The market experienced a journey southwards in the week ended June 19, 2020 from Monday through Friday save for Wednesday when it reacted to a dead cat bounce assisted by 10% gain in Nestle Plc
The market lost 141 basis points week-on-week due to the loss in our of the major market direction determinants, Dangote Cement Plc following its listing of N100 billion 3 years 12.5% Fixed rate series 1 senior unsecured Bonds due 2025 under the N300 billion Debt Issuance programme of the company.
The lost in the market is a sign of weak demand and inventors’ trading with utmost caution at the backdrop of expected slowdown in the market. This is premised on the expectation in the Q2 financials that the market believed will decline with expectation of the effect of Covid-19 and the lockdown fully reflecting on issuers Q2 financials coupled with the fear of a possible decline in the Nigeria’s GDP growth as a buildup of the economy entering into a recession.
The headline inflation is also not helping matters as it continues to rise. Nigeria’s annual inflation rate rose for a ninth straight month to 12.40% in May of 2020 from 12.34% in the prior month. It is the highest rate since April of 2018, due to the lingering effects of the global pandemic
The market’s mood will continue to be tepid in the short and intermediate terms owing to weak microeconomic variables and liquidity crunch as FPIs are waiting on the border line for a favourable FX regime to repatriate their funds to their countries of origin.
Prices in the market may continue to trade within the current price bands or within their price axes or possibly slow down as investors are cautious while waiting to assess the impact of the virus on the companies’ financials and the attendant consequences.
Japaul Oil Plc’s Change of Name and Capital Raise
Japaul Oil and Maritime Services has issued a general public notice of its AGM and its intention to increase its authorized capital from N6 billion to N 60 billion either by ordinary or preference share.
The company wants to raise N27 billion through different channel of fund raise from the market depending on which is approved at the AGM by the shareholders. It also mentioned the possibility of share reconstruction.
It worthy of note that Japaul Oil had traded at N0.50k on the floor of the Nigeria Exchange for a protracted time when the minimum price a share can trade was N0.50. But there came a water troubling Angel in the form of Milost that drove the price from N0.50k to N1.06k within a month. The price reversed to N0.50k when the bubbles that were formed from the expectation of Milost busted.
At the reclassification of the lowest price a stock can trade on the floor of the exchange from N0.50k to N0.20k, Japaul Oil was among stocks that made that price their bus stop.
With persistent losses after tax and lingering negative retained earnings standing at N14.9 billion as at December 2019 FYE. The profit standing in the 2019 financials was borne out of extra ordinary item.
First, the change of name cleanly signaled that the company may be changing its line of business, kudos to that but share reconstruction have never favoured the investors and never created value for the shareholders. The moment an organization cannot generate enough earnings to sustain the new price after reconstruction; the market will definitely reprice it which will leave the investors worst off.
We should all do our due diligence before we get optimistic with these issues.
Neimeth Plc
Shortly after the partial lifting of the lock down, market reasoned that the pharmaceuticals companies will be the net beneficiaries of the covid-19 vaccines manufacturing and undertake to reprice the stock in line with its peers.
After climaxing at N2.57 the stock had continued to receive bashing due to profit taking, it is worthy of note that the stock was trading at N0.62k a at January 2, 2020 and rose to N2.57 representing a whopping 314.5%.
Neimeth closed N1.54k a 40% drop in price. There is every possibility that the market will be looking at its direction again thinking it is now cheap enough as compared to the price of N2.57k where it is falling from.
Access Bank
During the course of the week, precisely on June 17 & 19, 2020, Access Bank notified the market of insider dealing on its shares totaling 6,814,464 units reportedly bought by their GMD, Mr. Herbert Wigwe.
The man who previously sold his position to meet demands has deemed it wise and fit to buy back to so as to returned to status quo ante. I think it is a sign of confidence he reposed on himself as the team lead of the bank. This might become positive for the bank going forward.