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THE NATION WEDNESDAY, SEPTEMBER 18, 2013
THE NATION INVESTORS
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Equities look to Q3 earnings for renewed rally
NVESTMENT managers and market pundits have predicted a renewed rally in the stock market in the weeks ahead on the back of third-quarter earnings reports by quoted companies. As companies round off their operations for the third quarter, market is already expectant of the ninemonth operational results, which most analysts take as windows for preview of full-year earnings and returns. Early filers are expected to turn in their interim results for the ninemonth period ended September 30, this year in October while all quoted companies are generally required to turn in their interim results for the third quarter on or before November 15. The regulatory filing calendar of the Nigerian Stock Exchange (NSE) stipulates November 15 as the mandatory due date for final submission of third quarter earnings reports, although the Exchange may in its discretion grant an extension till December 14.
Stories by Taofik Salako
Post-listing rules of the NSE requires that audited annual accounts of companies should be submitted within three months after the year end while quarterly financial statements are expected to be made available 45 days after the end of the quarter. Investment analysts at Morgan Capital Group said increasing positioning for the third quarter earnings would trigger bullish rally as investors seek to evaluate the dividend potential of the stocks. According to analysts, with the sustained bearishness in recent weeks, investors have largely adopted a wait and see approach with low risk appetites for perceived as the apathy for the perceived volatile banking stocks persist. Analysts noted most investors have chosen the safety of regular dividend paying stocks notwithstanding that some of these regular dividend-paying stock are currently trading at high price-earn-
ings multiples with low dividend yields at current prices. Analysts urged investors to remain focused on stocks with good fundamentals that have the capacity to retain value noting that even when their prices crash, they are the quickest off the mark in price appreciation when the market sentiment becomes bullish. Managing Director, GTI Securities, Mr Tunde Oyekunle, said third quarter earnings reports could provide impetus for a new round of rally as investors anticipate returns by the year-end. According to him, early results for the nine-month period would wet investors’ appetite and enhance the prospects of market’s recovery. The stock market opened this week with a 15-day negative return of -0.42 per cent, showing no letdown in the bearishness that had shaved off about N510 billion in equities’ values in August. The reversal in August had reduced average year-to-date capital gains at the
Nigerian equities market from about N3.03 trillion by the end of July to N2.52 trillion by the end of August. Average returns at the market, as indicated by the All Share Index (ASI) of the Nigerian Stock Exchange (NSE), shrank to 29.10 per cent by the end of August as against 35.03 per cent recorded by the end of July. Average year-to-date return opened this week at 28.56 per cent after it lost 0.84 per cent last week. Nigerian equities had consolidated their bullish rally in July as market capitalisation added N581 billion to throttle back to N12 trillion. Aggregate year-to-date return improved from six-month value of N2.45 trillion to N3.03 trillion by the end of July. After the downtrend in June, the market was particularly spectacular in July with a month-onmonth average return of 5.08 per cent. Aggregate market value of all equities closed July at N12.007 trillion as against its opening value of
N11.426 trillion for the month. The ASI also rose from month’s opening index of 36,164.31 points to close at 37,914.33 points. The stock market had closed the first half with average return of about 28.8 per cent, equivalent to N2.45 trillion in capital gains. Aggregate market value of all equities on the NSE had closed the first half at N11.426 trillion as against its valueon-board of N8.974 trillion that started the year, representing an increase of 27.3 per cent. The ASI had risen from 2013’s opening index of 28,078.81 points to close the first half at 36,164.31 points. The first half performance was moderated by the downtrend in the latter half of June, which saw the month closing as the most bearish month with a loss of N649 billion. Equities had shown brighter performance in the first five months with whooping capital gains of N3.10 trillion. Aggregate market capitalisation of all equities had closed May at N12.075 trillion while the ASI had indicated a five-month average return of 34.6 per cent.
Shareholders to deduct infraction costs from directors’ fees
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•From left: Executive Commissioner, Finance and Administration, Securities and Exchange Commission (SEC), Zakawanu Garuba, Director-General, Ms. Arunma Oteh; Managing Director, Nigerian Sovereign Investment Authority (NSIA), Mr Uche Orji and Non-Executive Commissioner, SEC, Olufunke Abiodun during the SEC Learning Series in Abuja.
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HAREHOLDERS would seek to deduct infraction costs from the fees payable to directors of their companies where such infractions border on clearly outlined rules and regulations. Founding member, Nigeria Shareholders Solidarity Association, Alhaji Gbadebo Olatokunbo, who spoke to The Nation, said they would start to consider carefully the reasons for infractions and the costs related to such infractions at the annual general meeting, decrying what they described as needless infractions. He spoke against the background of report by the Central Bank of Nigeria (CBN) that banks were violating credit reporting rules and the decision of the apex bank to meet any further violations after the reminder and warning with severe sanctions. He said shareholders would hold the directors to account for any violation, especially where it was discovered that existing rules were
Industrial, ethical stocks lead stock market’s returns
NVESTORS who staked their funds on industrial goods and ethical stocks have made almost a double of average return by other investors as non-financial stocks strengthen their increasing dominance at the Nigerian stock market. Year-to-date return analysis at the Nigerian Stock Exchange (NSE) showed that investors in industrial goods stocks and selected stocks that complied with non-interest, low gearing standards of Islamic investments have the highest returns in the stock market. Market’s opening data provided by the NSE on Monday showed that companies that engage in manufacturing of industrial goods such as cement and paints have generated the highest returns for investors. Investors in industrial goods stocks have earned twice the returns in the banking, oil and gas, insurance and consumer goods sectors and they are leading market’s overall average return by some 25 percentage points. The NSE Industrial Goods Index is the benchmark for four subgroups including building materials, electronic and electrical products, packaging and containers and tools and machinery. However, it is dominated by building material stocks, especially cement and paints manufacturing companies. The NSE Industrial Goods Index
consisted of 10 leading stocks out of the 26 companies listed in the sector. The representative stocks were selected based on their market capitalisation and liquidity. The benchmarked stocks included Ashaka Cement, Lafarge Cement Wapco Nigeria, Dangote Cement, CAP, Cement Company of Northern Nigeria (CCNN), Berger Paints, Cutix, Portland Paints & Products Nigeria, Beta Glass, and Paints and Coating Manufacturing Company. The NSE Industrial Goods Index showed a year-to-date return of 53.99 per cent, according to the values-on-board at the start of the market on Monday. Ethical stocks under the NSE-Lotus Islamic Index (NSE-Lotus II) trailed with a yearto-date return of 43.81 per cent, more than a triple of return in the financial services sector. The NSE Lotus II is the first index created to track the performance of Shari’ah compliant equities on the NSE and also the first index to be developed in collaboration with local partners. It was developed by the NSE in conjunction with Lotus Capital Limited. The NSE Lotus II excludes stocks in industries such as alcohol, interest-based financial services, tobacco, arms and ammunitions, gambling, piggery and other businesses regarded by Muslims’ laws as unlawful. The NSE Lotus II is constituted by 15 stocks, screened and selected by
a Shari’ah advisory board. Five of the stocks that constituted industrial index- Ashaka Cement, CAP, CCNN, Dangote Cement and Lafarge Cement also formed part of the benchmarked stocks under the ethical index stock. Others included Cadbury Nigeria, Julius Berger Nigeria, GlaxoSmithKline Consumer Nigeria, National Salt Company of Nigeria, Nestle Nigeria, Nigerian Aviation Handling Company (Nahco), Okomu Oil Palm, PZ Cussons Nigeria and Unilever Nigeria Plc. The All Share Index (ASI), the common value-based index that tracks all equities on the NSE, posted a year-to-date return of 28.56 per cent. The NSE 30 Index, which tracks the 30 most capitalised stocks, has returned 26.23 per cent so far this year. The NSE Consumer Goods Index, which tracks mostly fast moving consumer goods companies, indicated average return of 220.43 per cent while the NSE Oil and Gas Index, which serves as benchmark for the downstream oil sector, recorded a year-to-date return of 23.48 per cent. Financial services indices showed the least returns among the main indices. The NSE Banking index indicated the lowest return of 13.74 per cent while the NSE Insurance Index has returned 13.98 per cent. The report underlined growing concerns about diminishing influ-
ence of banking stocks, which hitherto have domineering influence on the overall market situation at the Exchange. The NSE Lotus II was by introduced by the NSE to increase the breadth of the market and create an important benchmark for investments as the alternative noninterest investment space widens. The NSE had reasoned that NSE Lotus II would serve as an important diversification tool for ethically minded investors and portfolio managers both locally and from around the world, who seek to profitably invest in emerging African equities market. It is also expected to serve as a general benchmark for ‘ethical’ funds and also basis for creating Mirror Funds, Index Funds, Exchange Traded Funds, Index options and other instruments, which would broaden the range of financial instruments being traded on the NSE.
explicit. According to him, the board and management are appointed by the shareholders to ensure that their companies are run under best practices and in compliance with rules. He pointed out that since the shareholders have the statutory mandate to fix directors’ fees at the annual general meeting, shareholders would use their votes to reduce the fees payable to directors in proportion to the infractions during the year under consideration. He said shareholders were aware that regulators usually issue warnings to companies before applying sanctions on subsequent defaults. The CBN had last week warned banks against violation of the Credit Risk Management System (CRMS), which requires all banks to report credit facilities availed to their board members and staff in the CRMS. The CRMS, a central database for credit information on borrowers established by the CBN Act No. 24 of 1991 (Sections 28 and 52) as amended, makes it mandatory for all banks to render returns to it in respect of all credit facilities of N1 million and above. The apex bank said credit facilities availed to board members and staff of banks are not exempted from the CRMS noting that the provisions of Sections 3.4 and 3.5 of the Prudential Guideline for Deposit Money Banks in Nigeria, July 2010 does not preclude banks from reporting credit facilities availed to its board members and staff in the CRMS. In the circular signed by Director, Banking Supervision, Central Bank of Nigeria (CBN), Mrs Tokunbo Martis, the apex banks stated that banks are required to report all credit facilities including principal and interest of N1million and above granted to their board members and staff in the CRMS as well as regularly update these credit facilities monthly. The apex bank stated that it henceforth, any observed breach will attract severe sanctions.
ICSAN holds conference Nov. 5
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HE Institute of Chartered of Secretaries and Administrators of Nigeria (ICSAN) will hold its 37 th yearly conference between November 5 and 6 at the Lagos Sheraton Hotel, Ikeja. According to the Registrar of the institute, ‘Dele Togunde, the
theme of the conference is, The interplay of risk managers and compliance issues in corporate governance. Expected at the event are chartered secretaries and administrators, accountants, lawyers, public servants, and bankers, among others.