Ruth Ibikunle
The Nigerian stock market last week closed on a bearish note as profit taking persist, returning -1.40% week on week.
Year to date, the market has returned 29.52% with the All Share Index and Market Capitalisation at 66,382.14 points and N36.331 trillion respectively.
In a stock market review with the MD/CEO of Global View Capital Limited, Aruna Kebira, the following were discussed:
Excerpts:
• The market last week closed on a bearish note, shedding 1.40% week on week. What is the outlook for the new week?
The market arena has been fraught with a barrage of information in recent weeks. I was expecting the market to latch on the appointment of a substantive CBN Governor and his eventual clearance at the Senate, as a catalyst for upward looking.
But the issue of the Naira/$ exchanging for over N1,000, the news that the government will not give Dangote Refinery preference in the procurement of crude, looming increases in inflation figures, and the inability of the MPC of the CBN to meet for the last scheduled meeting have all hurt the market.
There is a capital flight from the market to the forex, investors are selling their positions and holding their assets in dollars.
Nevertheless, we have always seen the market’s first reaction to such information and what the market did next, so I am expecting the market to repeat what it has always done. More so, the prices of fundamentally strong stocks have been trending down to a point where the market would consider them cheap.
Hopefully, I see a reversal of this negative trend in the market by October, as the market will begin to witness the release of Q32023 earnings reports.
Remember, these earnings reports would form the basis of what the year would close with because, after this, we have to wait till February or March 2024 before we can begin to expect Q4 2023.
• Oando led other price decliners, shedding 33.76% to close the week at N7.85. How low can Oando get to? Is it a good BUY?
It is of a truth that most investors made a kill in the last rally of the price of Oando stock we witnessed a fortnight ago. But also, a lot of investors have been made stagnant as their funds have been trapped in the stock while some who took bold steps to stop their losses had a chunk of their capital wiped off.
I can hear somebody mention that it is a zero-sum game, but the question is, must you be at the negative end of that equation?
We have always talked of fundamentally strong stocks, which I doubt if Oando is a member.
If there are market players who can speculate with a stock and so it well, why don’t you as a greenhorn leave the game to the masters of the game?
The stock rose from about N7.00 and got to N16.00 and closed the market on September 29, 2023, at N7.85. Do I need to be reminded that some investors are going to their banks, crying?
There are so many controversies surrounding that stock. I learned there is a case at the court involving Oando waiting for a determination by October.
At a delisting price of N7.07, any price above to me is a no, no. Even at that, the timetable of the delisting process has not been released, must I tie down my fund in Oando, waiting to receive about 12% as ROI when Cornerstone moved from N1.25 to N1.81? Not until the issues concerning the purchase of ENI Agip/NNPC Assets, and the issues of qualification of their 2021 earnings report have been cleared, I don’t think that the stock is a good buy even at its current price.
• What is driving the growth in Beta Glass, Consolidated Hallmark Insurance, and Cornerstone Insurance?
Cornerstone in its Q22023 earnings report showed that its profit for the year grew from N408.349m to N11.251b.
On July 10, 2023, Beta Glass wrote the exchange of the outcome of the 49th AGM and their resolution to pay a dividend of N1.17 per N0.50 share value.
This means it is trading cumdiv and in the market where most stocks have been marked down for dividends, the stock with the dividends declared will attract investors.
CHIPLC’s Q22023 shows remarkable growth from 5.24k to 9.13k. Their earnings forecast also shows that they will be closing the year with N2,025,019,319 PAT.
• How attractive are the following: Access, UBA, FBNH, Zenith, GTCO, Wema Bank, and Fidelity Bank?
Access Corp whose price rallied to N19.8t 52-week high, released its Q22023 and did not meet with the market’s expectation.
However, their gross earnings which are approaching a billion naira were not enough to return an impressive bottom line and a mouth-watering interim dividend. The associated cost in their acquisition and the middle line impact on the results was overwhelming making them return a growth in EPS of 48% from 252k to 374k
With the declaration of N0.30 interim dividend, while other tier-I banks were declaring N0.50, the market had no option but to punish the price of Access Corp.
The demand in the market has also risen, based on the past performances of the stock, to keep the price diminution stagnated at N15.55- N16.00.
And most discerning investors are of the belief that the price at which the stock is trading is a good bargain and are cashing in on it massively in anticipation of a better return in the next two quarters of the years.
At that, Access Corp looks attractive at the current price but would be better at a much lower price than what it is trading now.
UBA’s PAT grew from N70.335m in 2022 to N 378.235m in 2023 resulting to a growth of eps from N1.98 to N10.95, representing 453%.
The bank now capped its performance with an unprecedented interim declaration of N0.50.
The market, investors, and market participants are of the opinion that even if the bank made zero income in their Q3 and Q4, which is not possible in any case, the payment of a good final dividend is possible, using the interim as an example.
The moment the market finds its feet once again and there is another rally, UBA would be among the stocks that would set new 52-week high prices.
FBNH, Zenith, GTCO, Wema, and Fidelity all did well in their Q2 2023. The stagnant pricing of FBNH we’re seeing is not unconnected with its inability to declare an interim dividend.
Fidelity, with a N0.25k interim dividend, has drawn the attention of all and sundry in the market and all eyes are on it. Little wonder, that after the marked-down of the dividend, the price has refused to go below N8.00, meaning that it is attractive at that price to discerning investors and to those whose focus is on final decisions.
• What are the stocks to watch?
Wapco (Lafarge Africa), Dangote Sugar, Fidelity, Transcorp, Cornerstone Insurance and NASCON.