Skye Bank Review
- Gross Earnings increased by over 60% to N27.6billion
- Profit Before Tax increased 282% to N7.7billion
- Profit After Tax increased 337% to N7.6billion.
- Bank is vigorously pursuing cost cutting
- Seeking to accept additional 25% of the offer size as a result of over subscription.

Oceanic Bank Report
- Gross Earnings increased 128% to N66.7billion.
- Profit Before Tax increased 151% to N25billion.
- Profit After Tax increased to N20billion
- Improvement in cost structure

BGL Stock Recommendation

Additional Stock Recommendations

FSDH 2008 Market Outlook

Here is a write up by Meristem Securities on the facts about Penny Stocks

The Nitty Gritty of Penny Stocks

Blue Chip companies are made rather than born contrary to the perceptions of some investors.  They have to work through the different growth phases/business life cycles everyone else. Unfortunately, some investors believe that the best way to ‘dig for gold’ in shares trading is by scouring through penny stocks in hopes of finding the next Japauloil, IPWA, Niwicable,C&I Leasing,Cutix in the early 2007 or Capoil, Afroil, Poly Products in recent times. Some analysts express that this is probably not the best strategy.

Understanding a Penny/Micro-Cap Stock:

Technically, micro-cap stocks are classified as such based on their market capitalization while penny stocks are looked at in terms of their price. Definitions of what stocks qualify as penny / micro-cap vary. In the U.S, stock with market capitalization between $50m and $300 m (N6bn to N36bn) is a micro-cap. (Less than $50 m (<N6m is a nano-cap.) According to the U.S Securities & Exchange Commission (SEC) any stock under $5 is a penny stock.

While all these categorizations are not outlined in any formal /regulatory documents in the Nigerian context, but generally as a norm or market perception, a stock trading at a price range of N1 and N10 is usually considered penny.

The main thing you have to know about penny/micro stocks is that they are much riskier than regular stocks. For instance, junk bonds (bonds with a rating lower than BBB) are considered a much higher risk than those of investment grade (bonds with a rating higher than BBB). In the stock market parlance, equivalent comparison is penny stocks and blue-chip.

What is the Problem with These Stocks?
Market analysts have identified four (4) major issues which make penny stocks riskier compared to other stocks. These are:

Lack of Information Available to the Public:
A fundamental principle that is always preached by many professional analysts is that the key to any successful investment strategy is acquiring enough tangible information to make informed decisions. For micro-cap stocks, information is much more difficult to find. Companies listed on the second and third tiers market are have less stringent requirements especially in relation to disclosures and filling of operational reports with the regulators and are thus not as publicly scrutinized or regulated as those on the first tier board furthermore, much of the information available about micro-cap stocks is typically not from a credible source.

No Minimum Standards:
Stocks on the Second and Third Tier Markets do not have to fulfill minimum standard requirements to remain on the Exchange. Sometimes, this is why the stock is on one of these markets. Minimum standards act as a safety cushion for some investors and as a benchmark for some companies.

Lack of History:
Many of the companies considered to be micro-cap stocks are either newly formed or approaching bankruptcy. These companies will generally have a poor track record or none at all. As you can imagine, the lack of histories of companies only magnifies the difficulty in picking the right stock.

Liquidity:
When stocks do not have much liquidity, two problems arise: first, there is the possibility that the stock you purchased cannot be sold. If there is a low level of liquidity, it may be hard to find a buyer for a particular stock, and you may be required to lower your price until it is considered attractive by another buyer. Second, low liquidity levels provide opportunities for some traders to manipulate stock prices, which is done in many different ways – the easiest is to buy large amounts of stock, hype it up and then sell it after other investors find it attractive (also known as pump and dump).

The Problem for Investors
Penny stocks have been a thorn in the side of the regulators for some time because micro-cap stocks’ lack of available information and poor liquidity make these groups of stocks an easy target for fraudsters. There are many different ways these people will try to part you from your money, but here are two of the most common:

Biased Recommendations – Some micro-cap companies pay individual analysts to recommend the company stock in different media, i.e. newsletters, financial television and radio shows. Look to see if the issuers of the recommendations are being paid for their services as this is a giveaway of a bad investment and make sure that any press releases are not given falsely by people looking to influence the price of a stock.

Off-Shore Brokers– This is does not relate to Nigeria system. In the advanced markets like the U.S, under regulation S, the SEC permits companies selling stock outside the U.S. to foreign investors to be exempt from registering stock. These companies will typically sell the stock at a discount to offshore brokers who, in turn, sell them back to U.S. investors for a substantial profit. By cold calling a list of potential investors (investors with enough money to buy a particular stock) and providing attractive information, these dishonest brokers will use high-pressure “boiler room” sales tactics to persuade investors to purchase stock.

Buying These Stocks
Two common fallacies pertaining to penny stocks are that many of today’s stocks were once penny stocks and that there is a positive correlation between the number of stocks a person owns and his or her returns. Investors who have fallen into the trap of the first fallacy believe NESTLE, OANDO,FIRSTBANK, WAPCO, OCEANIC, ZENITH and many other large companies were once penny stocks that have appreciated to double/tripple digit values. Many investors make this mistake because they are looking at the “adjusted stock price”, which takes into account all stock splits. Rather than starting at a low market price, many of these companies actually started pretty high, continually rising until they needed to be split.

The second reason that many investors may be attracted to penny stocks is the conception that there is more room for appreciation and more opportunity to own more stock. If a stock is at N2 and rises by N1, you will have made a 50% return. This together with the with the fact that a N20,000 investment can buy 10,000 shares convinces investors that micro cap stock are a rapid surefire way to increase profits. For some reason, people think of the upside but forget about the downside. A N5 stock can just as easily go down N2.50k and lose half its value. Most often, these stocks do not succeed, and there is a high probability that you will lose your entire investment.

Conclusion

Sure, some pennies might be of good quality, and many Second and Third Tier Securities are working extremely hard to make their way up to the more reputable First Tier Securities. However, the flip-side is that there many good opportunities in stocks that are not trading for pennies. You need to understand that this is a high risk area that is not suitable for all investors. If you can not resist the lure of micro-caps, make sure you do extensive research and understand what you are getting into.

Analysis of Some Insurance Stocks

Afrinvest 2008 Stock Market Outlook

As a result of this, the Securities and Exchange Commission (SEC) has said that it would suspend trading in the shares of any publicly quoted company that fails to dispatch share certificates or return surplus monies on time.

Here is the story:

The Securities and Exchange Commission (SEC) wielded the big stick yesterday saying it would suspend trading in the shares of any public quoted company that fails to dispatch share certificates or return surplus monies in accordance with market rules.

 

The commission also said with effect from April 1, 2008, no registrar will be allowed to administer any public company to which it is a subsidiary.Many investors have expressed considerable displeasure which has turned into disenchantment with the capital market over deliberate delays by public quoted companies to dispatch their (investors’) share certificates several months and even years after the closure of their public offers.

 

Also, in instances when offers are oversubscribed, investors who are unlucky to get their full allotment of shares wait endlessly to get back their money.

 

In a bid to check this unwholesome trend and stamp its authority on the market, SEC yesterday said companies that violate its rules and regulations relating to the dispatch of share certificates and returned/surplus money will have their listed securities suspended indefinitely from being traded on the floor of the Nigerian Stock Exchange (NSE).

 

According to SEC’s rules, companies must submit their allotment proposals six weeks after the closure of an offer while certificates/returned money must be dispatched 15 working days after the date of clearance of the allotment.

 

These rules have been violated by many companies without any serious sanctions by the capital market regulator. Commenting on these developments, market analysts said SEC may have awoken from its slumber by the issuance of the new directive.

 

Apart from suspending trading in the shares of erring companies, the commission said that such defaulting companies would not be allowed to access the market for fresh issues.

 

“All such defaulting companies shall not be allowed to access the Nigerian capital market until all outstanding complaints against them are cleared to the satisfaction of the commission,” SEC said in a circular to all quoted companies.

The commission has also disallowed applications for preferential allotment.

 

“With effect from April 1, 2008, no registrar shall be allowed to administer the register of any public company to which it is a subsidiary, a holding company, a related company or which has substantial shareholding in the said registrar or in which the said registrar has substantial shareholding,” SEC said.

 

According to the commission, any violation of the directives shall attract severe sanctions including the outright withdrawal of registration to operate in the Nigerian capital market.Meanwhile, SEC has asked all investors who have not received their share certificates and returned/surplus monies in respect of all public offers that closed on or before October 31, 2007 to forward their complaints in writing to the director-general of the commission.

 

The commission advised such investors to enclose evidence of transactions justifying their claims, indicate the public offer and clearly mark the complaint “Non-receipt of share certificates and return/surplus” and telephone numbers.
 

Some of the companies whose offers closed before October 31, last year include, United Bank for Africa Plc, Oceanic Bank International Plc, First Bank Plc and Access Bank Plc.

“I think there is something in the NSE we are all overlooking.
People are waking up to the NSE and everyone is pouring money into the NSE now.Even my grand mother in the village was asking me the other day if she could buy shares.With so much money around,and few companies listed on the stock market ,your guess is as good as mine,especially with the penny shares.

NSE will even continue to climb when the hedge funds come in.Every financial analyst in Europe is researching Nigeria.Today my friend who works for a research company,told me a hedge fund has commissioned them to investigate 8 Nigerian companies.I think the market will rise this year and then start to even out,except ofcourse,Yar’adua’s election is annulled and a re-election leads to anarchy!!!This appears to be a major reason why Hedge Funds are not yet pouring into the country.”

Invisible:

I will certainly not predict the NSE any day, look at FBN with a very good result just announced, did a one day rise and fell the very next day?here used to be a time when a good result always guarantees a two weeks sustained bid. But these days, traders has turned everything on its head. Part of the explanation is the uniform calendar for banks. Most market insiders seem to think some banks will delay results till end of this yr.
All the same, let us watch and see.

Pumping777:

Well, we should have predicted first Bank’s price movement. All the banks that announced very good results do not have anything to show for it so far. UBA, PHB, Oceanic and now FBN. Zenith will soon join them. All these ones are going to be very sweet medium to long term sha. I think Oceanic will be the sweetest of them all. Gernerally, for stocks with prices above N30, it requires real news (like bonus) or solid rumour (like merger) for further northward movement. The stock go just dey go round and round and still dey same same place as Baba 70 talk am.

I have commented on the low nominal price syndrome. See how the insurance stocks have tried to normalize prices. The bank stocks that are moving positively in price are the ones at the lower end that had fair results. Access, FCMB, Guaranty and Diamond. For now, these ones can be sweet all the time. Small news, rumour or interim result can cause movement.

If Unity Bank comes out with a fairly decent result see how much better it will do than all these banks in the short run. Yes, Unity Bank!!.

Here is an excerpt of the report:

It might be a little difficult to believe but the west African nation of Nigeria has emerged as the best performing stock market in the world in 2007, leaving Slovenia and India behind at the second and third places.

Nigeria was the best performing market with gains of 115 per cent, followed by Slovenia with 87.62 per cent and India with 80 per cent, a study by Standard & Poors revealed.

Overall, emerging markets rose 42 per cent in 2007 as against a gain of 9.4 per cent in developed markets, according to Standard & Poors-Citigroup BMI global index.