Monday, 4 March 2013

Weaker-than-expected Corporate Earnings Jolt Stock Market

By Goddy Egene and Eromosele Abiodun

The Nigerian equities market recorded mixed performance last week as corporate earnings release by Nigerian Breweries and Nestle Nigeria Plc, failed to kindle a demand that could sustain positive run of the previous week.
Oscar-Onyema-18.jpg - Oscar-Onyema-18.jpg
NSE DG, Oscar Onyema
While volume of shares traded appreciated, the Nigerian Stock Exchange (NSE) All-Share Index, which mirrors the aggregate growth of the stock market fell by 2.1 per cent to close at 33,183.20.
One of the major drivers of the stock market early this year was high expectation that companies would turn in highly impressive 2012 financial results and declare high dividends. However, Nestle Nigeria Plc and Nigerian Breweries Plc that were the first firms to announce their results the previous week, did not impress many investors the performance fell below expectation.

Although in absolute terms, the dividends declared were higher than the previous year’s, the dividend yield is below two per cent. This, according to market operators, indicated that the equities might be overpriced at their current market prices.

 The equities market had the previous week sustained its positive run as investors sentiment remained positive for frontier markets in general, and Nigeria in particular.
But trading resumed last Monday on a poor note with the market struggling for direction. The situation was further worsened by investors taking profits on highly capitalised stocks causing a break in the extended gains witnessed in recent days.
The market, however, rebounded on Wednesday snapping the extended the losses of prior trading days as investors’ renewed interests lifted the market.
The growth recorded on the prior trading day was halted on Thursday by another round of profit-taking activities of the speculative investors.
At the close of business for the week last Friday, the appreciation recorded in the share prices of Guinness Nigeria Plc, Dangote Cement Plc, Zenith Bank Plc, ETI Plc and Guaranty Trust Bank Plc, drove the market northward as the benchmark index appreciated by 0.33 per cent to close at 33,183.19 points, compared with the depreciation of 1.96 per cent recorded the previous day.
But the Bull Run on Friday was enough to save the market from closing the week weaker. Analysis of trading numbers released by the NSE showed that the All-Share Index or ASI depreciated by 711.88 points or 2.10 per cent to close on Friday at 33,183.20. Also, the market capitalisation went down by 2.10 per cent to close at N10.618 trillion.
In the same vein, the NSE 30, the NSE Consumer Goods, the NSE Insurance and NSE Lotus II depreciated by 1.89 per cent, 1.26 per cent, 3.59 per cent and 1.97 per cent respectively. However, the NSE Banking and the NSE Oil/Gas appreciated by 0.63 per cent and 1.83 per cent respectively.

Market Turnover A further analysis of trading activities during the week under review showed that a total of 2.280 billion shares worth N24.633 billion in 28,170 deals were transacted last week on the floor of the NSE compared with 2.482 billion shares valued at N22.815 billion that exchanged hands the previous week in 32,471 deals.
The financial services sector was the most active during the week, contributing 67.70 per cent, 58.52 per cent and 55.59 per cent to the total equity turnover volume, value and number of trades respectively in 1.543 billion shares valued at N14.417 billion exchanged hands by investors in 15,660 deals.
The conglomerates sector followed with a turnover volume of 275.094 million shares worth N554.361 billion in 1,530 deals contributing 12.07 per cent, 2.25 per cent and 5.43 per cent to the total equity turnover volume, value and number of deals respectively. The Consumer Goods sector came third with a turnover volume of 138.015 million shares worth N7.719 billion in 4,820 deals.
Trading in the top three equities namely Transnational Corporation of Nigeria Plc, FBN Holdings Plc and Zenith Bank Plc (measured by turnover volume) accounted for 642.568 million shares worth N8.085 billion in 5,325 deals contributing 28.19 per cent, 32.82 per cent and 18.90 per cent to the total equity turnover volume, value and deals respectively.
Also traded during the week were 2,681 units of NewGold Exchange Traded Funds (ETFs) valued at N6.562 million exchanged hands in eight deals in contrast to a total of 193 units valued at N471,970 transacted the previous week in four deals.
In addition, 1,887 units of FGN bonds valued at N2.314 million were traded during the week in 20 deals in contrast to 16,050 units valued at N19.339 million transacted the previous week in 66 deals. However, there were no transactions in the State/Local Government Bonds and Corporate Bonds/Debentures sectors.

Gainers and Losers Meanwhile, 38 equities appreciated in price, while 46 equities recorded price declines and 113 equities remained constant. When compared with the preceding week, 38 equities gained while 55 equities recorded price declines and 104 equities remained constant. The top 10 gainers were: Presco Plc (N3.68), Conoil Plc (N2.10), Ashaka Cement Plc (N1.58), Lafarge WAPCO Plc (N1.40), Okomu Oil Palm Plc (N1.19), Oando Plc (N0.98), NCR Nigeria Plc (N0.87), Zenith Bank Plc (N0.59), Unilever Nigeria Plc (N0.50 ) and DN Meyer Plc (N0.46 ). Conversely, the top 10 losers were: Dangote Cement Plc (N12.1), Nigerian Breweries Plc (N4.50), Nestle Nigeria Plc (N4.00), Cadbury Nigeria Plc (N1.55), Mobil Oil Nigeria Plc (N1.45), MRS Oil Nigeria Plc (N1.45), UACN Property Development Company Plc (N1.10), Flour Mills Nigeria Plc (87 kobo), Berger Paints Plc (72 kobo) and Airline services and Logistics Plc (51 kobo).

Analysts’ Views However, experts believed the significant recovery in market activities towards the end of last week could be attributed to the renewed confidence demonstrated by the investors.

“During the week, we noted investors were cautious with trading while the profit taking activities by the speculative investors caused the setback to market performance. We however expect stability in market activities as the buy interests of investors heightens,“ said experts at BGL Limited.
They added that the market rebounded towards the end of last week because investors were taking position for a possible rally that will herald the release of stronger corporate results this week.

“Expectedly, investors are increasing their buy interests in the market in an attempt to enhance their portfolio positions in view of the anticipated rally in the corporate earnings season. We expect the market to be relatively stable as companies file their full year earnings for 2012 with the exchange. Listed companies especially those in the financial services sector are anticipated to declare impressive full year results based on their last Q3 results. This may likely trigger another significant rally in the market.
“While some investors may be anxious of the persistent drop in market activities, especially as the safe bet stocks are still on the low, a market pick-up is imminent as companies file their full year earnings for 2012 with the exchange. Companies in the financial services sector notably the banks are anticipated to declare impressive full year results based on their last Q3 results. This may likely have a significant positive impact on the market triggering a bull run,“ they stated.
Source: ThisDay

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