Get all the latest information on businesses and companies in Nigerian Stock Exchange.

Latest NSE Performance Chart

Here is the latest chart of the performance of the Nigerian Stock Exchange. It is currently at one of the lowest levels in the past year.

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Afrinvest’s Recommended Stocks

Here is a nice article on Business Day’s website on stocks to consider during the bear run in the NSE. It is based on a study by Afrinvest WA using projected gross earning, profit after tax, earning per share dividend per share, return on equity, price earning ratio and dividend yield. Their top stocks are Oceanic Bank, Bank PHB, Afribank, Dangote Sugar and International Engergy.

Oceanic Bank
As at the close of trading August, 2008, Oceanic Bank finished at N21.27 per share. This compared with N 24.54 as at the end June 27, 2008. The bank’s gross earning during the 2007 first year was N74. 5 billion and is expected to rise to N138.24 billion by the end of 2008 profit after tax was N17.55 billion and is expected to grow to N34.1 billion. Each investor earned N1.50 and dividend of N1.02 both of which are expected to rise to N1.76 and N1.21 respectively. Price earning ratio and is currently 20.22 times projected to drop to 13.44 times. The stock’s price is expected to close higher at N38.00 per share by the end of the year.

Bank PHB
Price at N20.79 per share August 11, Bank PHB is expected to appreciate to N38.0 per share. The forecast based on its current and expected performance indicators. The bank’s gross earning as at the close of business in the 2007 first half was N36.16 billion which is expected to grow to N75.4 billion, at the end of the 2008. Profit after tax which was N7.75 billion may grow to N28.7 billion by the end of the second half. Earning per share is expected to increase to N1.37 from N1.20 while dividend per share may hit 80 kobo from 70 kobo. Return on equity is projected to decline from 21.4 percent to 16.5 percent.

International Energy
As at the close of trading August 8, International Energy finished at N3.24 per share, a 69.6 percent increase compared to N1.91 per share June 27, 2008. And the stock may rise to N7.50 if current market sentiment is sustained. The company’s gross earning for 2007 first half is N2.68 billion to increase to N4.7 billion or 76.2 percent by the year end . Profit after tax is expected to rise by 99.3 percent to N1.5 billion from N0.752billon. Earning per share would grow by 75.0 percent to 28 kobo from 16 kobo. Dividend per share by the end of 2008 would be 18 kobo, up from 9kobo while return on investment is projected to rise by 12.9 percent. The price earning ratio would improve from 29.9 times to 13.1 times. Dividend yield is expected to grow by 4.3 percent from 4.7 percent in 2007.

Dangote Sugar
Dangote Sugar Refinery traded at N27.20 per share August 11, compared with N24.80 June 27, 2008. In the light of some recent performance indicators, Dangote could rise to N40 by the end of the year.
The company’s gross earning for 2007 first half was N80.64 billion and is expecte4d to climb by 4.5 percent to N84.3 billion by the end of December 2008. Profit after tax is to leap by 26.6 percent to N27.2 billion from N21.4 billion in 2007 while earning per share which was N2.15 would rise by 26.5 percent to N2.72 billion. Dividend per share is expected to be N2.00 from N1.7. Return on investment is expected to grow by 79.7 percent. The price earning ratio which was 18.1 times in 2007 should drop to 11.7 times.

Afribank
As at the close of business on Monday, Afribank closed at N25.00 per share, as against N22.60 in June. The stock is forecast to rise to N32.00 per share. Afribank is expected to grow gross earning by 72 .2 percent from N27,5 billion in the 2007 first half to N 47.4 billion .Profit after tax is to rise by 77.1 percent from N5.2 billion to N9.2 billion. Earning per share is to drop by 12 percent from N1.02 to N0.89. Dividend would grow from 30 kobo to 50 kobo. Return on investment is to decline by 5.8 percent while price earning ratio would rise from 11.4 times to 27.0 times.

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Mutual Funds In Nigeria

In recent years, there has been a significant increase in the number of mutual funds in Nigeria. ARM and IBTC were the pioneers in the mutual funds industry in Nigeria. My research shows that these two firms displayed the highest level of professionalism. They replied to emails promptly and provided the very detailed information on the requirements to invest in the stocks.

The report below provides the basic information on the available funds – their contact information, minimum required to invest in the mutual funds, the investment distribution. There was very little information available on 2 of the funds, First Bank’s Heritage Fund and Skye Bank’s Shelter Fund. A lot of information was sourced from the fund managers’ websites, online forums, and email exchanges with the companies.

My research shows that the mutual funds industry in Nigeria is still in its infancy and this is displayed by the lack of basic information about most of the funds (by their managers) and the lack of professionalism.

The ARM Discovery Fund had the lowest amount required to invest in it (N10,000). The average minimum required to invest in most of the other funds was N50,000. A lot of the funds did not provide any information on their management fees. ARM charges a management fee of 1.5% while Kakawa does not charge any first line management fee. However, Kakawa gets 50% of the excess return over the guaranteed investment rate.

READ/DOWNLOAD THE REPORT HERE: Mutual Funds In Nigeria (48)

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Stocks (Current Price vs Year Highs)

Proshare prepared a table comparing the stock prices of the companies on the Nigerian Stock Exchange as of June 18th to their year high.
It seems almost all the companies have seen a drop from their year highs to their current prices.
About 30% of the companies have lost at least a third of their values. The biggest culprits are Nigerian Wire Industries (83%), Big Treat (73%), Baico Insurance (73%), Costain (71%), Linkage Assurance (56%), and Nigerian Flour Mills (54%).
This is evidence of huge opportunities for investors who are willing to ride out the current bump ‘cos in the long run, these companies will appreciate in price.

Stock Price Comparison (129)

Here is the analysis of the performance of each of the sectors.

NSE Sectoral Analysis - June 18th (23)

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Stock Recommendations by Lead Capital and Zenith Securities

Below is the of stocks recommended by Lead Capital and Zenith Securities.

The interesting thing is the convergence of their picks. Both pick Oceanic and Skye Banks. In my own opinion, the best in the list are the insurance stocks.

You can read their full recommendation and reasons for their picks in the attached documents.

Lead Capital:
GlaxoSmithKline
Oceanic bank
UBA
Dangote Sugar
Skye Bank

Zenith Securites:
Cornerstone Insurance
Intercontinental WAPIC
UBA
Ikeja Hotels
Nigerian Breweries
Skye Bank
Diamond Bank
Zenith Bank
UAC Properties
Oceanic Bank
CAP PLC
Bank PHB
Ashaka Cement

ZSL Stock Recommendation - June 23rd (37)
Lead Capital Stock Recommendation - June 23rd (36)

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Bank PHB Share Certificate In The Mail

For those who partook of the Bank PHB offer, you can expect your share certificates in the mail anytime soon. Here is the story as published by Proshare NG:

First Registrar dispatches Bank PHB 2007 IPO share certificate

First Registrars Nigeria Limited, Registrars to the PlatinumHabib Bank Plc (BANK PHB) 2007 Initial Public Offer (IPO) last week dispatched share certificates to investors who took part in the offer. Ezekiel Oni, Head of Management Services of First Registrars confirmed this to Proshare NI today in Lagos Nigeria.

“We have already dispatched the BANK PHB 2007 share certificates since last week” Oni said.

However, this was contrary to what sources affirmed to Proshare NI when it visited the Corporate Affairs office of the bank situated at Keffi Street off Awolowo Road in the South West Ikoyi area of Lagos to ascertain the true situation from those in-charge as regards the issue of share certificates of the bank’s offer.

One of the sources at BANK PHB affirmed that the bank has earlier this week sent the share certificates to First Registrars for onward dispatch to investors.

Another source further confirmed to Proshare NI that share certificates of investors who furnished their Central Securities and Clearing System (CSCS) accounts had been lodged in with the CSCS last week.

As at the time of filling in this report, Proshare NI could not get clarification on the issue of return money as regards the offer.

All these are coming on the heels of investors’ complaints to Proshare NI that they have not received either their share certificates concerning the offer or the return money for non-allotment of shares they required from the bank.

In November 2007 BANK PHB sought to raise fresh funds of N85 billion from the Nigerian Capital Market by offering to the Nigerian investing public 5.0 billion Ordinary Shares of 50 Kobo each at N17.00 per share.

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Ecobank Nigeria declares N7.5b profit

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 (37)

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Why insurance stocks should be your long term choice

Here is a great article by Godfrey Obioma on the why you should own insurance stocks:

Why insurance stocks should be your long term choice
by GODFREY OBIOMA

An investor who had taken positions in insurance stocks early in 2007 and sold them late in the year or even early this year made a harvest through capital appreciation. That was because many insurance stocks rallied on the injection of capital through the consolidation exercise and perception that the sector would follow the earlier trend in the banking industry. At the end of the February deadline, many short term investors had rode on the back of the euphoria to anticipate a roller coaster trend. But the story has changed. Investors are now more interested in fundamentals, like earning and profitability. Except for a few, results coming in from that sectors, are not too impressive to drive up prices appreciably. Although there have been improvements, discerning investors think it is not yet uhuru for speculators.

The insurance market in Nigeria is small with low growth . About 70 percent of premium is distributed between marine, general accident and motor insurance policies.. A study by Afrinvest West Africa shows that gross premium increased just by 17.5 percent between 1996 and 2005 and 15.3 percent between 2003 and 2007. The company estimated total market size of N98.8 billion (US$844 million) in 2007. Penetration is low, in the insurance market, with lowest level of market depth in the life insurance product. Afrinvest research shows that of the 20 million people in formal and informal employment across the working population, less than 1million currently hold personal insurance policy.

Compared to banking , securities market and asset management business, the insurance sector is slow with very low inflation adjusted growth in the last 10 to 15 years. To address these problems, .the Federal Government, in September 2005, announced new minimum capital requirement . According to National Insurance Commission ( NAICOM),, the capital requirement for life insurance was increased from N150 million to N2 billion; general insurance , from N200 million to N3 billion while reinsurance was hiked from N350 million to N10 billion.

There is however silver in the horizon as the consolidation exercise has strengthened many insurance companies, created a lot more confidence in the sector. Besides, the economic reform which has boosted economic activities , is expected to drive increase in insurance business. while the increase in bank lending would enhance corporate and industrial insurable assets and gross premium..

Following the consolidation exercise, insurance companies have grown their shareholders funds. Leadway Assurance, for example , has shareholders fund of N9.4 billion; WAPIC Intercontinental N9.3 billion; A11CO N5.9 billion; Niger Insurance N5.5 billion; Gold link N5.4 billion; and Mutual Benefits N4.0 billion.

On the floor of the stock exchange, many insurers have demonstrated strength as their market capitalisation are fairly okey. WAPIC Insurance has market capitalization of N53.5 billion, Goldlink N48 billion; Niger Insurance N37.0; LASACO N34.9 billion, International Energy Insurance N34.9 billion and Cornerstone N30.5 billion..

Insurance companies have some of the highest price earning ratios showing high investment returning period. Notwithstanding, a number of them , are matching the record of banks in this area. The companies with some of the lowest PER are Prestige Assurance with 27.9 billion multiples; NEM Insurance 27.9; International Energy Insurance ;WAPIC Intercontinental 31.8 and Royal Exchange Assurance 35.1.

In terms of gross premium, Leadway has N5.7 billion; WAPIC Intercontinental Insurance N3.2 billion; Niger Insurance N3.1; AIICO N3.0 ; Cornserstone N2.7 billion; Royal Exchange Assurance N2.4 billion; Mutual Assurance N1.9 billion and Staco N1.7 billion.

The new capital levels and mandatory local content policy as well as the compulsory group life assurance under the pension Act are also expected to stimulate growth in the sector.

There are strong indications that some underwriters are tilting towards non insurance businesses like stock market investment, real estate, and oil and gas, which, although detract from , the objective of instilling professionalism in the sector, may on the long run grow bottom-line and investors’ returns.

With so much money pooled by insurance companies, the continuing economic reforms and opportunities for growth in earnings, the market is very bright for insurance stocks and long term investors are likely to reap the good returns.

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Allotment of AIICO Stocks

Below is the allotment for the recently concluded AIICO Offer:

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UAC Declares Audited Year End Results for Period Ended 31 Dec 2007

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FSDH’s 2008 Market Outlook and ‘07 Review

I must commend FSDH for this Market Outlook. One of the most striking things in the document is the fact that 15 of the most capitalized stocks are banking stocks. They represent over 20% of the market capitalization.
When you think of it, that is a very high percentage. It shows that the Nigerian Stock Exchange is highly dependent on the banking sector. While it is good that the economy is growing and that interest in the stock market is increasing, there is a danger of being overdependent on the banking sector.
At least for the first part of 2008, I am projecting that the insurance sector will be the new hot sector.

FSDH 2008 Market Outlook

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Penny Stocks

Here is a write up by Meristem Securities on the facts about Penny Stocks

 

The Nitty Gritty of Penny Stocks

Blue Chip companies are made rather than born contrary to the perceptions of some investors.  They have to work through the different growth phases/business life cycles everyone else. Unfortunately, some investors believe that the best way to ‘dig for gold’ in shares trading is by scouring through penny stocks in hopes of finding the next Japauloil, IPWA, Niwicable,C&I Leasing,Cutix in the early 2007 or Capoil, Afroil, Poly Products in recent times. Some analysts express that this is probably not the best strategy.

Understanding a Penny/Micro-Cap Stock:

Technically, micro-cap stocks are classified as such based on their market capitalization while penny stocks are looked at in terms of their price. Definitions of what stocks qualify as penny / micro-cap vary. In the U.S, stock with market capitalization between $50m and $300 m (N6bn to N36bn) is a micro-cap. (Less than $50 m (<N6m is a nano-cap.) According to the U.S Securities & Exchange Commission (SEC) any stock under $5 is a penny stock.

While all these categorizations are not outlined in any formal /regulatory documents in the Nigerian context, but generally as a norm or market perception, a stock trading at a price range of N1 and N10 is usually considered penny.

The main thing you have to know about penny/micro stocks is that they are much riskier than regular stocks. For instance, junk bonds (bonds with a rating lower than BBB) are considered a much higher risk than those of investment grade (bonds with a rating higher than BBB). In the stock market parlance, equivalent comparison is penny stocks and blue-chip.

What is the Problem with These Stocks?
Market analysts have identified four (4) major issues which make penny stocks riskier compared to other stocks. These are:

Lack of Information Available to the Public:
A fundamental principle that is always preached by many professional analysts is that the key to any successful investment strategy is acquiring enough tangible information to make informed decisions. For micro-cap stocks, information is much more difficult to find. Companies listed on the second and third tiers market are have less stringent requirements especially in relation to disclosures and filling of operational reports with the regulators and are thus not as publicly scrutinized or regulated as those on the first tier board furthermore, much of the information available about micro-cap stocks is typically not from a credible source.

No Minimum Standards:
Stocks on the Second and Third Tier Markets do not have to fulfill minimum standard requirements to remain on the Exchange. Sometimes, this is why the stock is on one of these markets. Minimum standards act as a safety cushion for some investors and as a benchmark for some companies.

Lack of History:
Many of the companies considered to be micro-cap stocks are either newly formed or approaching bankruptcy. These companies will generally have a poor track record or none at all. As you can imagine, the lack of histories of companies only magnifies the difficulty in picking the right stock.

Liquidity:
When stocks do not have much liquidity, two problems arise: first, there is the possibility that the stock you purchased cannot be sold. If there is a low level of liquidity, it may be hard to find a buyer for a particular stock, and you may be required to lower your price until it is considered attractive by another buyer. Second, low liquidity levels provide opportunities for some traders to manipulate stock prices, which is done in many different ways - the easiest is to buy large amounts of stock, hype it up and then sell it after other investors find it attractive (also known as pump and dump).

The Problem for Investors
Penny stocks have been a thorn in the side of the regulators for some time because micro-cap stocks’ lack of available information and poor liquidity make these groups of stocks an easy target for fraudsters. There are many different ways these people will try to part you from your money, but here are two of the most common:

Biased Recommendations – Some micro-cap companies pay individual analysts to recommend the company stock in different media, i.e. newsletters, financial television and radio shows. Look to see if the issuers of the recommendations are being paid for their services as this is a giveaway of a bad investment and make sure that any press releases are not given falsely by people looking to influence the price of a stock.

Off-Shore Brokers– This is does not relate to Nigeria system. In the advanced markets like the U.S, under regulation S, the SEC permits companies selling stock outside the U.S. to foreign investors to be exempt from registering stock. These companies will typically sell the stock at a discount to offshore brokers who, in turn, sell them back to U.S. investors for a substantial profit. By cold calling a list of potential investors (investors with enough money to buy a particular stock) and providing attractive information, these dishonest brokers will use high-pressure “boiler room” sales tactics to persuade investors to purchase stock.

Buying These Stocks
Two common fallacies pertaining to penny stocks are that many of today’s stocks were once penny stocks and that there is a positive correlation between the number of stocks a person owns and his or her returns. Investors who have fallen into the trap of the first fallacy believe NESTLE, OANDO,FIRSTBANK, WAPCO, OCEANIC, ZENITH and many other large companies were once penny stocks that have appreciated to double/tripple digit values. Many investors make this mistake because they are looking at the “adjusted stock price”, which takes into account all stock splits. Rather than starting at a low market price, many of these companies actually started pretty high, continually rising until they needed to be split.

The second reason that many investors may be attracted to penny stocks is the conception that there is more room for appreciation and more opportunity to own more stock. If a stock is at N2 and rises by N1, you will have made a 50% return. This together with the with the fact that a N20,000 investment can buy 10,000 shares convinces investors that micro cap stock are a rapid surefire way to increase profits. For some reason, people think of the upside but forget about the downside. A N5 stock can just as easily go down N2.50k and lose half its value. Most often, these stocks do not succeed, and there is a high probability that you will lose your entire investment.

Conclusion

Sure, some pennies might be of good quality, and many Second and Third Tier Securities are working extremely hard to make their way up to the more reputable First Tier Securities. However, the flip-side is that there many good opportunities in stocks that are not trading for pennies. You need to understand that this is a high risk area that is not suitable for all investors. If you can not resist the lure of micro-caps, make sure you do extensive research and understand what you are getting into.

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