Q1 Expectations: Short Term Hope Rises for The Market

  • Why Zenith, UCAP Remains Buyable at Current Prices
  • Why Stanbic IBTC Remains High at Current Price Despite Q1 EPS Growth

The Market Last Week:

There were three red and two green days last week as the Nigerian bourse continued to move sideways brought about by persistent exit pressure even in the face of impressive earnings from listed companies. On the whole, it was a WoW decline of 0.28% as Nigerian Stock Exchange’ All Share Index closed Friday at 40,814.89 from the close of 40,928.70 in the previous week. Market capitalisation also recorded same decline level, closing at N14.743 trillion from the record of 14.784trn. What do other market indicators reveal? Please see the table below.

Weekly Performance review:


  • Market data is mixed to reflect the sideways stance of the market.


  • Value so recorded in the week though significant was not widespread but only in few equities. This would not count for the market as strength but a show of capabilities in few stocks where investors are willing to take risk at current price while others are exiting.
  • Aside from Access that closed the week with marginal loss, other stocks with dominant value recorded for the week closed higher. This infers possibilities against sales pressure. In other words, the equities would have enjoyed better price performance but for the mass exit.
  • If the mass shedding continues for another week, these stocks will most likely experience sharp decline in price.


  • Aside Oando which experienced huge volume transaction last week, other major volume drivers are bank stocks. These are stocks with large outstanding number of shares and where short-term market play is most possible.
  • The corresponding deals against most of the volumes recorded tend more toward cross deals than normal general interest in the stocks. Oando and Zenith are more of normal buy and sell transactions. For FCMB, about half of the entire volume was transacted on Tuesday April 17 with only 180 deals.
  • If these are subtracted from the overall volume recorded in the week, there would have been a reduction.


  • Deals table as above shows clearly that only ten stocks took more than half of the deals recorded in the entire market for the week. This suggests not so much strength or any significant improvement.



  • Though rather insignificant, there were more gainers than losers in the week under review. There were also fewer losers last week than in the preceding week though number of unchanged stocks slightly increased.


  • More sector indexes grew in the week under review. That show concentration.



From Q1 reports released so far, aside from the results from Forte oil, virtually all others recorded a measure of growth on their 2018 Q1 earnings. The market could not be said to have so much compensated these efforts by managers of quoted companies but then, increasingly improving earnings at the least is a rekindle of hopes in the market, if not for the immediate short term but a period in the nearest period.


As we speak, two major first tier banks had released their Q1 earnings. The reports are good enough to expect a generally good outing for the majority of bank stocks as listed on the floor of the Nigerian Stock Exchange.


In Abayonomic’s first fundamental law of equity price movement, the price of a stock and its earnings must be proportionate in the long term. Hence, improving earnings in the face of declining prices is great buy and wait opportunities.


Meanwhile, Earnings reports in the stock market are akin to terminal reports sheets issued by schools to students at the end of every term. Of course, in the quarterly reports are vital statistics of quoted companies for the immediate past quarter, no matter how, every investor should assess the company’s earnings per share and compare with previous year’ reports and current price. This could also be compared with prices of other stocks in same industry or market at large but prices must be of priority. Let’s see together the use of earnings per share


  • Earnings per share- EPS is derived by simply dividing a company’s profit after tax for the period by the company’s outstanding number of shares. Meanwhile, outstanding number of shares is derived by multiplying the company’s share capital by two. Please note that share capital is expressed in Naira term hence, all you need do is multiply the figures given in naira term by two to get the outstanding number of shares. This is so because par value in the Nigerian market is mostly 50kobo.
  • Earnings per share simply tells us to look beyond huge turnover and profits though these are good if the company is always growing them but the bottom-line is the earnings per share. In other words, huge profit figure in a company with equally huge outstanding number of shares remains little whereas huge profit to a company with low outstanding number of shares is great. Therefore, when else a company is busy beaming its turnover and profits at you, please reduce such to EPS, compare with price before you make the move.
  • Earnings per share can be compared within same industry when price is brought in as a determining agent. If a company commands a high price and the earnings per share is low, it suggests strong confidence and also infers the fact that future possibilities are already imputed in the price today. Such stocks thus offer previous and long term investors lots of current benefits while fresh investment might take a long term to get value either in capital appreciation and/or cash dividend payout.

Let’s look at the table below to see what tails that it tells

  • On the strength of EPS, Zenith is a better pick at current price that Guaranty trust bank and Stanbic. But Stanbic’ EPS growth is higher but its price also had gone high. At that, fresh investment, based on this EPS so declared gives it to Zenith. But the Q1 EPS of Guaranty is also higher than of Zenith? Oh yes but the price of Guaranty is also far higher than Zenith. But why is Unilever not buyable? Very simple. It is because its price is too high to justify the improved earnings. More earnings growth would be enough to justify fresh investment in Unilever. UCAP from the Q1 reports is good though the growth is little because the stock’ price has refused to climb in the last couple of months.
  • If a company keeps growing its earnings per share and the market is not responding, so long as the possibilities of sustaining higher EPS growth are intact, the stock becomes buyable.
  • Price growth in the face of declining earnings per share will eventually erode investment.
  • In Nigeria, is it generally seen that relationship between earnings per share and price of a company should be 10 and lower. Please note, relationship between earning per share and price is the Price to earnings ratio or PER.
  • Cash dividends are often paid from current earnings per share. In other words, an earnings per share is the major determinant of cash dividend.
  • A company that pays all its earnings as dividend is good but companies that retain earnings for future use are better. This is so because current earnings are products of the past while retain earnings are apple proves that the future to a large extent can be catered for.




  • ZENITH BANK PLC: Whichever way one might want to look at it, a simple back of the envelope earnings analysis gives Zenith a pass mark an easy among its peers. It is apparent that Zenith is on the track of not just to repeat the performance of its 2017 audited reports in EPS but also to surpass it as its 2018 Q1 EPS of N1.50 is about 26% above the 2017 Q1 EPS yet, the price remains within reach. Indicators are also within buyable region. If price drops lower than current level, which is possible because of market trend, it would just be good to buy more. The stock will open strong Monday but its week will be shared among red and green days.
  • UCAP might decline but current 21kobo 2018 Q1 EPS released from 20kobo in the preceding year makes the stock a buy. Waiting a while for the price to come low might be better. It is bound to open low on Monday.
  • AFRICA PRUDENTIAL PLC: If the tempo of Afriprud’ 2018 Q1 EPS is maintained to its Q4, 2017 performances will be outperformed. Its 23kobo 2018 1 EPS is a pointer to the fact that the 86kobo 2017 Q4 EPS is well achievable without stress. The Monday will open low but its week might be shared between green and red days. After two or three further price gains, it might come to an overbought level and would need to shed some weight but then; the stock is good to hold for the medium to long term.



  • FBNH
  • FCMB though might soon be tired except if Q1 EPS comes in strong
  • NB PLC




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