Rising Oil Prices may Lift the Market
- By Paul Chukwu
- Published March 22nd, 2009
- Back Page
- Unrated
The week ahead
WITH the emphatic pronouncement of the government that it will not intervene in the stock market, operators, regulators and shareholders are figuring out the way forward. Those who were lax before the pronouncement have revved up their engines. And everything seems to be upbeat now. The thinking now in the stock market circles and especially among the regulators and the operators is “if everybody has rejected us, at least we can’t reject ourselves”. And Musa Al-Faki, director general of the Securities and Exchange Commission and Prof. Ndi Okereke-Onyiuke, director general of the NSE, were all emphatic in their pronouncement when they said, “our market cannot crash”. The optimism is being echoed in every stockbroking firm. The managing director of Peace Securities, Mr. Willie Ndata surmised everything by affirming that our market will not crash because the fundamentals of the companies are strong. For the stockbroking firms, he said that the worst that could happen is for houses to merge or be acquired; but for the market to crash is out of the question.
A couple of stocbroking firms have either been reducing staff strength or bringing on new but wealthy partners to inject more money into their operating account. Three days after the pronouncement by the government that there’ll be no bailout for the capital market, Al-Faki, said the need for brokerage houses to re-capitalize has become all the more imperative considering the fact that every stakeholder has to play its positive role to bring the market to an early rebound. He stressed that the recapitalization that was suspended will definitely take place. He assured every investor of the robustness of the Nigerian capital market. He stressed the believe that a market like Nigeria’s that has a concrete source of natural revenue – oil, needed by both the local and international community, and with a large market yet untapped, is an investor’s delight anytime any day. He also reminded investors that a study by the World Bank has emphatically said Nigerian banks and its institutions have not been adversely hurt by the global meltdown as people were thinking. Therefore, he concluded, “we only have to work as a team to shore up this market.
Thus from the foregoing, analysts and operators cannot but urge investors to go ahead and invest. Now that no help is coming from the source expected; it might even recover faster than envisaged. The market right now is relying on the budget as the surest source of strength. Others are happy that the price of crude oil is inching upwards. “These two factors lift the spirit” says an operator in the market.
As every investor is waiting for the rebound any investment should be made based on expected profitability. There are stocks that definitely show signs of profitability even before they enter their next quarter. In the market now, there are two kinds of investors –those who off-load and run away, too scared to look at their dwindling fortunes and those who off-load to enter stocks of expected profitability based on current earnings and price.
GTBank
There is the usual hope of a dividend plus bonus from this stock. Over the years, even before its listing in 2004, it has consistently been growing its earnings on a quarterly basis. It has always been a regulation-compliant company, presenting its quarterly and yearly report to the public as it is due. For the past five years, analysis shows that it has been growing its yearly earnings by between 8 per cent -10 per cent.
The bank whose year-end financial report is soon to be released, has performed up to the expectation of operators in the market; and this is in spite of the fact that it has increased its outstanding shares through bonus issues four times within the last five years. All has been within the ratio of 1:4 except last year when it did 1:11. Thus as the public awaits the ten-month December 31, 2008 audited report, dividend is expected but not a bonus. Dividend, analysts agree, is not going to be as much as were previously paid.
Oceanic Bank
In the past five years, this bank, which was listed on the exchange in 2004, has regularly paid dividend of up to 55% of its earnings to its shareholders. On the average, dividend has been increasing by 60% yearly. Even the enlarged share capital of the bank from the public offer of 2006 did not affect its earnings because management doubled its efforts in matching the increase with performance. On the strength of its strong performance and because of the shift from September 31 to December 31 2008 as the end of financial year, investors are in for a good dividend following its accumulated earnings and performance.
From the current earnings per share (EPS) of N1.86, the company is as good as having given one already. Little wonder the stock is on high demand. With the stock at below N7.00, at press time, and with a P/E ratio of only 4times, Oceanic is now investor’s toast. The expectation of a dividend is high.
ETI (Ecobank Transnational Incorporated)
In 2006 ETI was listed on the NSE under the foreign listing. It is the holding company of Ecobank Nigeria Plc. It is mainly in the wholesale and retail banking business in West African countries. It has consistently been profitable even when a stock split of 5:1 which brought its par value to 50k from the N32.00 it was listed in 2006 in June 2008. The split reduced the earnings from N3.23 in the 1st quarter of 2008 to N1:34 in the 2nd but it soared to N1.81 in the 3rd quarter.
Analysts believe that its 4th quarter EPS will hit between N2.00 – N2.30 out of which management will pay a dividend. Since its listing in 2006, it has progressively grown its earnings per share and rewarded shareholders in the same vein. In spite of the outstanding volume of shares (6 billion), the possibility of a dividend payout is very high. Stock market watchers believe it can pay between N1.00 – 1.30k as dividend. Income seekers from stock should consider this stock.
NBC (Nigerian Bottling Company)
A critical look at its historical data shows that over the years, it has been a consistent rewarder of those that has it. Those who bought into this company over the years have bountifully reaped from it. Before it releases its result to the public this month, dividend hunters are advised to take position. Dividend has been reduced in the last three years due to stiff competition from companies that have encroached into its market territory. However, it is still waxing stronger in the provision of non-alcoholic beverages than the rest.
WITH the emphatic pronouncement of the government that it will not intervene in the stock market, operators, regulators and shareholders are figuring out the way forward. Those who were lax before the pronouncement have revved up their engines. And everything seems to be upbeat now. The thinking now in the stock market circles and especially among the regulators and the operators is “if everybody has rejected us, at least we can’t reject ourselves”. And Musa Al-Faki, director general of the Securities and Exchange Commission and Prof. Ndi Okereke-Onyiuke, director general of the NSE, were all emphatic in their pronouncement when they said, “our market cannot crash”. The optimism is being echoed in every stockbroking firm. The managing director of Peace Securities, Mr. Willie Ndata surmised everything by affirming that our market will not crash because the fundamentals of the companies are strong. For the stockbroking firms, he said that the worst that could happen is for houses to merge or be acquired; but for the market to crash is out of the question.
A couple of stocbroking firms have either been reducing staff strength or bringing on new but wealthy partners to inject more money into their operating account. Three days after the pronouncement by the government that there’ll be no bailout for the capital market, Al-Faki, said the need for brokerage houses to re-capitalize has become all the more imperative considering the fact that every stakeholder has to play its positive role to bring the market to an early rebound. He stressed that the recapitalization that was suspended will definitely take place. He assured every investor of the robustness of the Nigerian capital market. He stressed the believe that a market like Nigeria’s that has a concrete source of natural revenue – oil, needed by both the local and international community, and with a large market yet untapped, is an investor’s delight anytime any day. He also reminded investors that a study by the World Bank has emphatically said Nigerian banks and its institutions have not been adversely hurt by the global meltdown as people were thinking. Therefore, he concluded, “we only have to work as a team to shore up this market.
Thus from the foregoing, analysts and operators cannot but urge investors to go ahead and invest. Now that no help is coming from the source expected; it might even recover faster than envisaged. The market right now is relying on the budget as the surest source of strength. Others are happy that the price of crude oil is inching upwards. “These two factors lift the spirit” says an operator in the market.
As every investor is waiting for the rebound any investment should be made based on expected profitability. There are stocks that definitely show signs of profitability even before they enter their next quarter. In the market now, there are two kinds of investors –those who off-load and run away, too scared to look at their dwindling fortunes and those who off-load to enter stocks of expected profitability based on current earnings and price.
GTBank
There is the usual hope of a dividend plus bonus from this stock. Over the years, even before its listing in 2004, it has consistently been growing its earnings on a quarterly basis. It has always been a regulation-compliant company, presenting its quarterly and yearly report to the public as it is due. For the past five years, analysis shows that it has been growing its yearly earnings by between 8 per cent -10 per cent.
The bank whose year-end financial report is soon to be released, has performed up to the expectation of operators in the market; and this is in spite of the fact that it has increased its outstanding shares through bonus issues four times within the last five years. All has been within the ratio of 1:4 except last year when it did 1:11. Thus as the public awaits the ten-month December 31, 2008 audited report, dividend is expected but not a bonus. Dividend, analysts agree, is not going to be as much as were previously paid.
Oceanic Bank
In the past five years, this bank, which was listed on the exchange in 2004, has regularly paid dividend of up to 55% of its earnings to its shareholders. On the average, dividend has been increasing by 60% yearly. Even the enlarged share capital of the bank from the public offer of 2006 did not affect its earnings because management doubled its efforts in matching the increase with performance. On the strength of its strong performance and because of the shift from September 31 to December 31 2008 as the end of financial year, investors are in for a good dividend following its accumulated earnings and performance.
From the current earnings per share (EPS) of N1.86, the company is as good as having given one already. Little wonder the stock is on high demand. With the stock at below N7.00, at press time, and with a P/E ratio of only 4times, Oceanic is now investor’s toast. The expectation of a dividend is high.
ETI (Ecobank Transnational Incorporated)
In 2006 ETI was listed on the NSE under the foreign listing. It is the holding company of Ecobank Nigeria Plc. It is mainly in the wholesale and retail banking business in West African countries. It has consistently been profitable even when a stock split of 5:1 which brought its par value to 50k from the N32.00 it was listed in 2006 in June 2008. The split reduced the earnings from N3.23 in the 1st quarter of 2008 to N1:34 in the 2nd but it soared to N1.81 in the 3rd quarter.
Analysts believe that its 4th quarter EPS will hit between N2.00 – N2.30 out of which management will pay a dividend. Since its listing in 2006, it has progressively grown its earnings per share and rewarded shareholders in the same vein. In spite of the outstanding volume of shares (6 billion), the possibility of a dividend payout is very high. Stock market watchers believe it can pay between N1.00 – 1.30k as dividend. Income seekers from stock should consider this stock.
NBC (Nigerian Bottling Company)
A critical look at its historical data shows that over the years, it has been a consistent rewarder of those that has it. Those who bought into this company over the years have bountifully reaped from it. Before it releases its result to the public this month, dividend hunters are advised to take position. Dividend has been reduced in the last three years due to stiff competition from companies that have encroached into its market territory. However, it is still waxing stronger in the provision of non-alcoholic beverages than the rest.
