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12-02-2018

18 BUSINESS A.M.

18 BUSINESS A.M. FEBRUARY, MONDAY 12 - SUNDAY 18, 2018

BUSINESS A.M. FEBRUARY, MONDAY 12 - SUNDAY 18, 2018 FINANCE & INVESTMENT 19 20 stocks trade below 50 kobo as price methodology rules review takes effect Kayode Ogunwale No fewer than 20 stocks listed on the floor of the Nigerian Stock Exchange (NSE) were affected by the amended Par Value Pricing Methodology Rules of the Exchange last week. At the end of the week’s trading, 11.63 percent of 172 equities listed on the bourse recorded sharp decline in their share prices since the commencement of the new rule on 29 January, 2018. The affected stocks are Amino International Plc., which ended the week trading at 25 kobo per share, Consolidated Hallmark Insurance Plc. (36 kobo), Lasaco Assurance Plc. (36 kobo), Unic Diversified Holdings Plc. (36 kobo), Associated Bus Company Plc. (39 kobo), Multiverse Mining & Exploration Plc. (40 kobo), Royal Exchange Plc. (42 kobo) and Japaul Oil & Maritime Services Plc. (42 kobo) per share. Others are Cornerstone Insurance Company Plc. (43 kobo), Unity Kapital Assurance Plc. (44 kobo), African Alliance Insurance Plc. (44 kobo), FTN Cocoa Plc. (44 kobo), Guinea Insurance Plc. (46 kobo), Courtville Business Solution Plc. (46 kobo), and First Aluminium Nigeria Plc. (46 kobo) per share. Equity Assurance Plc., Mutual Benefits Assurance Plc., Sovereign Trust Assurance Plc., Deap Capital Management & Trust Plc., and Chams Plc. all traded at 48 kobo per share respectively. The new rules categorized listed companies into three groups, based on their share value. Group A, according to the NSE, are the stocks trading N100 and above for four of the last six months, or new security listings period at N100 or above at the time of listing. Group B are the stocks of N5.00 or above but lower than N100 for four of the last six months of new security listings, priced at N5.00 or above but lower than N100 at the time of listing. Group C are the stocks lower than N5.00 for four of the last six months or new security listings priced lower than N5.00 at the time of listing. The bourse maintained that the new rules specified revised price limit, price movements and tick sizes (price floor, minimum pricing increments and minimum quantity to be traded that will change the published price). The NSE highlighted that price discovery for every listed shares under the new Par Value Rule remain determined by market forces and thus, equities may now trade below the erstwhile price floor 50 kobo/unit. The implications of the new rules according to analysts at United Capital is that, the policy may result in sharp depreciation of up to 37 listed securities which have not traded above N0.50 kobo for a long time, especially insurance companies. Analysts believe that the new rules would increase market liquidity and improve price discovery especially for lowly priced stocks. “With reduced minimum price of one kobo, stocks in the C categories that are intrinsically less than N0.50 kobo may be more prone to strategic trades or possible acquisition. “Some of the insurance companies that have not been performing optimally are the biggest suspects, especially as the sector remains ripe for further consolidation, amid the proposed implementation of more stringent risk-based supervision guidelines by the regulators,” an analyst said. According to him, other equities in this category include FTN Cocoa, John Holt, Multitrex, AfrInsurance, Aso Savings & Loans, Deap Capital, Resort Savings, Evan Medical, Union Diagnostic, Chan’s, Courtville, Omatek, Multiverse, Thomas Wyatt, Japaul Oil & Maritime Services, ABC Transport, Academy Press, Afromedia, Daar Communication, NSL Tech, R.T. Briesco, and Tantalizer, which closed at N0.50 kobo on Friday 26th Jan. 27, 2018. Access Bank’s long-term national rating now A+ in Fitch latest asset quality review Business a.m. A C C E S S BANK, NIGE- RIA’S Tier-1 bank, has seen its longterm national rating upgraded by Fitch Ratings, one of the world’s leading rating agencies. The agency, moved the bank’s rating up one notch to A+ from A and the bank maintained its long-term issuer default rating (IDR) at B, in the rating agency’s latest asset quality review of the bank. The basis for the IDR, in the opinion of Fitch, is that the bank’s IDRs are driven by its intrinsic creditworthiness as defined by its Viability Rating (VR). Fitch said this was reflective of Access Bank’s financial metrics, which it described as solid, and are “stronger than most Nigerian banks.” Herbert Wigwe, group managing director and chief executive officer, in his immediate reaction to the ratings released by Fitch, said it reflected the bank’s strategic intent to adopt best global practices in all aspects of its business, adding, “We have grown over the years to become a formidable force within the financial markets in which we play, with an aim to becoming the most respected African bank.” Regarding the bank’s asset quality metrics, Fitch said they compare “especially well” with its immediate peers, noting particularly, that the bank’s “stock of non-performing loans has remained under control, comprising 2.6% of gross loans at end September 2017, the lowest of all large Nigerian banks.” Fitch also stated that the bank has a good corporate banking franchise and good management stability, made up of a robust risk management framework, all of which are reflected in the bank’s “resilient asset quality”. Reviewing the state of the bank further, Fitch identified the refinancing of the bank’s Eurobond in 2016 as helping to ease its foreign currency liquidity position, noting that the bank’s national ratings, “are a reflection of its relative creditworthiness to the best credits in Nigeria. Projecting into the future, Wigwe said the bank remained focused, noting: “As we embark on our next five – year cyclical growth strategy, we remain focused on establishing robust risk management and compliance frameworks, and seeking innovative ways to continually eschew sustainable banking ethos.” Access Bank has been quoted on the Nigerian Stock Exchange since 1998 and has over 830,000 shareholders, made up of Nigerians and international institutional investors. It operates and serves its different markets through four business segments, namely, personal, business, commercial and corporate and investment banking. An information sheet released by the bank says the bank “has enjoyed what is arguably Africa’s most successful banking growth trajectory in the last twelve years, ranking amongst Africa’s top 20 banks by total assets and capital in 2016.” It operates through a network of 383 branches and service outlets located in major centres across Nigeria, sub-Saharan Africa and the United Kingdom, with representative offices in China, Lebanon and India. Ahead of NBS data, headline inflation seen to dip to 14.90% Kayode Ogunwale Nigeria’s yearon-year inflation rate has been forecast to ease further to 14.9% in January 2018. This is ahead the official release of inflation figures by the statistical authorities, the National Bureau of Statistics (NBS) The forecast figure represents a 0.47 percent decline from 15.37 percent in December 2017. “If our estimates are correct, this will mark the 12th consecutive decline since February 2017. Our forecast is based on a simple regression model and empirical analysis. We expect month- on-month inflation to flatten out to 0.59% (7.33% annualized),” analysts at Financial Derivatives Company (FDC) said in their monthly economic bulletin. Similarly, analysts at Afrinvest expect inflation to further moderate. “Although we expect Food Index M-o-M growth to accelerate as seasonality effect begins to wear off, the effect on Headline Index will be offset by benign core price environment against the backdrop of stable FX market. Hence, we forecast headline inflation to moderate to 15.0 percent year on year,” they noted. The downward trajectory in headline inflation, according to FDC, can be attributed to the decline in most global commodity food prices such as sugar and rice and to a minor extent, the stability of exchange rate between (N363/$- N364/$). “A stable exchange rate encourages producers to finally pass through the benefit of cheaper imports to consumers. Furthermore, the decline in production levels due to the fall in demand (post-Christmas blues) in January - evident in the sharp fall in FBN PMI to 54.6 from 68.7 in Dec’17 - will taper inflationary pressures,” they said. In their view, core inflation is expected to remain flat at 12.10% year-on-year despite an increase in domestic transport fares due to the resurgence of fuel scarcity in January. On the other hand, food inflation is seen tapering to 18.61 percent year-onyear in January from 19.42 percent in December 2017. Month-on-month food inflation is also projected to decline to 0.61 percent (7.59% annualized) from 0.62 percent (7.72% annualized). The fall in food inflation, they pointed out, can be attributed to the decline in domestic food prices across the food basket, especially grains. When Nigeria is compared to peers, most countries in sub-Saharan Africa (SSA), with the exception of Uganda, recorded an uptick in headline inflation in January. The rise was driven A stable exchange rate encourages producers to finally pass through the benefit of cheaper imports to consumers mainly by an increase in the prices of food, housing and utilities. High global crude oil prices continue to adversely affect logistics and utility costs in these countries. The FDC analysts however see a reversal in the trend in the coming months. They claimed that as business activities pick up in the run up to Easter, there would be an increase in aggregate domes

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