Stocks Trade Low, but Market Closed High Friday

Equities trading on the floor of the Nigerian stock Exchange from Monday through Thursday experienced no significant spike nor gathered any upbeat momentum. Index plummeted daily with a mean loss of 2.20 percent save Friday which witnessed a little rally as some stocks like FIRSTBANK, DANGSUGAR, DIAMONDBNK, ACCESS, SOVREGNINS and GUARANTY went on bid tossing the NSE ASI upwards by 0.61 percent to halt at 28,866.80 points for the week. Accordingly, the index shed 7.94 percent compared with previous week’s close of 31,357.24 points while total market capitalisation (TMC) of the 213 listed equities stood at N6.386 trillion (USD$49.12billion) after sliding off 7.94 percent.

Volume traded for the week dwindled backed with fear and loss of confidence from investors, who remain undecided as to the direction of the market and therefore seem to hold back from large transactions as indicators glide downwards.

In deep contrast to previous 4-day week end, trading statistics during the week under review was up by 5.4 percent (volume of shares), 43.7 percent (number of deals), and 12.9 percent (value of transactions). In summary, 1.05 billion shares were swapped in 34,103 trades valued at N7.3 billion as against 992 million shares exchanged in 23,733 deals valued N6.4bn.

News

1.       On conclusion of trading, the banking sector emerged most active sector for the week measured in volume of shares transacted. The sector accounted for 52 percent of the 492.6 million shares swapped in a total of 18, 265 deals valued at N4.7 billion. The sector movers were FIDELITYBK, GUARANTY, OCEANIC, and FIRSTBANK as activities in the shares of these banks accounted for 50 percent of the sector’s turnover. Trailing up next, investors exchanged stakes in 251.2 million insurance shares valued at N393.1 million and Telecommunications sector staked-up third with 111.9 million shares transacted in 912 trades worth N287.4 million.

2.       Demand side; Supply side: A long week of continuous pressure on the supply side of stocks trading with no appreciable demand to absorb the quantum of offer ended with a considerable number of equities on the bid chart. SPRINGBANK, FIRSTINLANDBNK, GAURANTY, DIAMONDBNK and FIRSTBANK had a place on the bid table. Well populated is the offer flip with ETI, IAINSURE, STACO, EQUITYASURE, and MTI with over 20 million units on offer each. 

3.       Although there was no business results for the week, we present attached a list of companies that made public their performance results for the previous week ended. INTERCONTINENTAL BANK PLC and CRUSADER NIGERIA PLC released their operations results. 

4.       Furthermore, the share price of NIGERIAN BREWERIES PLC was marked down for its interim dividend of N1.90k per share on Monday, December 29, 2008 while the Board of SKYE BANK PLC announced a change in its previous closure date of January 01, 2009 to January 12, 2009 and payment date still remains January 30, 2009.

5.       Gainers and Losers: The bears held activity sway for the week as the number of advancing stocks in gainers’ territory on a daily basis slipped off into the losers’ camp. By end of trading session on Friday, only 9 stocks out of 55 in the gainers’ camp last week was left while the bears’ camp was largely flooded with 77 equities which is 44 percent higher than 34 stocks recorded previous week end. 11 stocks remained unchanged.

6.       OANDO (+N4.17k, N82.18k), PZ (+N2.05k, N13.85k) and CCNN (+N1.50k, N7.09k) led the gainers’ camp (absolute price change) while CHEVRON (-N15.41k, N144.50k), GUINNESS (-N15.11k, N82.90k) and TOTAL (-N10.18k, N198.51k) top the price losers’ camp.

This unique offer is being packaged by some of the leading issuing houses in the country, led by FBN Capital Limited and BGL Plc. A statement on Tuesday said the Honeywell Flour Mills hybrid offer had the approval of the Securities and Exchange Commission and the Nigerian Stock Exchange.

The tenor period of the offer is 29 days, opening on Wednesday, December 3, 2008 and closing on December 31, 2008.

Honeywell Flour Mills Plc is part of the Honeywell Group, an indigenous conglomerate, led by the Chairman, Mr. Oba Otudeko, Commenting on the offer, Otudeko was quoted as saying, “Obviously, we believe in the future of this country and one thing that is clear is that, this is the time to buy and what more, to buy the shares of a leading company, which has made feeding Nigerians its core business for many years.”
The entry of the company into the flour milling industry redefined industry standards, as its high quality products compelled an improvement in the quality of flour products by other players in the industry, the statement said.

Demand for Honeywell Superfine Flour has continued to grow exponentially, as evidenced by its turnover figure, increasing from N7.32bn in 2004 to N18.77bn for the year ended March 31, 2008.

You can download the prospectus and application forms here:
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And these are the 20 worst performing stocks for the year:

Oceanic Bank
As at the close of trading August, 2008, Oceanic Bank finished at N21.27 per share. This compared with N 24.54 as at the end June 27, 2008. The bank’s gross earning during the 2007 first year was N74. 5 billion and is expected to rise to N138.24 billion by the end of 2008 profit after tax was N17.55 billion and is expected to grow to N34.1 billion. Each investor earned N1.50 and dividend of N1.02 both of which are expected to rise to N1.76 and N1.21 respectively. Price earning ratio and is currently 20.22 times projected to drop to 13.44 times. The stock’s price is expected to close higher at N38.00 per share by the end of the year.

Bank PHB
Price at N20.79 per share August 11, Bank PHB is expected to appreciate to N38.0 per share. The forecast based on its current and expected performance indicators. The bank’s gross earning as at the close of business in the 2007 first half was N36.16 billion which is expected to grow to N75.4 billion, at the end of the 2008. Profit after tax which was N7.75 billion may grow to N28.7 billion by the end of the second half. Earning per share is expected to increase to N1.37 from N1.20 while dividend per share may hit 80 kobo from 70 kobo. Return on equity is projected to decline from 21.4 percent to 16.5 percent.

International Energy
As at the close of trading August 8, International Energy finished at N3.24 per share, a 69.6 percent increase compared to N1.91 per share June 27, 2008. And the stock may rise to N7.50 if current market sentiment is sustained. The company’s gross earning for 2007 first half is N2.68 billion to increase to N4.7 billion or 76.2 percent by the year end . Profit after tax is expected to rise by 99.3 percent to N1.5 billion from N0.752billon. Earning per share would grow by 75.0 percent to 28 kobo from 16 kobo. Dividend per share by the end of 2008 would be 18 kobo, up from 9kobo while return on investment is projected to rise by 12.9 percent. The price earning ratio would improve from 29.9 times to 13.1 times. Dividend yield is expected to grow by 4.3 percent from 4.7 percent in 2007.

Dangote Sugar
Dangote Sugar Refinery traded at N27.20 per share August 11, compared with N24.80 June 27, 2008. In the light of some recent performance indicators, Dangote could rise to N40 by the end of the year.
The company’s gross earning for 2007 first half was N80.64 billion and is expecte4d to climb by 4.5 percent to N84.3 billion by the end of December 2008. Profit after tax is to leap by 26.6 percent to N27.2 billion from N21.4 billion in 2007 while earning per share which was N2.15 would rise by 26.5 percent to N2.72 billion. Dividend per share is expected to be N2.00 from N1.7. Return on investment is expected to grow by 79.7 percent. The price earning ratio which was 18.1 times in 2007 should drop to 11.7 times.

Afribank
As at the close of business on Monday, Afribank closed at N25.00 per share, as against N22.60 in June. The stock is forecast to rise to N32.00 per share. Afribank is expected to grow gross earning by 72 .2 percent from N27,5 billion in the 2007 first half to N 47.4 billion .Profit after tax is to rise by 77.1 percent from N5.2 billion to N9.2 billion. Earning per share is to drop by 12 percent from N1.02 to N0.89. Dividend would grow from 30 kobo to 50 kobo. Return on investment is to decline by 5.8 percent while price earning ratio would rise from 11.4 times to 27.0 times.

In recent years, there has been a significant increase in the number of mutual funds in Nigeria. ARM and IBTC were the pioneers in the mutual funds industry in Nigeria. My research shows that these two firms displayed the highest level of professionalism. They replied to emails promptly and provided the very detailed information on the requirements to invest in the stocks.

The report below provides the basic information on the available funds – their contact information, minimum required to invest in the mutual funds, the investment distribution. There was very little information available on 2 of the funds, First Bank’s Heritage Fund and Skye Bank’s Shelter Fund. A lot of information was sourced from the fund managers’ websites, online forums, and email exchanges with the companies.

My research shows that the mutual funds industry in Nigeria is still in its infancy and this is displayed by the lack of basic information about most of the funds (by their managers) and the lack of professionalism.

The ARM Discovery Fund had the lowest amount required to invest in it (N10,000). The average minimum required to invest in most of the other funds was N50,000. A lot of the funds did not provide any information on their management fees. ARM charges a management fee of 1.5% while Kakawa does not charge any first line management fee. However, Kakawa gets 50% of the excess return over the guaranteed investment rate.

READ/DOWNLOAD THE REPORT HERE: [Download not found]

Here is the analysis of the performance of each of the sectors.

The interesting thing is the convergence of their picks. Both pick Oceanic and Skye Banks. In my own opinion, the best in the list are the insurance stocks.

You can read their full recommendation and reasons for their picks in the attached documents.

Lead Capital:
GlaxoSmithKline
Oceanic bank
UBA
Dangote Sugar
Skye Bank

Zenith Securites:
Cornerstone Insurance
Intercontinental WAPIC
UBA
Ikeja Hotels
Nigerian Breweries
Skye Bank
Diamond Bank
Zenith Bank
UAC Properties
Oceanic Bank
CAP PLC
Bank PHB
Ashaka Cement

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First Registrar dispatches Bank PHB 2007 IPO share certificate

First Registrars Nigeria Limited, Registrars to the PlatinumHabib Bank Plc (BANK PHB) 2007 Initial Public Offer (IPO) last week dispatched share certificates to investors who took part in the offer. Ezekiel Oni, Head of Management Services of First Registrars confirmed this to Proshare NI today in Lagos Nigeria.

“We have already dispatched the BANK PHB 2007 share certificates since last week” Oni said.

However, this was contrary to what sources affirmed to Proshare NI when it visited the Corporate Affairs office of the bank situated at Keffi Street off Awolowo Road in the South West Ikoyi area of Lagos to ascertain the true situation from those in-charge as regards the issue of share certificates of the bank’s offer.

One of the sources at BANK PHB affirmed that the bank has earlier this week sent the share certificates to First Registrars for onward dispatch to investors.

Another source further confirmed to Proshare NI that share certificates of investors who furnished their Central Securities and Clearing System (CSCS) accounts had been lodged in with the CSCS last week.

As at the time of filling in this report, Proshare NI could not get clarification on the issue of return money as regards the offer.

All these are coming on the heels of investors’ complaints to Proshare NI that they have not received either their share certificates concerning the offer or the return money for non-allotment of shares they required from the bank.

In November 2007 BANK PHB sought to raise fresh funds of N85 billion from the Nigerian Capital Market by offering to the Nigerian investing public 5.0 billion Ordinary Shares of 50 Kobo each at N17.00 per share.

1. Gross earnings grew by 90 per cent to N33 billion from N17 billion recorded in the preceding year.
2. The bank’s profit before tax hit N10 billion, representing a 101 per cent increase over previous year’s figures.
3. The operating ratios also generally recorded positive improvements.
4. The bank’s balance sheet rose 136 per cent to N311 billion.
5. Operating expenses grew on account of renewed expansion initiative during the year and the implementation of a new banking operating software.
6. The bank renewed its growth plan with the opening of new branches and the purchase and assumption of branches of Hallmark Bank in liquidation.
7. Ecobank at the close of 2007 operated from 197 branches against the previous year’s 131 branches.
8. Outstanding performance is attributed to more efficient operations and processes resulting in increased customer base, more robust loan portfolio and commitment by all the stakeholders.
9. This level of performance was made possible by increased funding base, which translated to growth in volumes, and improved asset and liability management.
10. Dividend of 24 kobo per ordinary share of 50 kobo held.

The report is attached here: [Download not found]

Why insurance stocks should be your long term choice
by GODFREY OBIOMA

An investor who had taken positions in insurance stocks early in 2007 and sold them late in the year or even early this year made a harvest through capital appreciation. That was because many insurance stocks rallied on the injection of capital through the consolidation exercise and perception that the sector would follow the earlier trend in the banking industry. At the end of the February deadline, many short term investors had rode on the back of the euphoria to anticipate a roller coaster trend. But the story has changed. Investors are now more interested in fundamentals, like earning and profitability. Except for a few, results coming in from that sectors, are not too impressive to drive up prices appreciably. Although there have been improvements, discerning investors think it is not yet uhuru for speculators.

The insurance market in Nigeria is small with low growth . About 70 percent of premium is distributed between marine, general accident and motor insurance policies.. A study by Afrinvest West Africa shows that gross premium increased just by 17.5 percent between 1996 and 2005 and 15.3 percent between 2003 and 2007. The company estimated total market size of N98.8 billion (US$844 million) in 2007. Penetration is low, in the insurance market, with lowest level of market depth in the life insurance product. Afrinvest research shows that of the 20 million people in formal and informal employment across the working population, less than 1million currently hold personal insurance policy.

Compared to banking , securities market and asset management business, the insurance sector is slow with very low inflation adjusted growth in the last 10 to 15 years. To address these problems, .the Federal Government, in September 2005, announced new minimum capital requirement . According to National Insurance Commission ( NAICOM),, the capital requirement for life insurance was increased from N150 million to N2 billion; general insurance , from N200 million to N3 billion while reinsurance was hiked from N350 million to N10 billion.

There is however silver in the horizon as the consolidation exercise has strengthened many insurance companies, created a lot more confidence in the sector. Besides, the economic reform which has boosted economic activities , is expected to drive increase in insurance business. while the increase in bank lending would enhance corporate and industrial insurable assets and gross premium..

Following the consolidation exercise, insurance companies have grown their shareholders funds. Leadway Assurance, for example , has shareholders fund of N9.4 billion; WAPIC Intercontinental N9.3 billion; A11CO N5.9 billion; Niger Insurance N5.5 billion; Gold link N5.4 billion; and Mutual Benefits N4.0 billion.

On the floor of the stock exchange, many insurers have demonstrated strength as their market capitalisation are fairly okey. WAPIC Insurance has market capitalization of N53.5 billion, Goldlink N48 billion; Niger Insurance N37.0; LASACO N34.9 billion, International Energy Insurance N34.9 billion and Cornerstone N30.5 billion..

Insurance companies have some of the highest price earning ratios showing high investment returning period. Notwithstanding, a number of them , are matching the record of banks in this area. The companies with some of the lowest PER are Prestige Assurance with 27.9 billion multiples; NEM Insurance 27.9; International Energy Insurance ;WAPIC Intercontinental 31.8 and Royal Exchange Assurance 35.1.

In terms of gross premium, Leadway has N5.7 billion; WAPIC Intercontinental Insurance N3.2 billion; Niger Insurance N3.1; AIICO N3.0 ; Cornserstone N2.7 billion; Royal Exchange Assurance N2.4 billion; Mutual Assurance N1.9 billion and Staco N1.7 billion.

The new capital levels and mandatory local content policy as well as the compulsory group life assurance under the pension Act are also expected to stimulate growth in the sector.

There are strong indications that some underwriters are tilting towards non insurance businesses like stock market investment, real estate, and oil and gas, which, although detract from , the objective of instilling professionalism in the sector, may on the long run grow bottom-line and investors’ returns.

With so much money pooled by insurance companies, the continuing economic reforms and opportunities for growth in earnings, the market is very bright for insurance stocks and long term investors are likely to reap the good returns.