Following a surge in demand by investors, and strong fundamentals, 11 bluechip companies out of the 155 listed on the Nigerian Exchange Limited (NGX) dominated the equities market in eight months of 2023, growing their market value by 79.2 per cent during the period.
The companies include: Dangote Cement Plc, MTN Nigeria Communication Plc, Airtel Africa Plc, BUA Cement Plc, BUA Foods Plc and Guaranty Trust Holding Company Plc (GTCO).
Others are; Zenith Bank Plc, Seplat Energy Plc, Nestle Nigeria Plc, Stanbic IBTC Holdings Plc and Geregu Power Plc.
Specifically, the 11 companies are valued at N28.849 trillion as of August 31, 2023, accounting for about 79.2 per cent of the total N36.423trillion market value.
The stock market in 2023 has continued to on a positive trajectory, attributable to President Bola Tinubu foreign exchange policies, removal of fuel subsidies that have attracted more foreign investors participation and impressive corporate earnings by listed companies.
According to THISDAY investigations, Dangote Cement outpaced MTN Nigeria and Airtel Africa to become most value stock on Exchange following its price appreciation in eight months of 2023.
Nigerian cement giant company, Dangote Cement leads with a valuation of N6.13 trillion as of the end of August 2023, followed by MTN Nigeria with N5.76trillion in market capitalisation.
The stock price of Dangote Cement has appreciated by 37.9 per cent or N99.00 per share Year-till-Date (YtD) to N360 per share as of August 31, 2023 from N261 per share it opened for trading.
MTN Nigeria has also gained 27.67 per cent or N59.5 per share to close August 31, 2023 at N274.5 per share.
In third position among the most valuable companies stands Airtel Africa, boasting a market capitalization of N4.96 trillion as of August 31, 2023.
The stock price of Airtel Africa has depreciated by 23.5 per cent to N385 per share as of August 2023 to N1,250.00 per share from N1,635.00 per share it closed in 2022.
The Managing Director, Wyoming Capital and Partners, Mr. Tajudeen Olayinka explained that exchange rate volatility impacted negatively on Airtel Africa’s stock on the Exchange.
According to him, “Airtel Africa renders services to customers in different jurisdictions and enjoys multiple listing across borders, and so, its share price readily reacts strongly to exchange rate volatility across borders, especially, as it affects earnings and earnings prospect.”
With the recent devaluation of the Naira, Airtel Africa had announced that its impact would affect its $1.5million derivative instruments held.
The telecommunication giant revealed that the devaluation in the naira would have a negative impact on its $22million revenues, $12million EBITDA and $7million finance costs (excluding derivatives) in a 12- month basis.
The Central Bank of Nigeria (CBN) recently announced changes to the operations in the Nigerian Foreign Exchange (FX) Market, including the abolishment of segmentation, with all segments now collapsing into the Investors and Exporters (I&E) window and the reintroduction of the ‘Willing Buyer, Willing Seller’model at the I&E window.
It is also worth noting that GTCO also rose to become the most valuable bank on the NGX after surpassing Zenith Bank and Stanbic IBTC Holdings.
The market capitalisation of GTCO closed August 2023 at N1.08trillion as of August 31, 2023 as the stock price closed at N36.7 per share from N23.00 per share it closed in 2022.
GTCO recently announced an historical profit before tax of N327.40billion in the audited half year ended June 30, 2023, an increase of 2217.09 per cent from N103.25billion reported in prior half year ended June 30, 2022.
The Group on the NGX also declared N280.48billion profit after tax in H1 2023, an increase of 261.63 per cent from N77.56billion reported in H1 2022.
Meanwhile, Zenith Bank and Stanbic IBTC as of August 2023 have N1.03 trillion and N842.2billion in market capitalisation, respectively.
The stock price of Zenith Bank closed August 31, 2023 at N32.90 per share from N24.00 per share it share it closed in 2022 as Stanbic IBTC nearly doubled when it stock price closed August 2023 at N65.00 per share from N33.45 it closed for trading in 2022.
Analysts stated that the anticipation of a robust dividend for the 2022 financial year and the fundamentals of Zenith Bank, among others banks attracted foreign investors, stressing that GTCO is reaping from its diversification into Holding structure.
The Vice president, Highcap Securities Limited, Mr. David Adnori stated that the early filing of 2022 financial year result and accounts and dividend payout to shareholders repositioned GTCO, and Stanbic IBTC stocks in the period under review.
According to him, “The Holdings structure of GTCO is now proven to be advantageous and its impact is reflecting on profit declared in H1 2023. However, the stock price of GTCO is still undervalue on the Exchange.”
Analysts at Coronation in a report titled, “Nigerian Banks: A year of Resilience and Grit,” said they believed Nigerian banks currently trade at significant discounts to peers and thus offer an attractive entry point with a further case made by attractive dividend yields.
According to the report, “In 2023 we expect the Nigerian banking industry to face pressures stemming from stringent regulations, high inflation, continuous dollar shortages and even asset quality issues.
“Nonetheless, we expect modest growth in earnings from the banks featured, driven by rising interest rates, a strong contribution from non-interest revenue derived from FX revaluation gains, growth in nonbank businesses and digital banking.”
The firm disclosed that Nigerian banks largely underperformed the broad equity market in 2022 returning only 2.8per cent in price terms vs 19.9per cent for the NGX All-Share Index.
“We believe that the market’s lack of enthusiasm stemmed from a combination of low earnings growth post-Covid and the inability of foreign investors readily to repatriate dividend and capital proceeds.
“We believe Nigerian banks currently trade at significant discounts to peers and offer an attractive entry point with a further case made by attractive dividend yields,” the report added.