Market downturn: Experts seek government intervention, laud NSE’s action

Following the lifting of the regulatory measures to stem the free fall of prices of listed equities by the Nigerian Stock Exchange (NSE), the bearish trend that has been the order of the day in the capital market in the last couple of months returned last week, as the All-share index and market capitalisation both dropped by 9.65 per cent and 9.53 per cent respectively.

Evident in the decline was the fact that investors lost N1.12 trillion from their investments in the NSE, as the value of equities, represented by the market capitalisation dropped from N11.72 trillion at which it opened the week, to close the week at N10.6 trillion. The All-share index, another index for measuring performance of listed securities on the NSE, was not spared either, as it lost 5,809.21 basis points to close at 54,382.21 points from 60,191.83 points at which it opened the week.

To this end, experts in the Nigerian capital market have called for the intervention of the federal government in arresting the current downturn that has been witnessed in the market in the last couple of months.
Speaking in Lagos last week, the General Manager, Lambeth Trust and Investment Company Limited, Mr. David Adonri disclosed that the factors that are responsible for the continuous decline in the market indices and in the prices of shares can only be addressed by federal government, as the major factors are brought about by its activities.

He identified the monetary policies activities of the Central Bank of Nigeria (CBN), the delay in the implementation of the budget and the Niger-Delta crisis among other factors, as being responsible for the persistent decline in the prices of shares.

He said, “The CBN’s operation of the Monetary Policy Rate (MPR), which determines the interest rate to be charged by banks for lending and for deposit is a factor that determines the patronage of investors to the capital market. If the interest rate on deposits is high as a result of the MPR, investors will transfer their funds to the money market.

This has been the case in the past couple of months, as the interest rates have suddenly become attractive. Also, the delay in the implementation of the budget has created uncertainty in the mind of investors, especially institutional investors, who may have decided to withhold their funds from the capital market, while the Niger-Delta crisis, on its own part, have made foreign investors who had wanted to put their money in the country to desist from doing so, making them to take their other investments out of the country, some of which are in the capital market. All these have contributed in one way or the other to the decline that has recorded in the last couple of months.”

He called on the federal government to address the issues so as to restore confidence in the market and to improve the fortunes of the market, stemming the free fall. He also commended the NSE for its role in addressing the situation, stating that such actions are expected of the NSE in such critical situations that are capable of inhibiting the growth of the market.

However, the regulatory authorities have indicated their willingness to address the free fall of the prices of shares and prevent a collapse of the market. The CBN last week announced its determination to help in its own ways in addressing the decline in the market. It stated that it will not hesitate to churn out policies or introduce measures that will return the market on the path of growth and improved returns on investment.

Corroborating his views, Mr. Olufemi Awoyemi, Managing Director, Proshare Nigeria Limited disclosed that the action of the NSE in stemming the free fall in the prices of equities is in order with what is obtainable in other international capital market and does not amount to share price manipulation.

The NSE penultimate week, placed a ban on the downward movement of share prices, stating that any stockbroker who wants to trade a stock at a price lower than its current market price will have to present explanations to the NSE on why it wants to the stock to be sold at a lower price.

According to Awoyemi, “The NSE actions are in line with practices in stock exchanges worldwide. It is right for it to introduce measures that will prevent investors’ confidence from eroded and other factors that are likely to lead to the collapse of the capital market. For example, authorities in the New York Stock Exchange (NYSE) shut down the market for five days after the September 11, terrorists attack. This, according to the authorities was to avoid the collapse of the market which may have been caused by panic arising from the shock and uncertainties that followed.”

He noted that the action of the NSE cannot be called manipulation, but a process of putting check and balances to protect investors from losing their investment.

Meanwhile, Proshare has disclosed that its forthcoming investment and analyst seminar is designed to provide some clarity to burning issues in the capital market and provide investors with a roadmap to engage the market.

To this end, it stated that it has invited a renowned capital market analyst, Chukwuma Biosah, who is also the Chief Executive Officer of InvestIQ, to present its findings via a case study approach and demonstrate the validity of the approach and strategy used to play the market in these trying times.

The seminar which is scheduled to hold in Lagos and Port Harcourt, on June 26 and 21 respectively, is targeted at members of the analysts community and discerning investors who are committed to the capital market as a vehicle for wealth creation and other members of the public.

Meanwhile, Equity trading on the NSE in the week under review appreciated by 41.62 per cent as a turnover of 5.24 billion shares valued at 42.5 billion was recorded in 82,791 deals, in contrast to penultimate week’s turnover of 3.7 billion shares valued at N53.21 billion in 75,133 deals.

Analysis of trading in the week under review shows that on Monday, June 16, 2008, Dangote Sugar Refinery Plc recorded the highest share price gain, rising by N1.31 to close at N27.69 per share from N26.38 per share at which it opened, it recorded a turnover of 9.0 million shares valued at N246.67 million, its Earnings Per Share (EPS) stood at N0.14 while its Price Earnings (PE) ratio stood at 197.79, Costain (West Africa) Plc followed with a gain of N1.29 to close at N27.28 per share, it exchanged 4.31 million shares valued at N117.67 million, it notched a PE of 25.50 and an EPS of N1.07, Nigerian Aviation Handling Company Plc garnered N1.19 to close at N25.09 per share, it exchanged 180,961 shares valued at N4.4 million, it posted a PE ratio of 35.84 and an EPS of N0.70.

BankPHB Plc recorded a PE ratio of 23.40, an EPS of N1.19, a turnover of 63.07 million shares valued at N1.71 billion, a gain of N0.66 to close at N27.85 per share, Berger Paints gained N0.63 to close at N13.41 per share, it posted a turnover of 118,849 shares valued at N1.6 million, an EPS of N0.44 and a PE ratio of 30.48.

On Tuesday, Mobil Oil Nigeria Plc recorded the highest share price gain, rising by N9.37 to close at N196.87, investors traded 115,143 of its shares valued at N22.10 million, its EPS stood at N8.39 while its PE ratio stood at 35.04, Guinness Nigeria Plc followed with a gain of N1.80 to close at N130.00 per share, it recorded a turnover of 178,774 shares valued at N23.63 million, its EPS stood at N7.73 and its PE ratio stood at 16.82, Eterna Oil and Gas Plc garnered N1.66 to close at N34.92 per share, it exchanged 954,851 shares valued at N30.56 million.

Presco Plc notched an EPS of N0.33, a PE ratio of 89.06, a turnover of 2.87 million shares valued at N82.20, a share price gain of N1.39 to close at N29.39 per share, Dangote Flour Mills Plc gained N1.36 to close atN29.05 per share, it traded 1.87 million shares valued at N52.57 million, its EPS stood at N0.14 while its PE ratio stood at 207.50.

On Wednesday, June 18, 2007, Oando Plc recorded the highest share price gain, rising by N8.60 to close at N210.00 per share from N201.40 per share at which it opened, it exchanged 334,899 shares valued at N69.16 million, its EPS stood at N5.62 and its PE ratio stood at 37.37, Presco Plc followed with a gain of N1.11 to close at N30.50 per share, it traded 783,347 shares valued at N23.74 million, its posted an EPS of N0.33 and a PE ratio

STOCKS TO WATCH OUT FOR THIS WEEK

GTBank Plc, First City Monument Bank Plc, International Breweries Plc, Cement Company of Northern Nigeria Plc, Berger Paints, Red Star Express Plc, Omatek Ventures Plc, Transnational Corporation of Nigeria Plc, Unilever Nigeria Plc, Costain (West Africa) Plc, Big Treat Plc, National Salt Company Plc, Fidson Healthcare Plc, Japaul Oil and Maritime Services Plc, Union Homes Savings and Loans Plc, Deap Capital Management Trust Plc among others.

Companies Financial Results at a Glance

Four equity prices were adjusted for dividend as recommended by the Board of Directors. The price of Guinness Nigeria Plc was adjusted for Special Dividend of N6.80 per share. Intercontinental Bank Plc was adjusted for final dividend of N0.40 per share. Mutual Benefits Assurance Plc was adjusted for dividend of N0.06 per share. Equity Assurance Plc was adjusted for dividend of N0.035 per share

New Listing

The 2,941,789,472 shares in favour of Omatek Ventures Plc were admitted to the Daily Official List at a price of N4.90 per share on Wednesday, June 18, 2008 by way of Introduction. The shares were listed in the Computer and Office Equipment sub-sector. By this action, the number of listed companies and securities increased to 222 and 317,respectively.

COMPANY NEWS / LISTING

IKE JA HOTEL PLC; Audited result for the year ended 31 st December 2007 shows Turnover of N5.3 billion as against N4.64 billion in 2006. Profit after tax stood at N697.75 million compared with N525.94 million in 2006. The Directors are recommending a dividend of N0.10 per share. The date of closure of register of members is June 23,2008 while payment date is July 28,2008.

CRUSADER INSURANCE (NIG) PLC; Audited result for the year ended 31st December 2007 shows Gross Premium of N2.2 billion as against N1.21 billion in 2006. Profit after tax stood at N1.45 billion compared with N267.12 million in 2006. The Directors are recommending a dividend of NO. 15 per share. The date of closure of register of members is June 30,2008 while payment date would advised later.

SMART PRODUCTS NIGERIA PLC: Audited result for the year ended 31 st December 2007 shows Turnover ofN 12.54 million as against N 10.6 million in 2006. Profit after tax stood atN3.9 million compared with N2.4 million in 2006. The Directors are recommending a dividend of N0.075 per share. The date of closure of register of members is June 25,2008 while payment date would be announced later.

DN MEYER PLC: Audited result for the year ended 31st December 2007 shows Turnover of N2.1 billion as against N2.01 billion in 2006. Profit after tax stood atN63.8 million compared withN60.75 million in 2006. The Directors are recommending a dividend of NO. 10 per share. The date of closure of register of members is June 30, 2008 while payment date would be announced later.

DN MEYER PLC: Unaudited result for the first quarter ended 31st March 2008 shows Turnover of N491.55 million, as against N483.22 million in the comparable period of 2007. Profit after tax stood at N13.2 million compared with N10.4 million in 2007.

SCOA NIGERIA PLC; Unaudited result for the half year ended 30th June 2007 shows Turnover of N1.32 billion, as against N 1.25 billion in the comparable period of 2006. Profit after tax and exceptional items stood at N777.24 million compared with N20.2 million in 2006.

NAMPAK NIGERIA PLC: Audited result for the year ended 30th September 2007 shows Turnover of N2.85 billion as against N2.7 billion in 2006. Loss after tax and exceptional items stood at N145.92 million compared with profit after tax of N129.52 million in 2006.

NAMPAK NIGERIA PLC; Unaudited result for the half year ended 31st March 2008 shows Turnover of N1.436 billion, as against N1.439 billion in the comparable period of 2007. Loss after tax stood at N183 million compared with profit after tax of N61.74 million in 2007.

NCR (NIG) PLC; Audited result for the year ended 31 st December 2007 shows Turnover of N4.21 billion as against N1.6 billion in 2006. Loss after tax stood at N31.82 million compared with N623.1 million in 2006.

INCAR (NIG) PLC; Unaudited result for the first quarter ended 31st March 2008 shows Turnover of N22.52 million, as against N26.5 million in the comparable period of 2007. Loss after tax stood at M2.2 million compared with N2.3 million in 2007.–Vanguard