Author - mbcfin

Daily Financial Market Report for January 15, 2019

Dear Client/Reader,

Nigerian Stock Market Continues Bullish Trend; ASI Inches by 0.58%                 

The Nigerian Equities Market (NSE) extended its gains to four consecutive trading days as positive sentiments dominated trading activities. The bench mark – All Share Index (ASI) increased by 0.58% to close at 30,137.53 points. Market Capitalization gained N64billion to close at N11.24 trillion while the Year-to-Date (YtD) returns settled at -4.11%.       

Sectors performance was significantly bullish

Performance across sectors was significantly bullish as all sectors closed in green. The Industrial and Insurance sectors recorded the largest gains as they appreciated by 3.11% and 3.50% respectively due to positive sentiments in the shares of CCNN (10.00%); NEM (8.67%) and Mansard (8.33%). Similarly, the Oil & gas, Consumer goods and Banking sectors also advanced by 0.28%, 0.22% and 0.34% respectively due to gains in Oando (5.81%); Dangsugar (3.93%); Access (2.65%) and Zenith (0.69%).

Market activity measured by aggregate volume spiked by 127% while value also appreciated significantly by 199%. Investors traded a total of 300 million units of shares valued at ₦3.25 billion in 3,760 deals. 

NASD Market

The NASD market closed positive after today’s trading activities as the Unlisted Securities Index (USI) advanced by 0.19% to close at 753.83 points. Market capitalization also increased by 19 basis points to settle at N541.58 billion. Market activity measured by aggregate volume increased massively by 8,830% while value also spiked by 2,588%. Investors traded a total of 44,650 units of shares valued at N2.16 million in 4 deals. Wamco Plc, CSCS Plc and NDEP were the traded stocks for today.

Please find attached our daily market report for today, January 15, 2019.


Nestle Nigeria Plc 9M’18 results – Sturdy performance supported by lower costs…

Nestle Nigeria Plc (NESTLE) 9M’18 results – the firm grew its top line by 9.7% YoY to N203.1 billion in the period, in line with our estimate of N207.2 billion (-2.0% deviation). In the same vein, after-tax earnings advanced by 44.1% YoY to N33.1 billion, in line with our estimate of N33.5 billion.

Following its impressive 9M’18 earnings, the company proposed an interim dividend of N20.0/share (vs. N15.0/share in the prior year. This represents a dividend yield of 1.4% based on its last close price of N1,380.0.

Other highlights:

• In Q3’18, NESTLE’s revenue grew by 7.1% YoY to N67.8 billion. According to provided breakdown, the food segment, which contributes c.65% to top line, advanced by 12.4% YoY to N43.9 billion. This offset the shortfall in the beverage segment, which declined by 1.3% YoY to N23.9 billion in Q3’18.

• In the same vein, we note that cost of sales grew at a slower pace (+4.1% YoY) than revenue (+7.1% YoY). We believe this was impacted by the moderation in the cost of some key raw materials, notably sugar, which declined by 22.2% YoY relative to the same period in the corresponding year. All in, gross margin expanded by 1.6 ppts YoY and 1.1% ppts QoQ to 45.1%.

• Down the line, we observed operational efficiency, as EBIT margin was relatively flat in the period at 25.4% (Q3’17: 25.9%, Q2’18: 26.0%). On finance costs, lower FX related losses (-99.2% YoY) accompanied with a 2.0% YoY moderation in finance cost, drove overall finance costs for the period to N1.5 billion (-79.4% YoY). Together with finance income amounting to N551.7 million in the period, the company posted net finance cost of N990.8 million (-84.4% YoY).

• Overall, increased sales growth, manufacturing cost savings and significantly lower net finance costs boosted bottom line growth, as after-tax earnings surged by 81.3% YoY to N11.7 billion in the quarter.

Analyst take:

NESTLE’s ability to continuously drive top line growth despite weak consumer wallets is applaudable. For us, this speaks to consumer loyalty, as well as improved route-to-market strategies. In Q4’18, we expect increased volumes to continue to drive top-line growth, given the festivities during the period. On finance costs, we do not expect further material losses relating to FX, given the stability of the Naira – which should inherently lead to significant decline in finance costs, on a year-on-year basis. In sum, we expect the key drivers for earnings in the coming quarter to remain buoyant revenue growth and further cost savings. NESTLE currently trades at a P/E of 24.94x, a premium to Bloomberg MEA peer average of 19.64x. Based on our last review, our target price for the counter is N1,157.60 (SELL).




Portfolio Rebalancing Likely, As Investors Await March Year-end, Half Year Accounts

The Nigerian Stock Exchange had yet another positive trading session, reversing previous day’s down market, kicked starting the week with increased buying interest that boosted transaction volume, amidst continued repositioning value-laden stocks by traders and investors. This has supported the recovery move in the past one week.

The day started with a gap up at the opening which was sustained till the mid-morning and into noon, following which the benchmark NSE All-Share index hit intraday highs of 38,856.06 from the low of 38,649.41 points. There was however a slight pullback in the afternoon session as the index closed for the day at 38,845.31 on a positive market breadth.

The positive performance of the market is coming amidst new economic data showing that the Nigerian economy is still robust and upbeat, helped by the sustained oil production, helped by peace in the Niger Delta at a time oil price remain high. Therefore, helped by the contribution of oil production and sales, the nation recorded balance of trade surplus in the first quarter of 2018, according to data by the National Bureau of Statistics (NBS) last week. Also, we note recent steps by the fiscal authorities to speed up economic recovery, as the House of Representatives passed approved the government’s plan to issue Promissory Notes to settle contractor’s debts, among others.

However, the continued delay by President Muhammadu Buhari in signing the 2018 Appropriation Bill passed into law last month by the National Assembly is a sore point in the economic recovery drive which is key to the administration’s Economic Recovery & Growth Plan (ERGP).

Market technicals for the day were positive and strong as traded volume was huge in the midst of positive market breadth and strong demand for stocks.  Investdata daily sentiment reports reveals that market players are buying, with pressure at 95% and selling volume- 5% on a volume index of 1.81of the day’s total transactions.

The force behind the buying sentiment for the day slowed down marginally as reflected in the money flow index at 24.26 points from the previous day’s 25.92 points, which is an indication that profit takers are holding funds. Meanwhile, investors and traders demand for medium and high cap stocks remain high.

Index and Market Cap

The composite index on Monday gained 176.08 basis points to close at 38,845.31bps, after opening at 38,669.23bps, representing a 0.46% growth on a huge volume that was higher than the previous day’s. Similarly, market capitalisation was up by N63.79bn to close at N14.07tr from an opening value of N14.01 trillion, which also represented 0.46% value gain that further moved the year-to-date position into green.

If you are hunting for the right stocks to buy on this recovery, join Investdata Buy & Sell Signal setup. We have a watchlist of stocks for different investment purposes that you may position in, as the market sets for another phrase of recovery. To register and become a member send Yes or stocks to the phones numbers below. Our watch list has increased due to the lingering bear transition, take advantage of this service to buy right and sell right.

The upturn recorded at the end of Monday trading session was driven by price appreciations in   low, medium and high cap stocks like Nigerian Breweries, Guaranty Trust Bank, Zenith Bank, FBNH, Access Bank, Flourmills, Oando UBN, Dangote Flour, and Honeywell. These impacted positively on the market and raised the NSE’s Year-to-Date gain to 1.57%; while market capitalisation gain for the period stood at N461.9bn representing 3.39% above the year’s opening value.

Mixed Sector Performance

Sectorial performance was mixed as NSE Industrial and Oil/Gas closed in the red, while other sector indexes closed green and in the same direction with the general market. NSE banking index led the best performers with 1.05% due to value gained in Guaranty Trust Bank, Zenith Bank, UBN and Access Bank, followed by the NSE insurance and Consumer goods as Equity Assurance, Aiico, Niger Insurance, National salt, Flourmills and Nigerian Breweries appreciated in price.

Market breadth was positive with advancers outweighing decliners in the ratio of 30:20 to halt last Friday down market.

Market activities were mixed as volume was up by 187.19% to 603.17m shares from the previous day’s 210.03m units, while value was flat at N3.89bn. The day’s volume was boosted by trading in financial services, consumer goods and hotel services stocks like Ikeja Hotel, United Capital, Africa Prudential, Dangote Sugar and Access Bank that witnessed increased trading to top the activity chart.

National Salt and Diamond Bank were the best performing stocks that topped the advancers’ table, with 7.14% and 6.6% respectively to close at N24.00 and N1.62 each. This was as a result of improving earnings and low price attraction.

On the flip side, Berger Paints and BOCGAS were the worst performing, losing 5% each to close at N8.55 and N4.21 on profit taking.

Market Outlook

We expect the trend to slow down due to profit taking ahead of the forthcoming long holiday. Volatility is likely to continue as investors and other players rebalance their portfolios for March full-and half year earning season as equities remain undervalued with higher yields. Investors should review their position in line with their investment goals and take action as events as it unfolds in the global and domestic environment.

However, we would like to reiterate our advice that investors should go for equities with intrinsic value, especially during this season were less earnings are released ahead of march full year earnings release and Q2 interim dividend payment  are expected in the market arena very soon.
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.

Ambrose Omordion


Market Update

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