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Meristem’s Market Sentiments for the week ended May 30th:

Market Declines by 2.71% Despite a 4 Day Trading Week
The stock market continued in its bearish mood all through the 4-day trading week.  On the aggregate, The NSE All Share Index (ASI) dipped by 2.71% to close the week at 58,929.02 points while the total market capitalization of the 220 listed equities plunged by 2.64% to stand at N11.61 trillion. This divergence in the NSE ASI return and the percentage change in market capitalization was accounted for the new listing of 4.85 billion shares in favour of REGALINS Plc.

In the same vein, a cumulative total of 4.5 billion shares valued at N44.5 billion were exchanged by investors in 67,458 deals in contrast to last week’s trading statistics of 4.43 billion shares worth N55.31 billion traded in 90,400 deals.

Petroleum Sector Leads in  the Week’s Advancers’ Chart
37 stocks appreciated in price this week, higher than the 27 observed last weekend. The petroleum sector topped the advancers chart with OANDO and TOTAL appreciating by N18.81k to close N208.80k and N11.02k closing at N238.98k in that order. However, the losers declined from 92 recorded previous week to 82. CONOIL and MOBIL led the losers’ camp sheddingN14.15k and N10.50k.

Insurance Sector Maintains Strong Dominance
Strong market dominance was maintained by insurance sector to emerge as the most active during the week (measured in terms of turnover), with 3.3bn shares (representing 73% of the aggregate market turnover) worth N8.05bn exchanged by investors in 12,536 deals. Activities in the sector were propelled by high trading in the shares of Investment and Allied Insurance Plc. Trading in the shares of the company captured 85% of the sector’s turnover. The banking sector trailed behind on the week’s activity table with 875 million shares exchanged in 33,667 deals valued at N29.25. Activities in the shares of companies in the Conglomerates sector claimed the third position on the table with 66 million shares traded in 1,855 deals. (Full Update)

CORPORATE NEWS:
ARBICO, JAPAULOIL, WAPIC and Others Post Performance Results
CONTINENTAL REINSURANCE PLC, NIGERIAN BREWERIES PLC, JAPAULOIL PLC, TRIPPLEG PLC, INTERCONTINENTAL WAPIC PLC, ARBICO PLC, JULI PLC, NIGERIAN ROPES PLC, TOTAL PLC, MUTUAL BENEFIT ASSURANCE PLC, IKEJA HOTEL PLC and VITAFOAM PLC all posted their results during the trading week. (Full Update)

REGENCY ALLIANCE INSURANEC PLC Joins the Daily Official List (DOL)
REGENCY ALLIANCE INSURANEC PLC (REGALINS Plc) during the week joined the DOL of the Nigerian Stock Exchange by way of introduction with 4.85 billion ordinary shares of 50kobo each at N1.75k. The trading symbol is REGALINS Plc.

Eternaoil Plc Share Price Adjusted
The share price of ETERNALOIL PLC was marked down for scrip issues of 1 for 5 today. The ex-scrip price is N29.16k.

TRANSNATIONWIDE EXPRESS PLC set to raise Fresh Funds
The share price of TRANSEXPR Plc was placed on technical suspension following receipt of application to embark on new issues.

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Bearish trend depletes investor’s confidence.

The looming market downturn couldn’t be reversed as the bears again held sway for the week under review. The NSE all share index slipped by 189 basis points while total market capitalization plunged by 182%. The disparity in the index and market capitalization was as a result of the listing of 4.85 billion ordinary shares of Regency Alliance Insurance. There was an upside in volume traded with investors staking over 5.3 million units as against 3.94 million traded the previous week. Trades were buoyed by investors’ participation in the insurance and banking sector. The duo dominated the activity chart.

A week characterized with cautious trading, conflicting sentiments and a plethora of results failed in salvaging the downward market trend. United Textile moved northwards with 15.38% price upswing to lead the gainers’ camp. On the flip side, Eterna Oil & Gas slashed 18.55% to lead the top losers’ category. The petroleum marketing stock seems to be at the mercy of profit takers as the stock had rallied in the past. Most stocks in this category were preys to activities of bargain hunters and market correction.

The bulls failed to come out of the woods in the banking sector as prices of most stocks continued their downward trend. Bank PHB was the most affected as the stock shed 13.22% to close at N22.98. With the exception of Intercontinental Bank, Ecobank, Fidelity Bank and Skye bank, others recorded price declines. The bearish mood of this sector is one of the factors mitigating the expected market rebound as it accounts for about 60% of total market capitalization.

In the agro-allied sector, Presco sustained its bullish run chalking up 11.23%. It appears investors are still excited about the proposed corporate action. The agro-allied concern is proposing a cash dividend of N0.25k and a bonus of 1 for 1 for its investors. Afprint on the other hand shed 10.10% to close at N5.25 while Okomu oil suffered a 1.64% marginal price decline. Automobile concern Dunlop also moved with the bearish market mood, the stock slashed 3.43% at the end of proceedings.

A rather stagnant Breweries and Beverages’ sector in terms of price movement saw the bears on rampage for the week under review as most stocks plunged in prices.

7up was the most hit as the stock shed 9.73% to close at N53.26. Guinness and Nigerian Breweries suffered marginal declines as they both lost 0.38% and 0.10% respectively. Nigerian Bottling Company moved against sector trends to notch up 1.30%. The stock closed at N63.00.

The cement sector has been experiencing some sort of price volatility in recent times. A rather sluggish sector in terms of price movement reflected the downbeat outlook of the market. Ashaka’s free fall saw the stock losing 7.39%. Benue Cement and Lafarge Wapco also plunged 3.67% and 3.45% respectively while Cement Company of Northern Nigeria moved against sector trend with a 1.30% hike in price.

In the chemical and Paints sector, discordant sentiments were recorded as some stocks surged in prices while others suffered price depreciation. CAP closed on the fortunate side with a 5% upswing. While investors were indifferent to DM Meyer as the stock closed on a flat note. IPWA shed 9.59% to close at N6.60. In the construction industry, Julius Berger closed the week on a flat note while UAC properties got a 4.84% boost in price to close at N27.50.

Conflicting sentiments were reflected in the Consumer Goods’ sector. Sanction-plagued conglomerate-Cadbury was again the major loser in the consumer goods sector. The stock plummeted 5.52% to close at N34.20. Dangote Sugar and Dangote Flour also recorded price declines to close the week at N33.87 and N26.59 respectively. While Nestle, PZ and Unilever all scooped up 3.21%, 4.48% and 3.28% respectively.

The pendulum of activities in the Healthcare sector swung towards the bears as most stocks lost points. Neimeth International shed 10.22% for the week under review. GlaxoSmithkline, Nigeria-German Chemicals and May & Baker all recorded 2.65%, 4.97% and 5.97% price declines respectively. This sector seems to be experiencing a form of price correction as most stocks had rallied in the past.

Market tussle saw the bears almost matching the bulls as mixed fortunes were recorded in the petroleum marketing sector. African Petroleum is still currently under technical suspension following the application for a hybrid offer. Chevron closed the week on a flat note. Total and Oando recorded 4.83% and 4.67% price upsides respectively. The former released its first quarter result ended march, 2008 for the week under review. The oil marketing company grew its top and bottom line by 20.78% and 31.63% respectively. On the flip side, Conoil and Mobil recorded 6.99% and 5.00% price depreciations respectively.

The bears were agog in the insurance sector as most stocks recorded price downswings. Newly listed Invest and Allied Insurance continued its aggressive bullish run with 14.71% price hike. The stock closed the week as the third best performing stock. The fringe insurance company was listed at N1.30 but as continued to rally since then.

What appeared as resurgence some weeks ago seems to be a mirage as the bulls are still no where in sight. Analysts have attributed the lingering downbeat mood to several factors but the market still remains impervious to the attractive prices of most stocks. The lingering market downturn might persist for a few more trading days as the market continues to correct itself.

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Results for Nigerian Breweries, Tripple Gee, Intercontinental WAPIC, and JaPaul.

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Find attached a report analyzing UAC Properties Q1 results. Here are some highlights:

1. Turnover grew 52% to N1.64b.
2. 33% improvement in PBT margin as PBT grew 81% to N545.7m.
3. PAT grew 81% to 371m.
4. Reduction in the Total Cost as a percentage of turnover.
5. FSDH predicts that the company should surpass last year’s bottomline by a wide margin.
6. Income was from 2 major sources - business properties and residential properties.

UPDC Q1 Analysis (10)

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The Nigerian Stock Exchange (NSE) recently issued directives stating that "any company seeking to be listed by introduction on the NSE shall make 10% of its outstanding shares available on the day of listing for market making". This was to prevent the undue price appreciation and manipulation. They also directed that "the quantum of shares to be transacted before prices could be moved in either direction shall be 100,000 units".

In lieu of this development, UBA Capital Market conducted a research on the effect of this rule studying 17 stocks that had been listed on the NSE over the last year. Here is an excerpt of their report and findings.

On Wednesday, April 23, 2008, the Nigerian Stock Exchange (NSE) directed that any company seeking to be listed by introduction on the NSE shall make 10 percent of its outstanding shares available on the day of listing for market making. The need to ensure liquidity and prevent undue price appreciation arising from trading interference was cited as the primary consideration for the directive. Meanwhile, the NSE had earlier directed that the quantum of shares to be transacted before prices could be moved in either direction shall be 100,000 units.

We believe the NSE’s position was informed by the prevalence of rampant and substantial capital gains recorded by newly listed equities within a short period of listing on the exchange. According to the NSE, the prices of such stocks soared regardless of their fundamentals – and liquidity – which gives a general impression that the stock prices are being manipulated.

In our assessment of the new rules, we considered 17 stocks that were listed on the NSE over the last 52 weeks. On the whole, the basket of stocks increased by 104.19 percent within a month of listing on a cumulative daily volume of 2.8mn units.

Effectively, 65 percent of these stocks doubled within a month of listing while 82 percent recorded capital gains in excess of 50 percent within the same period. The foregoing underscores the fact that when companies are listed by introduction, the shares are not readily available to the public but held in the hands of a relatively few number of individuals and corporates, especially for companies that have done private placements. Therefore, the subsequent scarcity of the shares upon listing drives up the price regardless of the company’s fundamentals.

Here is the report: Review of NSE Guidelines (9)

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Results for Ikeja Hotel, Nigerian Ropes, Mutual Benefits Assurance, Vitafoam, Total and Staco Insurance:

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Lead Capital just prepared a wonderful report on the Cement Industry in Nigeria. They provide an analysis of the industry explaining the challenges and opportunities within the industry. They author also provides recommendation on some of the stocks.

Here are some highlights:

1. There is the problem of demand vs supply inequality. Supply has not been able to meet the ever growing demand.
2. Local production has remained at 50% of installed capacity with an annual growth rate of 3%.
3. A major challenge facing the industry is the lack of sufficient funding to carry out operations on a large scale.
4. The industry has the potential to contribute to the larger economy as it can be a major employer of skilled and unskilled labour, a vehicle for foreign direct investments, and a tool for infrastructural development.
5. WAPCO has the largest market share with 55% of the market, Ashaka Cement with 31%, and CCNN and BCC with 14% of the market.
6. Nigeria’s cement consumption is one of the lowest in Africa.

Download the report here: Cement Industry Report (30)

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Financial Nigeria is reporting that the CBN may adopt a new supervision model for banks in Nigeria.  Here is the report:

The Central Bank of Nigeria (CBN) may have begun moves to develop a home grown supervisory model that takes into account international  requirements and standards in banking supervision.

Indications to this effect emerged from a presentation that a Special Assistant to the Governor of the CBN on Banking Supervision made to the Bankers’ Committee during recent meeting of the body.

Coming from a close aide of the governor, some industry analysts see the development as a prelude to the unfolding of a supervisory approach that tries to harness the current consolidated supervisory approach and a home grown approach.

Last year, the apex bank rolled out a consolidated supervisory approach, which ensures that banks and their subsidiaries are treated as a group for effective supervision. Besides, it ensures that credit processes are consolidated so that warning signals can be sent out on time.

THISDAY gathered that the CBN governor’s aide canvassed the view that both the regulator and the operators should have the same expectations on supervisory activities. He also stressed the need for the Banking Supervision department, the CBN and the operators to work together to ensure a safe and sound financial system for Nigeria.

His presentation, which dwelt on Basel 2 and consolidated supervision, covered several areas, noting that the initial perceptions being that there was huge growth in the industry and the attendant high level of shareholders’ expectations. The other major issues he addressed were risk management, corporate governance, overheated real estate values, among others.

He said the success of supervision depends on the quality of the exercise. To ensure that supervision achieves the objectives it is meant to achieve, the CBN official suggested building of institutional capacity in the Banking Supervision of CBN, redefining the role of supervision, employing risk based supervision and consolidated supervision.

Besides, he called for the strengthening of corporate governance and risk management systems in banks, as well as an enabling legal framework that will facilitate supervision. Following the conclusion of the reforms of the banking sector and the emergence of mega banks, the calls for a new supervisory approach have become more strident. The calls are based on the fact that banks need to be more closely monitored now to prevent the possibility of them going under to avoid loss of investment by shareholders and other stakeholders.

Source: Thisday

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Tribune newspapers is reporting that Oando has concluded plans to raise N30billion for expansion. Here is an excerpt of the report:

IN pursuit of its expansion and growth drive, Oando Plc said it had concluded plans to raise $250 million (about N30 billion) from both local and international markets. Mr. Adewale Tinubu, Group Chief Executive of Oando, who made this disclosure at the company’s Annual General Meeting on Tuesday, said the fund would aim at developing down and upstream businesses into a world class facility.

He said the money would also enable the company to play a dominant role in the gas service sector of the economy. “Gas service station will be located in the same way we are having petrol stations in the country,” he said. Tinubu, who said about 300,000 hectares of land had been acquired in Lagos for the building of a local refinery, noted that existing shareholders of the company would be given preferential treatment during the company’s offer.

He explained that the $250 million would translate into 49 per cent divestment of the company’s group equity holding earlier being rumoured.

The trio of Chief Adeyemo Oyepeju, Sir Sunny Nwosu and Francis Oji, all leaders of various shareholders groups, said shareholders of the company would always abide by whatever decisions the management would take to grow its fortunes.

In another development, Ecobank Nigeria Plc has declared a profit after tax of N7.5 billion for the financial year ended December 31, 2007. The company will also hosts its shareholders to its annual general meeting in Lagos today.

This figure, compared to the 2006 results, represents 109 per cent growth. According to the annual report of the bank, it enjoyed a year of unprecedented growth in 2007 as its gross earnings grew by 90 per cent to N33 billion from N17 billion recorded in the preceding year.

The bank’s profit before tax hit N10 billion, representing a 101 per cent increase over previous year’s figures, while the operating ratios also generally recorded positive improvements.

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Ecobank released its results for the first quarter.
The company declared a profit after tax of N7.5 billion for the year ended December 31st, 2007 representing 109% growth over 2006. The highlights are:

1. Gross earnings grew by 90 per cent to N33 billion from N17 billion recorded in the preceding year.
2. The bank’s profit before tax hit N10 billion, representing a 101 per cent increase over previous year’s figures.
3. The operating ratios also generally recorded positive improvements.
4. The bank’s balance sheet rose 136 per cent to N311 billion.
5. Operating expenses grew on account of renewed expansion initiative during the year and the implementation of a new banking operating software.
6. The bank renewed its growth plan with the opening of new branches and the purchase and assumption of branches of Hallmark Bank in liquidation.
7. Ecobank at the close of 2007 operated from 197 branches against the previous year’s 131 branches.
8. Outstanding performance is attributed to more efficient operations and processes resulting in increased customer base, more robust loan portfolio and commitment by all the stakeholders.
9. This level of performance was made possible by increased funding base, which translated to growth in volumes, and improved asset and liability management.
10. Dividend of 24 kobo per ordinary share of 50 kobo held.

The report is attached here: Ecobank Q1 2008 Results (16)

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Find attached the weekly stock market reports prepared by NSE Pro, Lead Capital, and Zenith Securities.
Zenith Securities Weekly Report - May 23rd (7)
NSE Pro Weekly Report - May 23rd (12)
Lead Capital Weekly Report - may 23rd (9)
TRW-Weekly Stock Report - May 25 (15)
FSDH Weekly Report - May 25 (19)

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Find below FSDH’s analysis of the Q1 results for Mobil PLC.

Mobil Q1 Results (4)

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