Kayode Tokede
On the backdrop of closing positive in 2021, the value of 10 most capitalised stocks on the Nigerian Exchange Limited (NGX) gained N532.66billion despite the decline in BUA Cement, Stanbic IBTC Holdings Plc, Guaranty Trust Holdings Plc (GTCO) and Nigerian Breweries Plc market values.
The other most capitalised stocks on Value of 10 Highly Cap Stocks Gain N532.66bn Amid Decline in Others in 2021 include Dangote cement Plc, MTN Nigeria Plc, Airtel Africa Plc, Nestle Nigeria Plc, Zenith Bank Plc, and Lafarge Africa Plc.
The 10 most capitalised stocks are from Industrial Goods and banks with three representations each, while the Information Communication Technology (ICT) and Consumer Goods Sectors accounted for two companies.
Analysis of the equities market activity showed that the positive gain recorded by Dangote Cement, MTN Nigeria and Airtel Africa impacted on the overall market capitalisation as it appreciated by N1.24trillion to close at N22.297trillion in the year under review as against N21.057trillion in 202.
Thus, the NGX All-Share Index went up by 6.07 per cent to 42,716.44 basis points from 40,270.72 basis points the stock market opened in 2021.
Analysts believe foreign investors’ participation in the trading of Dangote Cement; MTN Nigeria and Airtel Africa stocks drive price appreciation.
According to the Chief Economist/Head, Investment Research of PanAfrican Capital Holdings, Mr. Moses Ojo, impressive corporate earnings and dividend pay out to shareholders contributed to these companies’ price appreciation in 2021.
According to Ojo: “The three companies are the largest companies by market capitalisation on the NGX. If these companies record one per cent gain, it will affect the direction of the stock market.
“The financial results of these companies have been impressive despite foreign and domestic challenges. Despite reporting high operating cost, the likes of MTN and Airtel Africa have maintained robust fundamentals.”
The Chief Operating Officer, InvestData Consulting Limited, Ambrose Omorodion attributed stock price appreciation in these companies to stability and its classification.
He said: “Investors are always after highly capitalised stocks across the world. These are companies where Pension Fund Administrators, foreign and high network investors are ready to take positions. These companies are defensive stocks and they control over 50 per cent value on the NGX.
“In the nine months unaudited result and accounts, the likes of Dangote Cement and MTN Nigeria have maintained impressive corporate earnings and it drive stock price appreciation on a short or long run. MTN Nigeria’s income from data revenue has shown attractive growth and investors are reacting based on the company’s drive to capture 5G data.”
Appreciation in Dangote Cement, MTN Nigeria and Airtel Africa contributed 92 per cent to overall market capitalisation in 2021 with the three combined accounting for N1.146trillion market capitalisation.
The breakdown revealed that MTN Nigeria by market capitalisation gained N551.6billion in 2021 when it stock price opened at N169.90 and close at N197.00 per share.
Dangote Cement stock price opened 2021 at N244.90 to close at N257, translating into a market capitalisation gain of N206.19, while Airtel Africa stock price added N103.2 to drive market capitalisation by N387.84billion in 2021.
The other companies that gained in market capitalisation in the year under review include Nestle Nigeria; N40.8billion; Zenith bank, N10.99billion and Lafarge Africa, N23.19billion.
The gain in Zenith Bank, among other banks stock boost banking index performance in 2021 as it gained 3.32 per cent to close at 406.07 basis points.
Conversely, BUA Cement, one of the highly capitalised stocks recorded most investors’ profit-taking in 2021, dropping by N348.8billion.
The stock price of the cement manufacturing company dropped by N10.30 to close 2021 at N67.05 from N77.35 it opened for trading this year.
Capital market analyst, Mr. Rotimi Fakeyejo stated that BUA Cement’s 13.3 per cent decline in stock price was related to its Basic Earnings Per Share.
The company closed nine months ended September 30, 2021 with N0.66 Basic Earnings Per Share as against N0.55 recorded in prior nine months of 2020.
Fakeyejo explained, “For BUA cement, the stock price in 2021 was not commensurate with the company’s Basic Earnings Per Share and investors decided to the selloff.”
On its part, GTCO dropped by N186.89billion in market capitalisation, while Stanbic IBTC Holdings also dropped by N104.3billion in 2021.
Fakeyejo explained further that: “The Holdco structure put a selling pressure on GTCO stock in 2021 couple with unimpressive nine months results. It is expected that most PFAs will divert from GTCO stock until after five years. Based on that, a lot of investors started taking profit-taking in GTCO, leading decline in 2021.
“Also, the poor performance of Stanbic IBTC Holdings in nine months of 2021 discouraged investors, a major reason for the decline in stock price recorded in 2021.”
Analysts however pointed out that profit-taking in multinational companies over foreign exchange scarcity impacted on Nigerian Breweries stock price in 2021.
The market capitalisation of Nigerian Breweries dropped by N47.98billion when it stock price depreciated by 10.7 per cent in 2021.
Analysis of the stock revealed that Nigerian Breweries market price opened 2021 at N56.00, dropped by N6.00 to close at N50.00 per share as at December 31, 2020.
Speaking with THISDAY, doyen of the market, Mr. Rasheed Yusuf said highly capitalised companies listed on the NGX in 2021 faced numerous domestic and foreign challenges.
He noted that the stock market performance is a reflection of the operating environment orchestrated by COVID-19 pandemic.
According to him: “The performance of companies’ stock price is a reflection of current economy reality and as you likely know, the pandemic brought the world economy to a standstill in 2021. The dominant concern was based on how to survive, coupled with virtual communication.
“I think the underline consideration is operating environment and how many companies were able to survive. Most of the companies on NGX have done well despite profit-taking in stock prices and weak corporate earnings. I think we should commend these companies for surviving 2021 macro economy challenges and be hopeful that in 2022, we should be looking at improved appreciation in stock prices.
“Our expectation should be, with the ease of movement with the benefit technology has also opened new ground, therefore, 2022 should be a year of manifestation of impressive corporate earnings and foreign investors returning to the stock market.”
The Vice President, Highcap Securities Limited, Mr. David Adnori, the weight of highly capitalized stocks listed on the NGX do contribute immensely to the performance of the NSE ASI and market capitalisation on daily basis.
Adnori said: “More importantly, this weighty contribution to the performance is more reflective in the market breadth position recorded in any trading day activities. Despite a negative market breadth, a positive movement in the stock price of any of the highly capitalized stocks could drive the NSE ASI to positive territory and sometimes, the reverse is the case.
“These companies’ performance is a reflection of the Nigeria economy and we expected foreign and domestic investors to trade caution in some of these companies.”
Adnori added that the stock market in 2021 faced volatility, especially from foreign investors as interest in fixed income securities improved.
He noted that the double-digit inflation, foreign exchange scarcity, and security were concerns to foreign investors, stressing that most of the highly capitalised were affected by these factors in 2021.
