investors in 11,023 deals.

Volume in the banking subsector was largely driven by activity in the shares of Fidelity Bank Plc, First Bank of Nigeria Plc and Zenith Bank Plc. Trading in the shares of the three banks accounted for 451.761 million shares.

The healthcare providers subsector of the Healthcare sector boosted by activity in the shares of Union Diagnostic and Clinical Services followed on the week's activity chart with a turnover of 327.697 million shares valued at N163.849 million traded in five deals.

Price Gainers/Losers

A total of 22 equities appreciated in prices last week, compared with 30 of the preceding week. Dangote Cement Plc led on the gainers with a gain of N5 to close at N120 per share. Unilever Nigeria Plc followed with a gain of N1.07 to close at N34.07 per share.

Other top 10 price gainers included: Nigerian Breweries Plc (N1.00); Guinness Nigeria Plc (N0.60); Portland Paints Plc (N0.60); Conoil Plc (N0.56); Glaxosmithkline Consumer Plc (N0.35); Cement Company of Northern Nigeria Plc (N0.23); Nigerian Aviation Handling Company Plc (N0.20) and Ikeja Hotels Plc (N0.19).

Conversely, 37 stocks declined as against 30 that depreciated last week. Lafarge Cement WAPCO Nigeria Plc led the price losers with N2.22 to close at N42.28 per share. Flour Mills of Nigeria Plc trailed with a loss of N4 to close at N52.80 per share.Other top price losers included: Arbico Plc and PZ Cussons Nigeria Plc (N1.00 apiece); UAC of Nigeria Plc (N0.90); Oando Plc (N0.74); Eterna Oil Plc (N0.50); International Breweries Plc (N0.30); Union Bank of Nigeria Plc (N0.26) and First Bank of Nigeria Plc (N0.25).

As Oteh settled down to business last week, stakeholders advised her to have positive reflections on what has happened, learn from it, make amends and bear no grudge.

"She should extend a hand of fellowship to the opposition because without criticism perfection on plans and vision might take longer time. From what has happened, I believe she has learnt some lessons which will help her going forward," a shareholder activist, Alhaji Gbadebo Olatokunbo said.

Also, the Managing Director/Chief Executive Officer of Partnership Investment Plc, Mr. Victor Ogienwonyi, said one thing that was clear since her suspension was that mistakes were made in managing relationships in her constituencies.

"She must immediately work to gain confidence of these various groups, particularly staff members. She must also review her actions and those people around her who advise her to make sure she does not make the same error of judgement from wrong advice. Being right sometimes does not mean being effective," he said.

The MD/CEO of Investment Centre Limited, Mr. Ifeanyi Odunwa, said mistakes had been made and lessons had been learnt in the last few months.

"My advice to Oteh is that she should be without bitterness or have ill feelings to anyone and accept all criticisms in good faith. I plead that everyone that was wronged should forgive in the interest of the market," he said.

Improved Banks' Results

One of the factors that would swing the market into the bulls territory this week, some analysts believe is the impressive results declared by some banks last week. The banks include Zenith Bank Plc, First Bank Plc, Fidelity Bank Plc, Sterling Bank Plc and Stanbic IBTC Bank Plc.

For instance, First Bank of Nigeria Plc reported a profit after tax of N46 billion for the half year ended June 30, 2012, showing an increase of 129 per cent above the N20.1 billion recorded in the corresponding period of 2011.

Gross earnings stood at N182.3 billion, up by 26 per cent from N145.1 billion, while profit before tax rose from N24.4 billion in 2011 to N54.8 billion in 2012. Total assets rose to N3.1 trillion. Capital adequacy ratio remained at 21.7 per cent, while return on average equity rose from 11.2 per cent in 2011 to 25.1 per cent.

Commenting on the performance, the Group Managing Director/Chief Executive Officer of First Bank, Mr. Bisi Onasanya, said the profit before tax was driven by strong revenue growth, lower impairment charges and modest growth in operating expenses.

"We are pleased with the continuing progress in our transformation agenda, which is focused on driving efficiencies in our business. The focus over coming periods will be to consolidate and build on those gains as we refine our business and operational platform to ensure we achieve our set objective of excellent service delivery as a basis to expand business volumes. We will continue to stratify our customer base, provide bespoke products across our various customer segments and with the needs of our customers being of primary concern," he said.

Zenith Bank Plc posted gross earnings of N151 billion for the half year ended June 30, 2012, up by 23 per cent from N123.2 billion recorded in the corresponding period of 2011. Profit before tax rose from N36.8 billion to 50.2 billion, while profit after tax grew by 32 per cent from N32.1 billion to N42 .4 billion. Earnings per share grew to N1.35, compared with N1.01 in 2011.

Similarly, Stanbic IBTC Bank reported gross earnings of N45.6 billion for the half year ended June 30, 2012, compared with N31.2 billion in the corresponding period of 2011.

Profit before tax stood at N5.855 billion as against N5.4 billion, just as profit after tax rose from N3.8 billion to N4.9 billion. EPS was 46 kobo up from 36 kobo in the corresponding period of 2011.

Fidelity Bank reported gross earnings of N51.8billion in 2012, showing an increase of 79 per cent above the N28.9 billion posted in the corresponding period of 2011. Profit for the year stood at N7.63billion, indicating a big leap of 163 per cent from the N2.9 billion recorded in 2011.

On the other hand, Sterling Bank Plc posted gross earnings of N32.6 billion for the half year ended June 30, 2012, up by 59 per cent from N20.5 billion in 2011. Profit after tax grew by 42 per cent from N2.1 billion to N3 billion in 2012.

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