Ruth Ibikunle
The Nigerian stock market last week closed on a negative note, shedding 0.62%. Year to date, the market has returned 4.76% with the All Share Index and Market Capitalisation at 107,821.39 points and N67.193 trillion respectively.
In a stock market review with the MD/CEO of GlobalView Capital Limited, Aruna Kebira, the following were discussed:
Excerpts:
The stock market was down by 0.62% last week. However, it closed the month of February on a positive note, growing 3.18%. What is the outlook for the new week and the month of March?
The market recorded two days of gains and three days of losses but the gains recorded were enough to turn the tide in favour of the ASI closing upwards.
Most of the bearish atmosphere witnessed by the market in the course of the week was occasioned by the selling pressure in the banking sector following the CBNs firm stance on insider loans, particularly those that are not performing.
Based on recent information, the Central Bank of Nigeria (CBN) is taking a firm stance on insider loans, particularly those that are non-performing. Here’s a breakdown of what the CBN is saying:
Focus on Non-Performing Loans:
* The CBN is specifically targeting bank directors with non-performing insider-related loans.
* They have issued directives for these individuals to step down immediately.
Strengthening Corporate Governance:
* These actions are aimed at strengthening corporate governance and improving risk management within the banking sector.
* The CBN is working to ensure that banks maintain sound financial practices and avoid conflicts of interest.
Remediation Efforts:
* Banks are being instructed to begin remediation efforts to recover these defaulted loans.
* Regulatory Actions:
* The CBN is taking regulatory actions to reduce insider loans at the banks.
In essence, the CBN is clamping down on practices that could compromise the stability and integrity of the Nigerian banking system.
But at the turn of the week, especially by Friday, we could see that the sector’s prices were trading sideways and stagnant, signifying the end of the sell pressure.
Since the market has started witnessing the declaration of dividends, we expect the market to close positively for the week. But it may witness mixed closings as the market will continue to reward the performing companies while punishing the prices of those whose earnings reports and dividend declarations are short of the market’s expectations.
The primary market auction of both the TBs and Bonds is interpreting the government’s body language of apathy towards borrowing. The stop rate for Bonds was 19%, while that for TBs was 18%.
The participants in that space, if the rates continue to drop, will be faced with reinvestment risks, and the available investment destination for them then would be the stock market.
· What drives the growth in PZ, Caverton, and Livestock Feeds?
PZ Cusson’s price rose from N29.50 on Monday and closed at N35.40 on Friday, January, 28. 2025. The increase represents a 20% growth in the price of the stock. This is coming on the back of the explanatory note released to the website of the NGX on February 15, 2025. In the note, PZ proposed to convert its debt to equity following these reasons.
In June 2022, PZCH (PZ Cussons (Holdings) Limited) advanced an intercompany loan of USD40.26 million to PZCN (PZ Cussons Nigeria PLC) to help settle outstanding foreign currency payables related to raw material imports, operational and other input-related costs that had not been possible to settle due to challenges with foreign currency availability. The liberalisation of the foreign exchange market in June 2023 and the attendant devaluation of the currency throughout 2023 and 2024 has had a material adverse impact on the financial results of the Company as the Naira value of its foreign currency-denominated loans has increased significantly. This resulted in an unrealised exchange loss of ₦157.9 billion, a loss after tax of ₦76.0 billion, and a negative shareholders’ equity position of ₦27.5 billion for the financial year ended 31 May 2024.
In light of the above, the Board of Directors of PZCN (the “Board”) has carefully considered various options to address the Company’s negative equity position which is considered essential to reposition the Company to the path of profitable sustainable growth. This includes settling the outstanding shareholder loan obligation and reducing the overall Company’s exposure to foreign currency fluctuation risk. The Board and PZCH, after extensive discussions, agree that the conversion of a portion of the outstanding loan amounting to USD34.26 million into equity (the “Conversion”) is the most efficient value of debt to be converted into equity and the optimal option for the Company to strengthen its balance sheet and significantly reduce exposure to further foreign exchange losses. The Conversion will significantly strengthen PZCN’s balance sheet and support its future growth without excessive dilution to the interests of minority shareholders.
Following the Conversion, the remaining shareholder loan balance of USD 6 million will remain as a loan payable to PZCH. The terms of the balance of the shareholder loan will not be altered as a result of the conversion. This loan is being provided on highly favourable terms, especially when compared with the current lending rates in Nigeria, which allows PZCN to maintain manageable financing costs while supporting its operational cash flow.
But the market and nay, investors are dealing on the stock cautiously as they believe that this may be a path to preparing the stock to be delisted from the NGX, the moment the parent company has acquired a chunk of the company’s outstanding shares.
Caverton price, on the other hand, rose from N2.40 on Monday to a full bid at N2.95 on Friday.
This may not be unconnected with the press release by the company on the NGX portal where it announced that Caverton Marine Limited, NNPC shipping, and Stena bulk launched a new joint venture.
The press release states inter alia:
Caverton Offshore Support Group Plc (Caverton or the Company) is pleased to announce that The Nigerian National Petroleum Corporation (NNPC) Shipping, Stena Bulk, and Caverton Marine Limited (a subsidiary of Caverton Offshore Support Group Plc) have signed a new joint venture that will transform Nigerian maritime transportation. The agreement, signed in London last week, will create a new tanker operation serving Nigeria and West Africa’s regional and global crude oil, refined product, and LNG shipping requirements. The joint venture partners will create a new company whose objective is to provide top-quality, reliable, and efficient maritime transport. The partners will explore options to create a modern and efficient fleet of tankers, comprising both new and existing tonnage depending on market factors and commercial opportunities in the region.
In the same vein, Livestock feed prices grew from N6.41 on Monday to N7.43 on Friday following the release of their UFS 2024.
The company grew its topline from N20.4b to N41.7b representing a surge of 104%
Its bottom line surged by 858% from a loss eps of 7.67k to 58.19k profit. The action we noticed in the price of the stock last week was the vote of confidence by investors who believed that the worst days of the organization were over.
· How attractive is Lafarge (WAPCO) at N75?
Lafarge Wapco declared a dividend of N1.20k for a stock trading at N75.00. Signifying a dividend yield of 1.6%
Ordinary, the market as a discounting factor would have repriced the stock, albeit, the price traded at N72.50 on Friday before closing back at N75.00.
But the news of a possible business combination of Holcim Group signing an agreement with Hua Xin cement to sell its shareholding in Lafarge Africa plc (“Lafarge”) is still a force to be reckoned with as far as Wapco share price is concerned.
It was rumored that the business combination consummation price may be over N100.00 which explains why the market stayed its action on repricing the stock at the declaration of the paltry dividend.
If the above grapevine information is anything to go by, the stock still has ample room for price appreciation.
· Is Dangote Cement a good buy at N480?
Dangote cement’s 52-week price at N591.10 is currently trading at N480.00. Meaning the price is 23% shy of the 52-week price.
We could recall that while the imbroglio between the Dangote Refinery and the NNPCL lasted, the price of the stock was constantly on full offer.
The Dangote Refinery is engaged in the price of pms reduction from N1,100 in 2024 to N826.00 in February 2025.
That is a positive signal that the load of the refinery on the head of the man is getting lesser by the day. Consequently, he would be chanced to face his other businesses as it were.
The company declared a dividend of N30.00 per share, which is a maintenance of the last declared dividend for 2023.
Dangote Cement on February 18 released a corporate disclosure on the NGX portal informing the Nigerian Exchange Limited (NGX) and all stakeholders that: Dangote Cement PLC plans to invest USD 400 million to upscale a second production line at its Mugher cement plant in Ethiopia. This expansion aims to double the facility’s annual production capacity to 5 million tons and is expected to become operational within 30 months.
For whatever that is worth, the next level of the cement company will be on an upward trajectory.
· Why is Sunu Assurance trending down?
The trending down of the price of the stock may be a result of the nondisclosure of a possibility of a dividend declaration as part of the decisions at their just held Board of Directors’ meeting held on February 21, 2024.
This is earnings season where companies declare dividends. Any company not in compliance with that will witness investors moving their assets from such in search of where their bread would be better buttered.
· What are the stocks to watch?
AFRIPRUD, Ellah Lakes, Ecobank, Fidelity, Dangote Sugar, NASCON, and a host of others.