Trading floor of the Nigeria Stock Exchange

Goddy Egene writes that with more price gainers than losers in 2017, investors are happy that they staked their funds in the stock market

Investing in the equities market provides significantly higher returns compared to other forms of investments. However, it equally carries higher risks, hence many investors, who are risk averse, prefer fixed income.

For three years-2014, 2015 and 2016- the Nigerian equities market recorded a decline, a development that made more investors to go remain in the fixed income securities market.
However, 2017 was a turning point as the market rebounded and delivered significant returns to investors. The Nigerian Stock Exchange (NSE) All-Share Index rose 42.3 per cent, while market capitalisation gained N4.36 trillion to close the year at N13.61 trillion.

In all, 67 stocks appreciated in value, while 38 depreciated. Some of the stocks fetched returns above 100 per cent. The highest price gainer, for instance, Dangote Sugar Refinery Plc posted a gain of 227 per cent, while International Breweries Plc, Fidelity Bank Plc, Fidson Healthcare Plc and Dangote Flour Mills Plc appreciated by 194.5 per cent, 192.8 per cent, 189 per cent and 185 per cent respectively.

According to analysts at Meristem Securities Limited, positive sentiments dominated the Nigerian equities market in 2017 as investor confidence was restored following release of impressive financial scorecards, alongside developments such as the increase of Nigeria’s weighting in Morgan Stanley Capital International (MSCI) Frontier Market Indexes and the introduction of the Investors’ and Exporters’ (I&E) FX window in April which increased the participation of investors in the equities market.

“Given that we expect the Nigerian economy to maintain its steady growth, we do not expect the market to deviate from its current trend, hence, we opine that this positive momentum will be sustained in 2018, albeit at a slower pace on the back of the high base effect in 2017. Positive sentiments dominated the Nigerian equities market in the year as investor confidence was restored following release of impressive financial scorecards, alongside developments such as the increase of Nigeria’s weighting in Morgan Stanley Capital International (MSCI) Frontier Market Indexes and the introduction of the Investors’ and Exporters’ (I&E) FX window in April which increased the participation of investors in the equities market,” MSL said.

Agricultural Sector
A further review of the sectoral performance by MSL indicated that the agricultural sector closed in the positive territory, as the MERI-AGRI index advanced by 66.6 per cent.
“Trailing the banking and services sectors, the sector closed as one of the best performers in the year. Sector breadth was pegged at 2.00x, as two stocks advanced while one declined.

Presco Plc (+70.82 per cent) and Okomu Oil Palm Plc (+68.51 per cent) recorded gains while Livestock Feeds Plc declined by 1.19 per cent.
“The positive outing recorded at the close of the year can be attributed to the price advancements noted on the two large cap counters in the sector, following increased investors’ appetite for the stocks. We expect the positive appetite for agricultural stocks to continue in 2018, to be fueled by the Federal Government’s intervention in the sector in terms of provision of credit facilities in addition to other incentives. We also expect improved performance through increased public-private partnership with sector players, in a bid to achieve self-sufficiency in the production of certain agricultural products,” they said.

Banking Sector
Outpacing all other sectors in the bourse, the sector prevailed as investors’ favorite for 2017, as the MERI-Banking Index, which measures performance of sector stocks in the space, advanced by 81.92 per cent in 2017.
Accordingly, sector breadth closed positive at 4.00x, as 12 bulls outran three bears.
Fidelity Bank (+192.86 per cent) topped the gainers’ chart in the banking sector while recording the third highest return in the entire market. On its trail were Stnabic IBTC Holdings Plc (+176.67 per cent), FBN Holding Plc (+162.69 per cent), UBA (+128.89 per cent) and Access Bank Plc (78.02 per cent).

On the other hand, Jaiz Bank , Wema Bank Plc and Unity Bank Plc were the only counters with negative annual returns as their share price recorded respective declines of 49.60 per cent, 3.70 per cent and 3.64 per cent in that order.
“Active investor participation was seen in the sector, as investors reacted to the inflow of favourable news within the space in a bid to position adequately for short-term and long-term profits.

The sector’s performance was largely anchored by investors’ reaction towards the financial performance and corporate benefits of sector companies. We also note the impact of portfolio rebalancing activities and the year-end rally on the sector, as this drove most counters to their year-highs. In the coming year, we envisage increased participation within the space as we note that the sector is highly suited for speculative trading as well as long-term investments,” the analysts said.
According to them, about the financial performance of companies in the sector, in 2018, they envisage a moderation in profit growth on the back of a decline in asset yield.
“Therefore, even though we expect a positive return at the end of the year, we do not envisage gains as sizeable as that recorded in 2017,” they said.

Consumer Goods Sector
MSL Following a barrage of bullish investor sentiments in 2017, the consumer goods space upturned the previous year’s loss to close the year in the green zone. The NSEFBT10 returned +36.97 per cent in the year, as the sector breadth for the year stood at 2.17x, reflecting 13 gainers and six losers.
DSR topped the gainers’ chart for the year, after recording a share price appreciation of 227.33 per cent. The ticker was trailed by International Breweries Plc (+194.59 per cent), Dangote Flour Mills Plc (+185.88 per cent), NASCON (+117.65 per cent) and Nestle (+92.10 per cent).
Conversely, Seven-Up Bottling Company Plc (-20.95 per cent), Enamelware (-20.80 per cent), Champion Breweries Plc (-15.10 per cent), Union Dicon Salt Plc (-14.17 per cent) and Nigerian Breweries Plc (-8.85 per cent) were the major underperformers for the year.

“The sector benefitted from the all-round improvement in the state of the economy which triggered top and bottom-line growth in the companies, thus boosting investor confidence in sector stocks. In 2018, we expect the positive sentiments towards the sector to be sustained, as the improved FX environment and moderating inflationary pressures should help stem the input costs of the companies and enhance growth in their earnings. We however do not envisage the magnitude of capital appreciation recorded in 2017 to be replicated given the effect of a high base,” MSL said.

Healthcare Sector
According to the investment banking firm, the positive sentiments, which pervaded the general equities market in 2017 was reflected in the healthcare sector, as the sector returned +43.23 per cent, thus, emerging one of the best performing sectors in the year. The sector breadth settled at 2.50x as five stocks advanced, while two declined.

The best performing stock for the year was Fidson Healthcare, as the counter appreciated by 189.06 per cent followed by May & Baker Nigeria Plc , which advanced by 176.60 per cent . Other tickers that recorded gains in the year were GlaxoSmithkline (+37.21 per cent), Pharma Deko Plc (+32.58 per cent) and Ekocorp Plc (+4.98 per cent).
Conversely, Morison Industries Plc recorded the highest decline, shedding 67.88 per cent. Neimeth International Pharmaceuticals Plc fell by 3.8 per cent.

“The bullish sentiments witnessed in the healthcare sector can be attributed to the impressive financial scorecards released by the companies during the year, as most companies recorded remarkable YoY growths, given the improved FX liquidity recorded in 2017. Moreover, the low base effect from the previous year boosted performance considerably. Also, it is worthy to note that Fidson Healthcare and May & Baker particularly witnessed strong bullish activity during the year, as the stocks attained their 5-year-high prices of N3.99 and N5.52 respectively,” they said.
In the coming year, MSL said they expect the positive momentum to be sustained, albeit, to a lesser degree, given the high base effect of 2017.
“We expect the major driver of positive sentiments to be impressive earnings releases, as well as a generally upbeat market mood,” they said.

Industrial Goods
The industrial goods sector was resilient in the year, upturning the losses recorded in 2016, as the MERI-IND index returned +31.14 per cent at the end of the year. As evidenced by the sector breadth which closed at 3.00x, the sector closed the year in favour of gainers, as there were nine gainers and three losers while other counters traded flat.
At the close of the year, CCNN emerged as the top performer in the sector, after advancing by 90 per cent. Beta Glass Plc (+69.23 per cent), Berger Paints
(+32.66 per cent), Dangote Cement Plc (+32.19 per cent) and Portland Paints (+22.22 per cent) also featured on the top gainers’ chart for the year.

On the flip side, PaintsCom was the top laggard for the year, after shedding 9.23 per cent. The counter was trailed by Vanleer (-6.19 per cent) and African Paints (-4.86 per cent).
“The sector enjoyed improved investor confidence in the year as most companies recorded significant gains in their top-line and bottom-line performances. Consequently, the positive sentiments sustained on most of the sector’s stocks drove the sector’s performance in the year,” MSL said.

Insurance sector
Positive sentiments dominated the insurance sector in 2017 , as the NSEINS10 gained 10.36 per cent . Sector breadth pegged at 2.00 with four tickers advanced, while declined while all others traded flat.
NEM dominated the sector for the second consecutive year, gaining 58.10 per cent. Continental Reinsurance Plc, Linkage Assurance Plc and AXA Mansard Insurance Plc appreciated by 41.41 per cent, 32 per cent and 15.57 per cent respectively.

Counters which dragged the sector’s performance in the year were AIICO Insurance Plc and Law Union & Rock Insurance which shed 17.46 per cent and 3.75 per cent in that order.
According to MSL, the positive performance of the sector was reflective of the positive mood in the Nigerian equities market.
“We are optimistic about the growth prospects of sector companies in 2018, given projected infrastructural spending and efforts by the NAICOM to deepen the distribution channels for insurance products,” they said.

Oil and Gas Sector
Despite the negative sentiments that trailed most of the oil and gas ‘ stocks, the oil and gas sector closed the year on a positive note, as the NSEOILG5 index advanced by 5.76 per cent at the end of the year.
There were three gainers and five losers at the close of the year, indicating a market breadth of 0.60x.
Seplat was the best performing stock for the year, advancing 64.80 per cent, trailed by Eterna Plc (+30.97 per cent) and Oando (+27.45 per cent). Conversely, Forte Oil Plc closed as the worst performing stock for the second consecutive year as fell by 48.5 per cent. Other losers were: MRS Oil Nigeria Plc (-36.49), Double 11 (-30.25 per cent), Conoil Plc (-25.29 per cent) and Total(-23.09 per cent).

In their opinion, MSL analysts said the sector’s performance was majorly dragged by weak appetite for some of the sector’s large cap stocks following the unimpressive financial scorecards released in the year.
“We, however, note that the renewed investor sentiment on Seplat in the last quarter of the year pushed the sector index to a positive close. In the coming year, while we envisage improved investors’ appetite towards players in the upstream segment, we expect the sentiments on most downstream stocks to remain largely unchanged. We however expect the performance of some large cap stocks to bring the sector to a positive close at the end of the year,” they said.

Services Sector
The services sector closed the year upbeat, as some counters recorded triple digit growth in the year. The sector performance as measured by the MERI-SER index showed a 68.13 per cent return in the year. The sector breadth settled at 1.40x, as there were seven gainers and five losers.

C & I Leasing topped the gainers’ chart, after recording a 158 per cent. Also trailing the counter with a triple digit price advancement was Newrest ASL Plc(+138 per cent). Other top gainers were Transcorp Hotel Plc(+44.78 per cent), Caverton (+43.33 per cent) and NAHCO (+25.95 per cent).
Conversely, University Press Plc closed as the top loser, shedding 46.23 per cent Other losers were Trans nationwide Express Plc (-22 per cent), Capital Hotel Plc (-10 per cent).