₦airaland Forum

Finally, NSE Indicators Close Positive On Flurry Of Positive Economic News, Data


Market Update for May 16, 2018

After two days in the red, Nigeria’s stock market had green, even if very volatile session on Wednesday on a low traded volume with improved buying pressure. Traders took advantage of low valuations in the midst of impressive economic data as the fiscal authority seems to be waking up to complement the monetary policy stimulus that had supported the economy so far. It is may be too early to link the positive close to Wednesday passage of the 2018 Appropriation Bill, six months after it was sent to the National Assembly, preparatory to been transmitted to President Muhammadu Buhari for assent. The budget passed by both legislative arms is coming with an additional N508bn spending capacity at N9.1tr, just as the crude oil benchmark was raised to $50.5 per barrel, up from $45 originally set.
The Nigerian Stock Exchange’s All-Share Index opened lower early and then rallied back at the mid-morning to usher in five waves which touched intraday highs of 41,027.28 that was the resistance for the day from the low of 40,531.90.
There was also an obvious market reaction to positive economic news likely the continued decline in inflation rate as April report revealed, just as the Federal Government made known its plans to settle debt owed to contractors. There is also the expected release of Nigeria’s Q1 GDP report by the National Bureau of Statistics (NBS), which many macro-economic indices show may come better than previously anticipated compared to the previous quarter.

The renewed interest of foreign participants in the market as revealed by transactions in Nestle, Guaranty Trust Bank, UBA and Nigerian Breweries cannot be over-emphasised. For example, 600,000 units of Nestle was traded at N1,600 per share, while Guaranty Trust Bank’s 20m shares changed hands at N44 each. UBA’s 25m units were crossed at N11.60 and NB, 4.2m shares at N124 per unit.
We have said repeatedly that it is the interpretation foreign investors give to the coming 2019 general elections that will determine the next phase of the market after it had corrected for almost five months in the midst of stronger corporate earnings and improving economic recovery.
Also, the fear of higher yield in the international market is a threat to global market stability. The risk now seems to be bubble in emerging market currencies due to divergence in global monetary policies arising from the widening gap in rates which will create capital flight out of low rate environments into the US where yield, the US$ and oil price are looking up.

Midweek’s market technicals were positive and weak as volume traded were low in the midst of negative market breadth and buying pressure of 93% while selling volume stood at 7% on a volume index of 0.71 of the day’s total transactions. The resurgence of the bull reflected in the money flow index at 63.99 points from previous day’s 56.80 points. This is an indication that funds are entering the market again but we have to watch to see if it can be sustained.

Index and Market Cap
The composite NSEASI gained a strong 377.55 basis points, closing at 40,992.97bps, after opening at 40,615.42 bps, representing a 0.93% growth on a low volume that was higher than the previous day’s. Similarly, market capitalisation was up by N136.76bn to close at N14.9tr from an opening value of N14.71tr, also representing 0.93% value gained to reduce the losing position of investors.
The rebound as mentioned in our earlier was driven by bargain hunter taking position in medium and high cap stocks like Dangote Cement, NB, Nestle, Zenith Bank, Fidelity Bank, ETI, Dangote Sugar, Unilever and AXA Mansard Insurance. This impacted positively on the NSE’s Year-to-Date returns, which rose to 7.19%; while market capitalisation gains for the period stands at N1.21 trillion, stand at 9.04% above the year’s opening value.

Mixed Sector Performance
Sectorial performance for the midweek’s session were largely bullish, except for the NSE Banking and Oil/Gas that were lower as a result of sell pressures in Access Bank, UBN and Forte Oil that pulled down the two indices. NSE Consumer, Insurance and Industrial indexes were higher due to price appreciation in Nestle, NB, Dangote Cement and AXA Mansard.
Market breadth remained negative as decliners outweighed advancers in the ratio of 30:15 to reverse two days down sessions.
Market activities were mixed as volume traded rose by 27.6% to 259.49m shares from previous day’s 203.36m units, while value was marginally down by 1.5% to N4.36bn from the previous day’s N4.43bn.

Transaction volume was boosted by banking and services providers stocks like Diamond Bank, Zenith Bank, Guaranty Trust Bank, FCMB and Tran nation-wide express which witnessed increased trading to top the activity chart.
Cutix and Unilever were the best performing stocks as they topped the advancers’ table, gaining 5% and 4.9% respectively to close at N3.15 and N52.35 each. This was due to expectation Q4 earnings and market sentiments.
On the flip side, Skye Bank and Diamond Bank were the worst performing, losing 9.4% and 9.1% respectively to close at N0.77 and N1.49 each purely on profit taking, non-release of three years financials by Skye, as well as reactions to unimpressive 2017 full year and 2018Q1 earnings reports by Diamond.

Market Outlook
We expect sustain trend as bargain hunters take advantage of low prices in the midst of volatility as investors reposition their portfolios, on the strength of company’s stronger numbers to start the financial year, as economic fundamentals become more robust as reflected in the April consumer price index. The market is expected to also price the news of plans by the fiscal authorities seek National Assembly approval to settle contractors’ debt which will boost economic activities. We expect Q1 GDP and outcome of MPC meeting next week to give direction.
Investors should not panic out of their position but watch events as it unfolds

However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is ongoing and Q1 results are expected in the market arena.
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.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.

Get your home study pack of the INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy, thereby ensuring that you invest and trade with knowledge. You can also access stocks analysed in the home study pack of the Chart Summit held on February 24, 2018, including the 15 stock-picks for 2018 are available now to guide your positioning as trading for the year.
Comprehensive training materials on stock Trading and Investing for Financial Independence series are Available, you can play and watch on your mobile phone, laptop, desktop and TV set. Kindly call or send yes to 08032055467, 08028164086 or 08111811223.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambrose.o@investdata.com.ng
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
https://investdata.com.ng/2018/05/finally-nse-indicators-close-positive-flurry-positive-economic-news-data/#more

Investdata Daily Sentiment Reports

NSEASI buy 93% sell 7% volume index 0.71 MFI 64.00
Aiico buy volume index 1.44 MFI 48.85
CIleasing buy 50% sell 50% MFI 88.64
Dangote flour buy volume index 0.71 MFI 22.32
Dangote sugar buy MFI 31.13
Fbnh buy 63% sell 37% MFI 63.29
Fcmb buy MFI 16.44
Fidelity buy MFI 30.20
GT buy 89% sell 11% volume index 1.08 MFI 40.03
Oando buy 20% sell 80% MFI 42.23
Uba buy 0% MFI 64.80
Ubn buy MFI 86.58
Wapco buy volume index 1.15 MFI 33.36
Wema buy 67% sell 33% volume index 1.98 MFI 21.12
Zenith buy 43% sell 57% volume index 1.06 MFI 56.44

http://investdataltd..com/2018/05/investdata-daily-sentiment-reports_17.html

DEBT RATIO

The debt ratio is a financial ratio that measures the extent of a company’s leverage. It is defined as the ratio of total debt to total assets, represented as a decimal or percentage. It could also be referred to as the debt-to-assets ratio.
Debt Ratio = Total Debt/Total Assets

The higher the debt ratio, the more leveraged a company is, implying greater financial risk. A debt ratio greater than 100% tells you that a company has more debt than assets. Meanwhile, a debt ratio less than 100% indicates that a company has more assets than debt. Debt ratio used in conjunction with other measures of financial health, can help investors determine a company’s risk level.

Investdata Academy
http://investdataltd..com/2018/05/debt-ratio.html

Union Bank Of Nigeria: Mixed Financials, Good For Long Term Positioning


Company: Union Bank of Nigeria Plc
Rating: Long Term Buy
Current Market Price: N6.75
Intrinsic Value: N13.32
Latest Cash Div: NIL
By: Jeariogbe Tunde Segun (Equity Analyst)

Key Financial Tickers
• This report takes into consideration both the full year financial performance indices of UBN ended December 31, 2017 and the first quarter ended March 31, 2018 statistics.
• Leading from the last oversubscribed right issue of UBN the new shares outstanding used in our analysis is 29.120 billion units.
• Between the December 2016 and 2017 financial year, the Non-performing loan (NPL) ratio soared from 6.9% to 19.8%, while the ratio moderated within the first three months of 2018 to 14.9%.
• In its full year statistics, the Retained Deficit dropped outstandingly from N244.183 billion to N14.384 billion. Surprisingly, it increased to N16.710 billion in its 2018 first quarter result. We are of the opinion that the management should pay keen attention to this figure to encourage investors, especially those who faithfully participated in its last capital raising exercise through the right issue.
• Due to the deficit state of the financial institution reserve, it has not been able to reward investors in a long while. We are of the opinion that if the management maintains cautious models through the current financial year, investors’ hope of being rewarded will increase.


Corporate Figures
• Gross Earnings for the 2017 full-year grew by 26.42% over the comparable period of last year, moving from the N129.60 billion of 2016 to the current N163.84 billion
• Similarly, Interest Income estimated at N124.54 billion from the N99.72 billion reported in 2016 financial.
• Net Impairment Charge was N25.609 billion, as against the N17.879 billion in the comparable period.
• Thus, both Profit before and after Tax stood below 2016’ by 1.39% and 5.09% respectively.
• As noted above, there was a retained Deficit of N14.384 billion, as against the N244.183 billion in 2016
• Enhanced by the just concluded right issue, Net Assets value improved by 27.27% to N345.741 billion, compared to the previous N271.670 billion.


Liquidity/Risk Ratios
• The share price of Union Bank is theoretically less volatile than the market. In our opinion, this could be linked to the no dividend status of the bank, traders are likely playing equities with stronger probability of paying dividend.
• Although a financial institution, it currently runs a fair Debt to Equity ratio of 28.69%, slightly above the industry average of 27.17%.


Profitability Ratios
• The amount reported as Interest Expense is same as 35.33% of the Gross Earnings figure, this is 32.01% over the 26.76% estimated in similar period of 2016.
• Profit before Tax (PBT) Margin decreased by 22.00% from similar period of 2016. As can be seen from the table below, PBT is 9.47% of the Gross Earnings as against the 12.14% margin in 2016
• Similarly, Profit after Tax stood below 2016’s by 24.92% as the margin between the profit for the year and the Gross Earnings is currently estimated at 8.92% as against the previous 11.88%
• In other words, 91.08% of the Gross Earnings were used to take care of various expenses through the year. In our opinion, this is evidently on the high side.


Efficiency Ratios
• Gross Earnings to Total Assets ratio was fairly stable through the years under comparison in this report. The Gross Earnings is currently estimated to be 11.26% of the Total Assets, as against the 10.35% estimated last year
• Gross Earnings to Equity was also fairly stable having reduced marginally to 47.39% from the 47.71% estimated in 2016 figures.
• Going by the Financial Leverage of 4.21x, it can be safely concluded that the financial institution has used more debt (as against the equity) to acquire additional assets. Please note that the index only dropped by 8.70% below the estimates in 2016
• Considering the inherent risk in the operating environment, the bank seems to have adopted a cautious approach towards creation of risk assets as the Loan to Deposit dropped by 15.42% from 67.74% to 57.30%


Investment Ratios
• The amount earned per share of Union Bank is currently estimated at N0.50 based on the current 29.120 billion units. The said earning is 44.80% below the N0.90 estimated in 2016 when the outstanding shares were 16.935 billion
• Similarly, Total Comprehensive Income for the period stood below 2016 income by 43.60%
• Since the difference in EPS was far higher than changes observed in the market price of UBN shares, the current earnings only yielded 7.43% of the current market price, this is lower than the 18.18% yield achieved in 2016
• Nevertheless, reasonable investor confidence was achieved within the period, based on the improvement in the PE/Ratio from 5.50x to 13.46x
• Going by the estimated 0.57x Price to Book Value, one could safely conclude that the shares of Union Bank are underpriced, a fact that is further established by the estimated N11.87 Book Value, as against the N6.75 market price as at released of this result.


First Quarter 2018 Financial Indices
• Outstandingly, all income statement improved over corresponding quarter of 2016
 Gross earnings: Up 15% to N39.5bn from the ₦34.3bn posted in Q1 2017,
 Profit before Tax improved over 2016 by 16.01% from N4.661 billion to N5.407 billion
 Profit after Tax equally appreciated over 2016 by 17.02%. Currently standing at N5.288 billion, compare to N4.519 billion last year
• Total Assets dropped by 5.11% from N1.455 trillion to N1.381 billion.
• In the same trend, Total Liability shifted down marginally by 1.28% to N1.095 trillion from N1.109 trillion.
• Net Assets posted for the period is now N285.652 billion, which is 17.38% below the previous N285.652 billion, despite the capital recently raised through the right issue.
• On the strength of the above mentioned
 Profit per share for the reported three months is 18k compared to the 27k earned in Q1-2017
 The said earnings is a marginal yield of 2.69% over the current market price as at the released of the financials
 Book Value dropped to N9.81 below the N20.41 achieved at the end of Q1-2017

Valuation
• Our valuation method considered the zero incentive status of Union Bank over the years
• Thus, we adopted the residual income valuation model with the assumption that the next full year earnings will drop and then remain stable (three-year income considered)
• We arrived at N13.32 per share intrinsic value for each unit of Union Bank.
• On the strength of this we recommend a very long term position in the share price of Union Bank Plc.

https://investdata.com.ng/2018/05/union-bank-nigeria-mixed-financials-good-long-term-positioning/#more

IMF Task Nigeria, Others On Tax Revenue, Public Spending, Jobs, As China Shoots Global Debts To $164tr


A new report Global Debt Database, by the International Monetary Fund (IMF) wants nations across the globe to put in place automatic stabilizers like tax and spending that move in sync with output and employment to operate fully.
These, it said, should be complimented with driving down deficits and debts towards medium-term targets, lamenting the rising global public and private sector debt conundrum.

The report titled: IMF Fiscal Monitor: Capitalizing on Good Times, drew attention to global debts now at a historic $164tr in 2016, representing 225% of world GDP and representing 12% more than the previous 2009 peak. Global debt, unlike in 2009, the IMF noted, is driven this time by China, which accounted for 43% of the increase.
While global debt level stood at $116tr 2007, China’s debt level soared from just $5tr at the time to $26tr in 2016, representing a 420% leap over the period.

According to the IMF, “public debt plays an important role in the surge in global debt, reflecting the economic collapse during the global financial crisis and the policy response, as well as the effects of the 2014 fall in commodity prices and rapid spending growth in the case of emerging markets and low-income developing countries.”
Debt in advanced economies, the report added, is at 105% of GDP on average, levels not seen since World War II, while that of emerging market and middle-income economies, is close to 50% of GDP, levels last seen during the 1980s debt crisis.
For low-income developing countries, average debt-to-GDP ratios have been climbing at a rapid pace and exceed 40% as of 2017, nearly half of which is on non-concessional terms. This has expectedly resulted in a doubling of the interest burden as a share of tax revenues in the past 10 years.

“Underpinning debt dynamics for all countries are large primary deficits, which reached
record levels in the case of emerging market and developing economies,” expressing concern over the high government debt and deficits.
“Countries with elevated government debt are vulnerable to a sudden tightening of global financing conditions, which could disrupt market access and put economic activity in jeopardy.
“Moreover, experience shows that countries can be subject to large, unexpected shocks to public debt-to-GDP ratios, which would exacerbate rollover risks. It is important to note that large debt and deficits hinder governments’ ability to implement a strong fiscal policy response to support the economy in the event of a downturn.

“Historical experience shows that a weak fiscal position increases the depth and duration of recession—such as in the aftermath of a financial crisis—because governments are unable to deploy sufficient fiscal policy to support growth.”
Building fiscal room to manoeuver, the IMF stressed, is especially relevant now that private sector debt is at record highs and rising, drawing attention to excessive private debt in some countries that puts them at risk of an abrupt and costly deleveraging process.
The report called for decisive action “to strengthen fiscal buffers, taking full advantage of the cyclical upswing in economic activity,” helping to protect the economy, both by creating room for fiscal policy to step in to support economic activity during a downturn and by reducing the risk of financing difficulties if global financial conditions tighten
suddenly.
According to the executive summary of the report, the IMF urged all countries “to keep their sights on policies to lift their medium-term growth outlook.

“Indeed, recent fiscal adjustment in some countries has not necessarily prioritized growth-friendly measures, as illustrated by the decline in public investment spending as a share of GDP among advanced economies and commodity exporters.
“Advanced economies should focus on seeking efficiency gains in spending and rationalizing entitlements to make room for more public investment, incentives for labor market participation, and improvements in the quality of education and health services. Some advanced economies would also benefit from broadening tax bases and upgrading the design of their tax systems.”
It urged emerging market and developing economies, to prioritize raising revenue for financing “critical spending on physical and human capital and social spending. All countries should promote inclusive growth to avoid excessive inequality that can impede social mobility, erode social cohesion, and ultimately hurt growth.”

https://investdata.com.ng/2018/05/imf-task-nigeria-others-tax-revenue-public-spending-jobs-china-shoots-global-debts-164tr/#more

IOSCO To Focus On Challenges Of Securities Market Regulation Worldwide


Members of the International Organization of Securities Commissions (IOSCO) rose from its 43rd Annual Conference in Budapest, Hungary, with a resolve to focus on, and proffer solutions to key issues confronting securities market regulation across the globe.
A statement by Efe Ebelo, acting head, Corporate Communications at Nigeria’s Securities & Exchange Commission (SEC), on Tuesday said the public sessions of the conference deliberated on key issues such as the sale of unsuitable products to retail investors; and the challenges of Fintech and digitalization.

The conference also discussed the shift from active to passively managed collective investment schemes, as well as how Small and Medium-scale Enterprises (SMEs) can access the capital market for the much-needed funding.
Speaking at the conference, Ashley Alder, Chair of the IOSCO Board, said members took important steps during the event to advance “priority work in focused areas such as market resilience, financial technologies, and information sharing among securities market regulators, while addressing the biggest risks to investor protection, market integrity and financial stability.”

The board also discussed how best to approach the continuing growth of Initial Coin Offerings (ICOs) and agreed on the need to develop a Support Framework that would assist members as they consider how to address domestic and cross-border issues stemming from coin offerings that could impact investor or consumer protection.
On her part, Acting Director-General of SEC Nigeria, Ms. Mary Uduk assured of the determination of management in advancing the initiatives which she said are aimed at protecting investors, while ensuring fair, efficient and transparent markets, and mitigating systemic risk.

https://investdata.com.ng/2018/05/iosco-focus-challenges-securities-market-regulation-worldwide/#more