Garba Kurfi is a force within the Nigerian capital market. The Managing Director of APT Securities & Funds Ltd. He is currently a member of Investment and Securities Tribunal and one of their judges there. At a time he was a council member of the Nigerian Stock Exchange. He is a fellow of the Chartered Institute of Stockbrokers, Nigeria. In a chat with Abayomi Obabolujo, Mallam Kurfi gave in-depth insight on the current realities as regards the Nigerian Capital market. Excerpts:
What is happening to our market?
Actually, the market initially suffered from the election, but thereafter, what follows was that the election was done and ended peacefully.
However, the foreign investors who are one of the major players that provides most of the bulk of the liquidity in the market decided to stay away; and this for obvious reasons. The fact that they know that the tenor of the current CBN Governor is ending by June. The fact that they have not gotten any inclination from the presidency who is likely going to take over from him, make most of them decide to watch and wait until they confirm who is the next Governor. This is very essential for the foreign investors because they are mindful of the foreign exchange policy that will favour them such that whatever they bring, they can get it out as at when due; and if this is not assured, they cannot come into the market.
Therefore who is going to be the next CBN governor is very vital for the foreign investors. Most of them decided to wait and see; and this is not helping matters. As at April, the Presidency supposed to start scouting for who is going to be the next CBN governor, if they intend not to renew the tenor of the current one. No single statement has come from the presidency as regards this matter. Therefore it affects the perception of the foreign investors about our economy.
Now, we have seen the results from quoted companies, particularly for the audited report. So what will be your advice to your clients and the general public?
Quite a number of the companies came out with impressive result; and some of them were able to sustain and maintain the dividend they declared for 2017. Some even came top ahead of what they declared in 2017. But the real challenge is this; if you look at the frontier market, in terms of dividend yield, we are the best. We have some stocks that gave as much as 13% compared to dividend yield of 5%-6% in the frontier market. But why the investors are not coming, they go beyond that. Not only that we have a very good dividend yield, but we need to get more activities; and because a lot of our local investors face so many other challenges in terms of school fees, medical trip among others, most of them are divesting, and that put more pressure to the market selling.
For investors that have excess liquidity, I will advise them to take position of most of this stocks, because I know it’s a matter of time. By the time the budget is approved and the new cabinet is set, you will see the market will bounce back; and at that time it will be too late for those who want to take position to get it because the seller may decide to call for it.
If you are advising someone to look at the stock market, what specific stock are you thinking in your mind?
First, I think of the banking sector. If you look at it, apart from the liquidity, they pay very good dividend.
The second is the Cement Industry. If you look at most of the prices of stocks in the cement industry, they are very low. Today, we have no alternative to cement. With the new government, you will see more project coming and therefore there will be more demand for cement. In effect, share prices of most stocks in cement industry will rise back. So we see them coming up.
Next is the Insurance sector. They are at the lowest ebb. I don’t see most insurance stocks going below where they are. With the acquisition by the foreign investors especially on some of the few insurance companies. If this is successful, most of those that get co-investors are likely to rebound from where they are today. So I see those once as stocks to watch.
Definitely, nobody can do away with the agricultural sector, but we have very few stocks in the likes of Presco and Okomu. At their current prices, they are good to go. If their prices can come down a bit lower than where they are today, they are good to go, because they look promising.
I want you to mention it, is it Guaranty we are looking at, is it Zenith? Is it Access? Access and Diamond have merged eventually, what are your expectations?
Any serious investor can take position in Access Bank because their current price is still at the P.E ratio of less than 3. Their earnings per share is likely to be about N1.90 or thereabout or even N2; the current price they are trading at the PE ratio of less than 3. For me, I will advise investors to take position.
Zenith Bank is currently trading at N20 with N2.85 dividend. Even by dividend yield, it is over 14%. With the earnings per share (EPS) of N6, you will see that they will see that the stock is trading around 3.3% to less than 4%. So Zenith Bank is goo to go.
Caverton has come down to as low as N1 from the listed price of N9.60. They’ve just declared 25 kobo dividend which is still cool at their current price.
Oando, though they have not paid any dividend, but we believe if the management can look at it again, even if they don’t pay final dividend, they should come up with interim dividend. Otherwise, institutional investors like Pension Funds may decide to run away, and that may not be good for the stock. I believe the management of Oando can do something that can trigger it up. Whatever they pay as interim dividend, I can assure you that the price of the stock can bounce back.
The share price of Eternal Oil is not rising up, but they can come back.
Other stocks to watch are Fidson, GSK and UACN. With all the structural changes that is coming into their management, we look that these are stocks that their future will likely be brighter than where they are.
Just last week, we get to hear that Jumia, a company operating in Nigeria went to list on the New York Exchange. Is that nor abnormal for you?
For us, I look at it that it is our market. The management of Nigerian Stock Exchange and Securities and Exchange Commission have to sit down and look at it. Jumia listed at $14, at the end of the trading day, it closed at $23 to $25. You can see what gain, more than 50%, can this happen in our market? The answer is no. So we have to come back and look at ourselves. When $14 is converted to naira, it is about N5000. The best stock here is trading less than N1500. So you can see that they have the market, they have the platform. Therefore, if you are looking for money, you have to go where it matters. I think our management (NSE and SEC) have to revisit our policy and bring the policies that will be more attractive to listing. If they do that, we will see more companies getting listed, because Jumia is more of Africa and Nigeria than New York.
The result of FBNH, the big elephant released their result last week. What will you say to this result?
I think FBNH needs to revisit their cost of doing things. The truth of the matter, yes, they have reduced into their provision. In 2015/2016, FBNH provided over N200 billion bad loan. In 2017, it reduced to over N100 billion. Now they provided over N60 billion bad loan against Guaranty Trust Bank that provided less than N20 billion. So we are saying that they need to clean up all their books and make sure that they not only clean it but pursue it to recover; because if they make certain percent of what they have provided as recovery, it will declare beyond what other bank have declared. So they need to clean up.
It is not enough to make provision, you have to go beyond provision, make sure that you make recovery to the maximum so that the shareholders will be better off. If they do that, I can assure you, it will be a darling stocks ahead other banks.