12-02-2018

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