BusinessDay 23 Aug 2018

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20 BUSINESS DAY C002D5556 Investor Helping you to build wealth & make wise decisions Thursday 23 August 2018 United Capital investment views Market bears hold on to the baton The Nigerian bourse extended the prior week’s bearish momentum amid a lack of bullish triggers. Thus, the NSE-ASI ended 4 of the 5 trading days of the week in red territory as year-to-date (YtD) return touched 9.3percent as at Thursday before closing the week at 7.8percent. Despite the last gasp rebound recorded on the last trading day, the NSE-ASI fell by 0.5percent week-on-week (w/w) to 35,266.3 points while market capitalization shrank to N12.9trillion as investors lost a further N66.3billion. Activity levels improved as average volume and value traded were up 23.9percent w/w and 50.5percent w/w to 229.3mn units and N2.5billion respectively. Sectoral performance was overly bearish as 4 the 5 sectors we track, declined w/w. The Industrial Goods (+1.3percent) Index was the week’s lone gainer, consequent on increased buying interest for DANGCEM (+2.8percent) in the later part of the week. On the other hand, the Financial Services (-7.4percent); Bank (-3.8percent) and Insurance (-3.6percent) Indices, bore the brunt of the sell-off during the week, owing to w/w losses recorded by UBA (-11.6percent), ACCESS (-4percent), ZENITH (-3.2percent), GUARANTY (-2.6percent), AIICO (-4.2percent) and NEM (-3.4percent). Similarly, selloff in OANDO (-11.7percent) and NESTLE (-3.9percent) dragged both the Oil & Gas (-1.5percent) and Consumer Goods (-1.1percent) Indices lower w/w. Investors’ sentiment was underwhelming as market breadth closed the week at 0.3x (previously 0.4x); 13 stocks advanced while 45 declined w/w. This week, we expect the market to remain largely downbeat due to a continued absence of bullish triggers. Also, we expect investors to take profit during early trades ahead of the holiday. Money Market: Rates hover around single-digit on CBN’s passiveness Compared to the preceding week, there was a slight squeeze in system liquidity as rates averaged 9.7percent (Previous week: 8.3percent) on the backdrop of bills funded by authorized dealers at the weekly wholesale FX sales interventions. Elsewhere, the CBN allowed a net repayment of N286.5bn OMO bills - selling only N153.5billion of OMO bills against N440.0bn maturities. Consequently, this trajectory braced liquidity levels. The CBN set out to sell a total of N450.0bn at the OMO auction across two maturities, nonetheless, demand was extremely underwhelming at 0.3x. The 91- & 203-day bills on offer were closed out at stop rates of 11.05percent and 12.15percent respectively. Looking into the new week, a sizeable maturity to the tune of N364.3billion is expected to hit the system and we do not expect any aggressiveness from the CBN in curbing any excesses, given that OMO rates have remained stable at an average of 11.6percent since May-18. Consequently, rates are expected to hover close to prevailing levels - barring any other significant liquidity event. Yields: Offshore risk-off sentiment pushes bond yields to a YTD high of 14.6percent In the T-Bills market, the bearish theme of the week was guided by sell-off by offshore clients, as well as liquidity sentiments following the week’s liquidity straining activities; OMO auction, Bond auction, NTB auction and provisioning for CBN’s retail FX auction by banks. Consequently, average T-bill yield inched higher by 30bps w/w to close the week at 12.8percent. (91-day (up 6bps to 11.6percent), 182-day (up 26bps to 13.3percent) and the 364-day (up 58bps to 13.4percent). Elsewhere, the apex bank conducted its bi-monthly Nigerian Treasury Bill (NTB) auction, wherein it successfully re-financed N33.4bn. Demand was modest with a bid-to-cover ratio of 1.5x compared to 1.3x in the previous auction. Notably, the 364-day tenor was mostly demanded (with a bid-cover of 1.8x compared to 1.0x at the 91- day and 182-day tenors apiece). The auction was carried out at the following stop rates: 91- day (10percent vs. 10percent sentiments from foreign players (considering Turkey’s turmoil, a stronger dollar and policy normalization in advanced economies) to weigh on sentiments in the fixed income market. Though, we may still see pockets of demand given that yields are relatively attractive. Foreign Exchange: Movement across FX windows remain muted In the Foreign exchange market, the naira continued to experience stability as movements across FX windows remained soft. The parallel market saw modest naira appreciation by 14bps to settle at N358.5/$1, while the Interbank and Investors & Exporter’s FX windows saw naira depreciation by 3bps and 14bps respectively to finish at N306.1/$1 and N362.5/$1. Looking ahead, the outlook of the naira is expected to remain tied to the spate of CBN’s intervention in the spot and forward market, as well as the better price discovery in the I & E FX window. Global Market Review and Outlook Trade worries impact global stocks RSA fund price of PFAs as at August 3, 2018 S/N PFAs CURRENT PRICE 1 CrusaderSterling Pensions 3.9820 2 Premium Pensions 3.9805 3 ARM Pension Mgrs. 3.9034 4 Stanbic-IBTC Pensions 3.7542 5 Legacy PFA 3.6384 6 NLPC PFA 3.4638 7 PAL Pensions 3.4618 8 First Guarantee Pension 3.3070 9 Trustfund Pensions 3.2793 10 SigmaVaughn Pensions 3.1244 11 AIICO Pension Managers 3.0571 12 Leadway Pensure PFA 3.0502 13 APT Pensions 2.7911 14 Fidelity Pensions 2.7460 15 AXA Mansard 2.7331 16 Veritas Glanvlls Pensions 2.6680 17 OAK Pensions 2.5785 18 Investment One Pension Mgrs. 2.4792 19 IEI Anchor Pension Managers 2.3461 20 Radix Pension 2.0434 21 NPF Pensions 1.4670 at the last auction), 182-day (10.4percent vs. 10.4percent at the last auction) and 364-day (11.2percent versus 11.3percent at the last auction). The general risk-off sentiment for Emerging Market assets that was spurred by Turkey’s turmoil saw further off-shore sell-off in the Nigerian bond market. As such, average bond yield edged higher by 46bps to end at a YTD high of 14.6percent. Also, the Debt Management Office (DMO) conducted its monthly auction of FGN bonds for August. The monetary authority initially set out to raise a total of N90billion but was only able to successfully fill 44.1percent of its offer due to an underwhelming demand and an unwillingness of the monetary authority to take up aggressive bids. Thus, the auction was carried out at the following marginal rates: 5-year (14.39percent versus 13.69percent at the last auction), 7-year (14.60percent versus 14percent at the last auction) and 10-year (14.69percent versus 14.30percent at the last auction) – Notably, this represents the fifth consecutive monthly increase in stop rates at the bond auction. Looking forward, we expect the play of political tensions in the local market and risk-off In the week that ended 17th of August 2018, three themes shaped the global financial market. First, worries of the financial and currency turmoil in Turkey. Second, the renewed trade talks between the U.S. and China, and finally, strong earnings reports. These factors all took turns in driving daily market moves. In light of the aforementioned, major US equity benchmarks ended the week mixed as continued worries about Turkey weighed, while varying degrees of the news of U.S. and China’s trade talks provided succour for equities. The Dow Jones Industrial Avg. and S&P 500 Indexes were up 1.4percent and 0.6percent w/w while the NASDAQ Composite Index trended southwards by 0.3percent w/w. In Europe, the major equity benchmarks we track were largely bearish amid concerns about the health of Italian banks, Turkey’s currency crisis, and the uncertainty about global trade policies. Overall, Germany’s DAX (-1.7percent) UK’s FTSE (-1.4percent), France’s CAC (-1.3percent), and the Pan European STOXX (-1.2percent) all ended the week in the red territory. Investor’s Square •Have you been shabbily treated by your registrar, stockbroke r or other capital market operators? Let us know and investor will help you investigate and report back. E-mail: iheanyi.nwachukwu@businessdayonline.com Analysts’ views on Customs Street this week After posting ten straight negative closes lately, the Nigerian stock market is still not looking good to produce positive stories this week, according to analysts’ views complied by Iheanyi Nwachukwu. This week, United Capital Plc analysts expect the market to remain largely downbeat due to a continued absence of bullish triggers. Also, we expect investors to take profit during early trades ahead of the holiday. Despite the Dangote Cement-driven recovery witnessed at week closed August 17, 2018, Vetiva Capital analysts still foresee a return to negative territory by this week “given that underlying investor apathy remains in the market.” They had expected milder losses at the start of the week. In line with Vetiva outlook this week, Custom Street traded lower by 1.71percent on Monday August 20, 2018 as declined stocks outnumbered advancers. The Lagos Bourse performance has been largely driven by brewing The Nigerian Stock Exchange (NSE) has admitted a total volume of 7,000,000 units of 16.54percent N7billion Senior Secured Series 1 Bond issued by C&I Leasing political risk coupled with some underwhelming firsthalf (H1) 2018 earnings released lately. GTI Research analysts’ expectation for equities this trading week is mixed. “We encourage investors to trade cautiously in the short to medium term, amid continued profit-taking resulting from political uncertainty. However, we believe that buying stocks with strong fundamentals at the current lows prices holds better potentials in the medium-to-long-term,” according to GTI Research. Access Bank economic intelligence team expects the bearish performance seen last week to be sustained “as investors continue to take profit following some less-than-stellar corporate scorecards releases.” Cordros Capital research said their outlook for equities in the near-to-medium term remains conservative, “in the absence of a near term one-off positive catalyst; and more so, amidst brewing political concerns. However, stable macroeconomic fundamentals remain supportive of recovery in the long term.” NSE lists C&I Leasing, UPDC bonds …delists Paints and Coatings Manufacturers from Daily Official List Plc. The bond was admitted to trade at the Exchange on Friday August 17, 2018. Also, a total volume of 4,355,000 units of 16percent UPD APR 2023 bond issued by UACN Property Development Company Plc were admitted to trade at the Exchange on Tuesday August 14, 2018. In another development, the entire issued share capital of Paints and Coatings Manufacturers Nigeria Plc was delisted from the Daily Official List of the Nigerian Stock Exchange. The delisting of Paints and Coatings Manufacturers Nigeria Plc was in compliance with the company’s request for voluntary delisting and the subsequent approval of the Exchange which became effective August 17, 2018.
Thursday 23 August 2018 C002D5556 BUSINESS DAY 21 Investor Helping you to build wealth & make wise decisions Stanbic IBTC sees key risks to H2 results outlook …but another earnings beat in H1 prompts Vetiva ‘Hold’ rating IHEANYI NWACHUKWU For Stanbic IBTC Holdings Plc, its key areas of focus in this second-half (H2) of 2018 remain: cost efficiency, improving risk asset quality, loan growth, growing low-cost deposits, new product development and client service. The holding company financial institution says key risks to its results outlook in this H2 period are: low deposit growth, declining yield on government securities, and political environment. The financial institution disclosed all these in its halfyear results presentation. Recently, Stanbic IBTC Holdings Plc published its firsthalf (H1) results for the period ended June 30, 2018. The results at the Nigerian Stock Exchange (NSE) show the group’s gross earnings increased by 17.5 percent to N114.2 billion against N97.19billion recorded in the corresponding H1 period of 2017. Stanbic IBTC Holdings Plc has nine direct subsidiaries, namely: Stanbic IBTC Bank PLC, Stanbic IBTC Pension Managers Limited, Stanbic IBTC Asset Management Limited, Stanbic IBTC Capital Limited, Stanbic IBTC Investments Limited, Stanbic IBTC Stockbrokers Limited, Stanbic IBTC Ventures Limited, Stanbic IBTC Insurance Brokers Limited and Stanbic IBTC Trustees Limited and two indirect subsidiaries, namely: Stanbic IBTC Bureau De Change Limited, Stanbic IBTC Nominees Limited. On Nigeria’s economic and political environment, the company expects that in H2’18 Nigeria will witness continuous economic growth, stable oil production levels, steady rise in oil price, and peaceful electioneering process. Stanbic IBTC Holdings Plc also foresees headline inflation moderating around 11percent, stable political environment, and continuous accretion to external reserves. On the banking industry, it expects: no change in Monetary Policy Rate (MPR) except there is pressure on exchange rate; interest rates to remain around 11percent– 13percent.; and stable foreign exchange (FX) rate. In H1’18, its Profit Before Tax (PBT) increased by 73.9percent for the period ended June 30, 2018 to N50.73billion against N29.16billion in H1’17. The company’s profit after tax (PAT) increased by 78.7percent to N43.08billion against N24.11billion in H1’17. Earnings Per Share (EPS) in the first half of 2018 increased by 80.9percent to 416kobo against 230kobo in the corresponding first half of 2017. Total assets in June 2018 stood at N1.37 trillion as against N1.39 trillion in December 2017. The stock of Stanbic IBTC Holdings Plc made the top gainers table at the close trading on Monday August 20, 2018, from N50.05 to N50.3, implying an increase of 25kobo or 0.50percent. At the Lagos Bourse, Stanbic IBTC Holdings is valued at N508.717billion with shares outstanding of 10,113,674,444 units. Stanbic IBTC Holdings is a member of Standard Bank Group. Its equity ownership structure shows Stanbic Africa Holdings (64.03percent); First Century International Limited (7.39percent); and Other shareholders (28.58percent). Board proposes N10.113billion as interim dividend The Board also declared an Interim Dividend of N1 per ordinary share of 50 kobo each, which amounts to N10.113billion, subject to deduction of appropriate withholding tax and regulatory approval. The interim dividend translates to 2percent interim dividend yield. The interim dividend will be paid to shareholders of the financial institution whose names appear in the Register of Members as at the close of business on Tuesday 28 August 2018. The Register of shareholders will be closed from Wednesday August 29, 2018 to Tuesday September 4, 2018. The Dividend Payment date in respect of this Interim Dividend shall be on Wednesday September 26, 2018. In line with the authority granted by shareholders to the Board of Directors Stanbic IBTC Holdings Plc at the Extra Ordinary General Meeting held on August 6, 2015, the Board has authorised that shareholders will have the option of electing to receive their Interim Dividends by way of New Ordinary Shares (Scrip Dividend). In view of this, and in order to allow ample opportunity for shareholders who may wish to exercise the option of receiving Scrip Dividend instead of Cash Dividend, the Dividend Payment date in respect of this Interim Dividend shall be on Wednesday September 26, 2018. On the above payment date, shareholders who have not elected to receive their Interim Dividend by way of Scrip Dividend, will have their Cash Interim Dividend paid electronically (provided that they have completed the e-dividend registration and mandated the Registrar to pay their dividends directly into their Bank accounts), or have dividend warrants dispatched to them (for those without e-dividend mandates). This Interim Dividend (whether cash or scrip) is only applicable to shareholders whose names appear on the Register of Members as at close of business on Tuesday 28 August 2018. Analysts view “Stanbic released its H1’18 results, posting strong yearon-year (y/y) performance following another impressive quarter. Although the run rate recorded in Q2’18 marginally lagged performance from the earlier quarter, H1’18 earnings still came in largely ahead of our estimate as PAT rose 79percent y/y to N43.1 billion – better than our N36.9 billion estimate. Notably, Gross Earnings came in flat quarter-on-quarter (q/q) at N57 billion as a modest 3percent q/q rise in Interest Income offset a 6percent moderation in Non-Interest Income. We highlight that this trend deviates from the trend we have observed across other banks in Q2’18”, said Olalekan Olabode’s team of analysts at Vetiva Capital Management Limited. Vetiva wants investors to ‘Hold’ Stanbic IBTC Holdings Plc shares noting that they consider it correctly valued with little upside or downside, but that the potential return between +5 and +14.99percent is expected to be realised between current price and analysts’ target price. The analysts target price (TP) for the stock is N50.07. “We have revised our estimates to reflect the miss across key line items. Particularly, we note that quarterly earnings run rate moderated marginally in Q2’18 following a much lower loan write back within the period vs. Q1’18. Following the strong growth observed in Q2’18, we revise our loan growth forecast for FY’18 to 10percent (Previous: 0percent). Hence, our Interest Income estimate is largely unchanged at N130 billion despite the H1’18 miss. Similarly, our Non-Interest Income is maintained at N108.4 billion – in line with H1’18 run rate. However, we cut our loan loss provision to a mild N1.3 billion – a relatively cautious stance given the N5.5 billion write back so far in H1’18”, the analysts added. “With Operating Expense also left relatively unchanged at N97.7 billion, we raise our PAT estimate to N79.2 billion (Previous: N73.7 billion), translating to an EPS of N7.88. With average industry leading RoE and RoA of 36.2percent and 5.6percent respectively, STANBIC trades at FY’18 P/B: 2.1x and P/E: 6.3x vs. our coverage banks’ average P/B: 0.7x and P/E: 3.8x. Overall, we raise our Target Price (TP) to N50.07 (Previous: N42.38)”, Vetiva Capital analysts further noted in their August 17 equity research. Management speaks “The operating environment in the first half of the year was characterized by rising oil prices, stable oil production level leading to accretion to the country’s external reserves, improved foreign exchange liquidity with attendant interventions from the Central Bank of Nigeria and moderating inflation amid declining yields on money market securities,” said Yinka Sanni, Chief Executive Officer, Stanbic IBTC Holdings Plc. He further stated, “Stanbic IBTC continued to deliver stellar performance over the course of the first half of the year. Profit before tax grew to N50.73 billion representing a 74 percent growth from prior year on the back of noninterest revenue growth and recoveries from delinquent assets previously impaired. Our credit impairment line has a write back of N5.5 billion as at June 2018 as we continue to intensify recovery efforts on previously classified loans. “Interest income increased by 6percent to N59.9billion, predominantly driven by loan growth. This was offset by increase in interest expense of 26 percent as a result of interest paid on maturing term deposits and other borrowings. We are making good progress on our drive to reduce cost of funds which has reduced by more than 100 basis points, manifesting in a 15 percent reduction in interest cost between Q1 2018 and Q2 2018,” Sanni said. He noted that, “We have seen significant growth in transaction volumes across our digital platforms. The volume of transactions via our mobile banking, SME internet banking, USSD platforms and ATMs have increased by over 100 percent each year-on-year as we continued to drive noninterest income growth. Also, we kicked off the initial stage of implementing a virtual banking proposition. Our Africa-China Banking Center was recently launched and it aims to provide bespoke solutions and address the needs of business communities in both Nigeria and China while leveraging our relationship with Standard Bank and the Industrial & Commercial Bank of China (“ICBC”).” Sanni said the group remains focused on driving long-term value for its clients and shareholders through its balanced and diversified business model, while thanking the various stakeholders – customers, employees and regulators – for their contributions and support towards the achievement of these strong results. The Group maintained capital adequacy levels that are significantly above the regulatory limit of 10 percent. The group’s total capital adequacy ratio for the period closed at 27.4 percent (Bank: 23.0 percent) and Tier 1 capital adequacy ratio of 23.3 percent (Bank: 18.5 percent). The improvement in group capital adequacy ratio to 27.4 percent from 23.5 percent in December 2017 was as a result of the significant increase in retained profit. “We remain wellpositioned to meet expected future capital requirements and growth”, Sanni stated.
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