In the outgone year 2017, Dangote Sugar, International Breweries and Fidelity Bank emerged as the best performing stocks on the Nigerian Stock Exchange (NSE). Last year was indeed very good for the local bourse and a number of equities performed relatively well at the market.
For the first time in three years, the Nigerian market closed the year in the positive territory, as the NSE All-Share Index (ASI) returned 42.30 percent year-on-year. Consequently, market capitalisation advanced significantly to close at N13.61 trillion in contrast to N9.25 trillion as at the end of 2016, helped by a combination of capital appreciation, new listings in the form of new companies and rights issues.
Performance across sectors was broadly impressive, with 65 stocks posting price appreciation, while 32 stocks recorded price declines. The share prices of 27 companies gained over 50 per cent of their opening prices in 2017, led by Dangote Sugar Refinery, which recorded the juiciest capital appreciation as it closed the year at N20, from N6.11 it opened, leaving its shareholders 227.33 per cent better. International Breweries followed with 194.59 per cent gain.
This seems an appreciation by the market of the decision of its core investor- South Africa’s SABMiller recently acquired by bigger rival and Belgian giant brewer- Anheuser-Busch InBev SA/NV to merge International Breweries Plc, listed on the Nigerian Stock Exchange (NSE); Pabod Breweries and Intafact Beverages. While Pabod is based in Port Harcourt and was founded by the Rivers State Government, Interfact is located in Onitsha, Anambra State.
Fidelity Bank led in its sector, chalking 192.86 per cent, closing at N2.46 each, Fidson Healthcare gained 189.06 per cent, while Dangote Flour Mills, helped by the decision of Dangote Industries Limited to reacquire majority stake in the company from South Africa’s Tiger Brands, under which the company recorded five years of negative financials. Dangote Flour Mills recorded 101.16 per cent rise in gross earnings at N100.28 billion from N49.85 billion in 2016, while profit notched 175 per cent to N7.81 billion from N2.84 billion in 2016.
Stanbic IBTC Bank gained 176.67 per cent, May and Baker up by 176.6 per cent; FBN Holdings appreciated by 162.69 per cent, while C&I Leasing rose by 158 per cent.
Also, Air Services and Logistics appreciated by 138 per cent. United Bank for Africa’s share price gained by 128.89 per cent, Nascon and Allied Industries rose by 117.65 per cent, just as Nestle closed as Nigeria’s most priced stock, attaining a new all-time peak of N1,555.99 per share, gaining 92.1 per cent.
Also the year closed with Cement Company of Northern Nigeria, Access Bank, Zenith Bank, Diamond Bank, Okomu Oil gained 90 per cent, 78.02 per cent, 73.83 per cent, 70.82 per cent, 70.45 per cent and 68.51 per cent, among others.
Capital market analysts noted that stock prices rose on better-than-expected quarter earnings released in 2017, which particularly bolstered demand. They also noted that the effect of this was enhanced by a review of the Central Bank of Nigeria (CBN) Foreign Exchange policy, leading to the introduction of Investors & Exporters window that boosted FX liquidity, resulting in a relatively stable exchange rate regime which impacted positively on the nation’s manufacturing sector and economic activities, among others.
They added that the positive economic data and companies’ financial results were sustained during the year, reflecting on the prevailing economic expansion that strengthened the market and economic fundamentals that affected domestic and international investor confidence which boosted demand for equities.
Analysts at Cordros Capital added that the companies’ share improved on earnings performance in 2017. Giving an example, they said that the first quarter 2017 results closely mirrored the fourth quarter, 2016 earnings. To be specific, the earnings of consumer goods companies grew 42 per cent year-on-year on average, while those of cement grew by 49 per cent year-on-year and banking appreciated by 40 per cent year-on-year all grew at high double-digits, with agricultural companies with a growth of 133 per cent year-on-year.
Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion noted that banking stocks were among the best performance in the year as a result of impressive asset yields on their portfolio of high yield investment securities and the translation impact of Foreign Currency (FCY) interest income.
He also noted that another positive for the banking index performance in 2017 is the review of the multi-fund structure by Pension Commission (PenCom), which increased Pension Funds Authority’s (PFA) participation in the equities market and increased exposure to the banks within its coverage universe, which constituents of the NSE Pension Index.
Also, analysts at United Capital pointed out that looking back at 2017, it truly was a pleasant year, saying that equities investment returns surprised positively and currently stands above 40 per cent year-to date. They noted further that corporate earnings are turning up and commodity prices are humming along quite nicely.
Looking at 2018, United Capital said despite the recent gains realised, we think strong returns can be achieved in 2018, saying that most of the gains realised in 2017 were driven by large capitalised stocks as expectation for small capitalised stocks to catch up as fundamentals solidify in 2018.
They also noted that even though banks stole the show in 2017, we see little scope for significant outperformance in 2018, but rather, look favourably to the consumer goods sector. With a benign inflation outlook and lower debt burdens, consumers and businesses appear energized.
“Therefore, we expected the consumer goods sector to be the immediate beneficiary of these fundamentals. The biggest elephant in the room is oil. Given the over-dependence on oil, the Nigerian equities market is somewhat sticky to oil price movements. As long as prices remain stable and elevated, we do not see any other bottleneck that can trigger a negative repricing” United Capital analysts said.
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