Poor Corporate Results Retard Stock Market Rally

18 Feb 2013

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By Goddy Egene and Eromosele Abiodun
The equities market benchmark gauge, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) closed last with week with a decline of 0.17 per cent as investors reacted negatively to the poor results released by brewing giants Guinness Nigeria Plc and International Energy Insurance (IEI) Plc.

Also Nigerian Bag Manufacturing Company Plc, Honeywell Flour Mills Plc, Chellarams Plc, all recorded depreciation in profit for the quarterly results.

But IEI, one of Nigeria’s leading insurance firm many investors expected should do well, reported a loss of N4.6 billion for the year ended December 31, 2011. The performance was a deterioration on the N255 million loss posted in 2010.

Although some investors have been contemplating profit-taking due to the unprecedented rally in the market, a drizzling of the news of the poor results dampened investor ardour.

Consequently, the ASI, which had appreciated by 2.78 per cent the previous week, fell by 0.17 per cent to close at 33,258.45 last week.
Before the decline, the ASI had soared by over 19 per cent within 25 trading days, a situation analysts attributed to the accommodative monetary stance in the United States and other developed economies. The policy, they reasoned, has fuelled portfolio inflows into emerging and frontier markets.
A review of the performance of the market showed that trading had last Monday resumed on a bullish note as investors showed a significant buy interests for stocks in virtually all the key sectors, driving all the sectoral indices upward.

At resumption trading on Tuesday’s loss recorded by Dangote Cement weighed down the ASI, sliding by 0.07 per cent to settle at 33,487.77 points below Monday’s level.

By mid-week, activities in the bourse maintained its downward trend, as the ASI lost by 0.39 per cent to close at 33,355.54. The fall in the Index was as a result of the losses recorded in the share prices of Dangote Cement Plc, FBN Holdings Plc, Nigerian Breweries Plc, Guaranty Trust Bank Plc and Guinness Nigeria Plc. On Thursday, stock prices fell again making it a three straight days of losses as investors continue to cash-out profits on winning stocks.

Last Friday, losses recorded in the share prices of Dangote Cement Plc, Access Bank Plc, ETI, Cadbury Nigeria Plc and Guinness Nigeria Plc, impacted the market negatively leading to the ASI shedding by 0.25 per cent to close at 33,258.45.

As a result, most market indicators closed the week southward. The ASI went down by 0.17 per cent to close on Friday at 33,258.45, while the market capitalisation depreciated by 0.15 per cent to close at N10.643 trillion.

Three of the NSE sectoral indices depreciated: The NSE 30, the NSE Consumer Goods and the NSE Banking by 3.81 per cent, 3.22 per cent and 4.40 per cent respectively, while the NSE Insurance, the NSE Oil/Gas and NSE Lotus II appreciated by 4.19 per cent, 1.22 per cent and 6.03 per cent, respectively.
Market Turnover
Meanwhile, investors traded 4.249 billion shares worth N23.177 billion in 39,391 deals last week on the floor of the exchange in contrast to a total of 3.572 billion shares valued at N24.692 billion that exchanged hands the previous week in 39,321 deals.

The financial services sector continued its dominance as the most active during the week, contributing 76.53 per cent, 61.87 per cent, 60.51 per cent to the total equity turnover volume, value and number of trades respectively in 3.252 billion shares valued at N14.339 billion exchanged hands by investors in 23,835 deals.

Unity Bank Plc from the banking subsector, International Energy Insurance Company Plc and Sovereign Trust Insurance Plc of Insurance Carriers, Brokers and Services subsector of the Financial Services sector was the most active during the week (measured by turnover volume). Trading in the shares of the three equities accounted for 888.791 million shares worth N700.617 million in 2,634 deals, representing 27.33 per cent and 20.92 per cent of the turnover volume recorded by the sector and total turnover for the week, respectively.

The conglomerates sector followed with a total turnover volume of 363.527 million shares worth N964.618 million in 2,053 deals. Similar to the previous week, volume in the sector was largely driven by the shares of Transnational Corporation of Nigeria Plc with a turnover volume of 355.103 million shares valued at N698.511 million in 1,610 deals.

Also traded during the week were 339 units of NewGold Exchange Traded Funds (ETFs) valued at N854,813 exchanged hands in 6 deals in contrast to a total of 539 units valued at N1.382 million transacted last week in 4 deals.

In addition, 6,460 units of FGN bonds valued at N7.970 million were traded during the week in 21 deals. However, there were no transactions in the State/Local Government Bonds and Corporate Bonds/Debentures sectors.
Gainers and Losers
Analysis of the equity price movements indicated that 51 equities gained while 42 equities recorded price declines and 104 equities remained constant. When compared with the preceding week, 73 equities gained while 18 equities recorded price declines and 106 equities remained constant.

The top 10 gainers were: Nestle Nigeria Plc (N20.27), Okomu Oil Palm Plc (N7.63), GlaxoSmithKline Consumer Nigeria Plc (N7.49), Mobil Oil Nigeria Plc (N5.53), CAP Plc (N2.36), New Nigeria Flour Mills Plc (N1.87), MRS Oil Nigeria Plc (N1.58), Conoil Plc (N1.10), Dangote Cement Plc (N1.00) and Berger Paints Plc (80 kobo).

Conversely, the top 10 losers included: Guinness Nigeria Plc (N7.41), Lafarge WAPCO Plc (N5.20), Total Nigeria Plc (N3.99), Forte Oil Plc (N2.41), Flour Mills Nigeria Plc (N2.26), Ashaka Cement Plc (N1.61), Cadbury Nigeria Plc (N1.59), International Breweries Plc (N1.45), Julius Berger Nigeria Plc (N1.00) and Stanbic IBTC Holdings Plc (75 kobo).
Despite the slowdown in momentum last week, analysts believe the downward trend may not last as majority of investors will soon start taking position so as to profit from some strong corporate results from banks and manufacturing firms.

Zenith Bank is expected to announce a dividend increase of over 30 per cent, while the board of Nigerian Breweries Plc this Wednesday to consider the accounts of the company for 2012 financial and recommend corporate action for the year.

Analysts at BGL Securities said: “We do not expect this southward movement to extend for long as investors are likely to start taking positions in view of the corporate earnings season that will start in March. Investors seem to be in high speed with profit taking on winning stocks causing the extended losses in the market, with almost all the NSE sector indices trending downward.
“We observed that speculative investors are cashing out to preserve capital while cautiously seeking the best possible time to re-enter the market. With the gradual entry into the corporate earnings season as the month is folding up, we expect investors to start taking safe bets in the market in anticipation of the strong earnings reports of listed companies. The quoted companies are expected to start filing their audited results for 2012 with the NSE from the early week of March 2013.”

Tags: Nigeria, Featured, Business, NSE

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