BusinessDay 07 Jan 2019

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18 BUSINESS DAY www.businessday.ng www.facebook.com/businessdayng @businessDayNG @Businessdayng Monday 07 January 2019 Live @ The Exchanges Top Gainers/Losers as at Friday 04 January 2019 Market Statistics as at Friday 04 January 2019 GAINERS Company Opening Closing Change OKOMUOIL N76.2 N80 3.8 NB N78.7 N79.5 0.8 GUARANTY N32.95 N33.5 0.55 STANBIC N46 N46.5 0.5 UPL N1.97 N2.14 0.17 LOSERS Company Opening Closing Change CAP N34 N31.5 -2.5 BETAGLAS N68.3 N67 -1.3 FO N30.7 N29.6 -1.1 ZENITHBANK N22.7 N21.7 -1 GLAXOSMITH N13.05 N12.2 -0.85 ASI (Points) 30,638.90 DEALS (Numbers) 4,082.00 VOLUME (Numbers) 334,316,959.00 VALUE (N billion) 1.771 MARKET CAP (N Trn 11.425 NSE-30 Index: Sterling Bank replaces Beta Glass Stories by Iheanyi Nwachukwu The Nigerian Stock Exchange (NSE) has reviewed the NSE-30 Index and the eight sectoral indices of the exchange, which are NSE Consumer Goods, NSE Banking, NSE Insurance, NSE Industrial, NSE Oil & Gas, NSE Pension, NSE Lotus Islamic and NSE Corporate Governance Indices. The composition of these indices became effective on January 1, 2019 after the completion of the year-end review and index rebalancing exercise. This resulted to entry of some major companies and the exit of others from the various indices. On the NSE-30 Index, Sterling Bank Plc has replaced Beta Glass Company Plc. MRS Oil Nig Plc has replaced Eterna Plc in the NSE Oil/ Gas Index. There were no changes in the NSE Consumer Goods Index and that of NSE Industrial Index, but in the NSE Banking Index, Jaiz Bank Plc replaced Diamond Bank Plc. In the NSE Insurance Index, Consolidated Hallmark Insurance Plc, Sovereign Trust Insurance Plc, Regency Assurance Plc replaced Continental Reinsurance Plc, Staco Insurance Plc, and Standard Alliance Insurance Plc. NSE Pension Index has new entrants like CCNN Plc, Beta Glass Co. Plc, Julius Berger Plc while Diamond Bank Plc, Continental Reinsurance Plc, Ecobank International Incorporated have exited. Jaiz Bank Plc has replaced Nigeria Aviation Handling Company Plc in the Lotus Islamic Index. Meanwhile, while there were no new entrants into the Corporate Governance Index, the likes of NEM Insurance Plc, Diamond Bank Plc, and Continental Reinsurance Plc have all exited the Index. The indices, which were developed using the market capitalization methodology, are rebalanced on a biannual basis, the first business day in January and in July. The Stocks are selected based on market capitalization and liquidity. The liquidity is based on the number of days the stock is traded during the preceding two quarters. To be included in the index, the stock must have traded Strong earnings put Vitafoam shares on high demand Impressive corporate earnings and expectation of high return on investment have put shares of Vitafoam Nigeria Plc on the league of the most sought after by discerning investors on The Nigerian Stock Exchange as they scramble to beef up their portfolio with the stock despite the bearish trend. Vitafoam’s impressive performance in the third quarter which ended on September 30, 2018 indicated that the its net profit stood at N601.923million from a loss of N127.690million in the preceding year while its basic Earnings Per Share (EPS) hit N57 kobo in the review period as against a loss of N15 kobo in the preceding year. As a reward for its numerous shareholders, the company announced a dividend of 25 kobo per share. This is in addition to declaration of bonus share of one for five ordinary shares. The announcement of Vitafoam’s strong earnings prompted many investors to place buy order on the stock to take advantage of its current low price relative to the company’s intrinsic value on stock market. On Monday, December 31st, 2018, the last trading day for the year, Vitafoam led the gainers’ chart on The Exchange, followed by Stambic IBTC as Vitafoam’s share price appreciated by 10 percent, from N4 to N4. 40, following transaction of 2, 687,190 shares, worth N11,823, 096 on the company’s shares. Market watchers were quick to commend the company’s performance, saying demand for its shares may continue despite the general lull in the market. Network Capital’s Managing Director and Chief Executive Officer, Oluropo Dada, promptly ascribed the rally created by Vitafoam’s result to the associated value for both existing and potential shareholders: “The Stock market is information - driven. It responds to every information from quoted companies, regardless of the type of information. This is the beauty of the market in aggregating investors’ reaction to every bit of information or market hearsay. The 25k dividend and one for five bonus is the fundamental factor driving Vitafoam’s share price. This is real. Everyone knows that the company’s current performance is far better than that of last year”, Dada said. Vitafoam’s Group Managing Director and Chief Executive Officer, Vitafoam Nigeria Plc, Taiwo Adeniyi attributed the company’s recent opportunity performance to a range of factors including access to finance and availability of raw materials and putting customers at the center of all the company’s activities among others. “ We are enjoying Improved funding through Bank of Industry’s (BOI’s) intervention, deliberate cost management, improved efficiency, customer centric approach to selling, innnovative thinking, market differentiation, Government’s deliberate policy on forex trading and availability which has helped in sourcing of input materials at cheaper rates and for at least 70 percent of the number of trading days in the preceding two quarters. The Nigerian bourse began publishing the NSE 30 Index in February 2009 with index values available from January 1, 2007. On July 1, 2008, The NSE developed four sectoral indices and one index in 2013, with a base value of 1,000 points, designed to provide investable benchmarks to capture the performance of specific sectors. The Insurance and Consumer Goods sector index, comprises the 15 most capitalized and liquid companies; Banking and Industrial Goods sector index, comprised of 10 most capitalised and liquid companies, while the Oil & Gas sector index, is composed of the seven most capitalized and liquid companies. also planning”, Adeniyi said. As part of its Corporate Social Responsibility (CSR), annually, Vitafoam donates its products to Lagos Island Marternity Hospital to ensue availability of good equipment and identify with the Baby of the year. Speaking at this year’s edition in Lagos, Adeniyi said it was consistent with the company’s CSR policy as its products cut across diverse age groups and status. “Vitafoam has been known over the years for good quality products. It believes in being part of the child’s life from cradle. We have always been known to provide for the home, every age set you find in the home. We have products that meets the needs of the baby up to when it becomes a toddler and then, when he eventually grows up to become an adult. Continental Reinsurance incorporates CIMA subsidiary, appoints Oumar BA as its CEO Continental Reinsurance Plc has completed the incorporation of a subsidiary office in Douala, Cameroon. This status is a key milestone in its strategy of operating through a network of wellcapitalized subsidiaries across Africa. “This development reinforces our commitment to the CIMA region and our valued partners,” said Oyetunji, Group Managing Director of Continental Reinsurance Plc. “We already have a strong local team on the ground, and our goal is to utilize our new status to maximize value.” The move is in line with the new CIMA Code in the Francophone region which requires a reinsurance company based in a Member State to be established as a limited liability company and further permits a reinsurance company with its head office in a Member State to install a branch in another Member State. The Company started its operations in Douala in 2004 as a branch office and later opened its Abidjan office in 2012 to diversify its activities in the CIMA region. Oyetunji added: “At the same time, we are delighted to announce that we have appointed Oumar BA as the Chief Executive Officer of the newly established subsidiary, effective immediately. Given our new status, we believe he will be able to leverage on his expertise and track record to capitalize on the current demand for localized service and we look forward to Oumar helping us develop that further in the CIMA region.” Oumar brings over two decades of experience to the Company. Most previously, he served at Swiss Re as Regional Manager (West Africa – Anglophone). Prior to that, he held roles as Senior Client Manager (Swiss Re Africa / Swiss Re Zurich), Property Underwriter (Swiss Re Africa / Johannesburg) and also worked with Salama Assurances (Senegal).
Monday 07 January 2019 www.businessday.ng COMPANIES & MARKETS COMPANY NEWS ANALYSIS AND INSIGHT facebook.com/businessdayng @Businessdayng @Businessdayng BUSINESS DAY 19 Equity funds count losses as stock market rout takes toll Pg. 20 ANALYSIS Companies face higher borrowing costs in 2019 LOLADE AKINMURELE Again, the private sector is at risk of being crowded out by government borrowing in 2019 in bad news for an economy still sruggling to find its feet after a scathing recession. Expectations for a higher yield environment this year implies higher borrowing costs for corporates. The yield expectations are being driven by rising interest rates in developed markets which could force the hand of the Central Bank of Nigeria (CBN) to raise interest rates in order to compete favourably for capital. Yields are also tipped to rise if the federal government fails to meet its revenue target for the third straight year as that will widen the budget financing gap which would in turn boost local bond supply and bid yields higher. The Federal government’s 2019 budget has a N2.3 trillion deficit and is predicated on revenues of N7 trillion. Both scenarios are threatened by disappointing revenues which naturally feeds into a wider deficit that will leave the government with limited options than to borrow. Capital expenditure bore the brunt of disappointing revenues in the past two years but 2019 will give the government less wriggle room given L-R: Aniekan Joseph, Area Sales Manager, Lagos; Dr. Soji Adetona, Consultant Pathologist; Olanrewaju Bolawe, Medical Scientist, all of SYNLAB Nigeria (formerly PathCare) at the recently held Health Writers Association of Nigeria (HEWAN) Awards and Symposium, where SYNLAB Nigeria was awarded “Best Laboratory of the Year”. the spike in recurrent expenditure which cannot be easily made away with like capital spending. Non-debt recurrent expenditure alone will hit N4 trillion this year. If government revenue is to perform as it did in 2017 or 2018 where only 50 percent of the target was met, then worker salaries, overhead costs and statutory transfers will be higher than total revenue, before considering capital expenditure and debt servicing. The total non-debt recurrent expenditure will equate to 128 percent of the government’s projected N3.5 trillion revenue for the year. N3.5 trillion is half of the N7 trillion 2019 revenue projection. What that implies is that the government would have to borrow just to maintain an over bloated bureaucracy. Add capital expenditure as well as debt servicing obligations and the government will need to borrow even more, thereby crowding out the private sector. After a record breaking 2017 for government bond yields which peaked at 18 percent, 2018 saw yields fall to 14 percent on average amid lower inflation rate and reduced bond supply from the federal government which tweaked its debt strategy to borrow less domestically in favour of external debt. However, there are signs of a higher yield environment in 2019 and those signs started flashing as early as late 2018. Rising global interest rates which sparked selloffs in emerging markets and political uncertainty that coloured the second half of the year, saw the Central Bank of Nigeria push yields higher in the fourth quarter of 2018 using Open Market Operations (OMO) auctions, to attract foreign portfolio investors and tame inflation ahead of the system liquidity that accompanies campaign spending in an election year. The OMO auctions laid down a marker for fixed income yields, with one-year government Treasury Bills rising as high as 17 percent while average bond yields rose nearly 200 basis points to 15 percent. The aggressive monetary tightening adopted by the CBN is expected to continue this year on the back of higher inflation expectations and rising interest rates in the United States and other developed markets. The price stability mandate of the CBN means if inflation rises, interest rates are likely to be raised. The apex bank relied heavily on raising interest rates in the latter part of 2016 when inflation soared to a high of 18 percent. The CBN hiked benchmark rates to 14 percent from 11 percent over that period and that’s where it has stayed for nearly two years now. The outlook for higher interest rates in the United States and sustained foreign capital outflow this year will only pile more pressure to the CBN to tighten even further. The consensus forecast for interest rates in 2019 is a 50-basis hike to 14.5 percent. The Monetary Policy Committee is scheduled to hold their first meeting of 2019 this January. The IMF tips the Nigerian economy to expand 2.3 percent this year. Although still in a tepid posture, the economy is gradually recovering from recession. The economy expanded by 1.81 percent in the third quarter of 2018, up from 1.5 percent in previous quarter, but still below 1.91 percent recorded in the first quarter. The country’s growth rate still falls short of population growth rate of 2.6 percent, implying that the economy needs stimulus policies to make growth sustainable and inclusive. MARKETS Vitafoam recommends N260.51m dividend, approves bonus issues for shareholders OLUWASEGUN OLAKOYENIKAN The Board of Vitafoam Nigeria Plc, one of Nigeria’s leading manufacturers of foam and flexible/rigid polyurethane products, has recommended a dividend of N260.51 million to the company’s shareholders. In a notice filed at the Nigerian Stock Exchange (NSE) Friday by the foam maker, the recommendation was made at a meeting of its Board of Directors held on December 18, 2018. The dividend represents 25 kobo per share for the financial year ended September 30, 2018 and it is subject to shareholders’ approval at Vitafoam’s Annual General Meeting scheduled to hold on March 7, 2019 in Lagos, and withholding tax, according to the firm. “If approved at the Annual General Meeting, the dividend will be paid on 8th March, 2019, to members whose names appear in the Register of members at the close of business on Friday, 15th February, 2019,” Vitafoam said. Besides, the Board also approved a bonus issue of 1 new share for every 5 existing ordinary shares to shareholders whose names appear on the register of members at the close of business on Friday, February 15, 2018. Vitafoam explained that “the new shares shall rank equally in all respects with the existing ordinary shares except that they shall not rank for the dividend recommendation of the year ended 30th September, 2018.” This implies Vitafoam’s outstanding shares in the market would increase from its current 1.04 billion shares, a development that would have resultant effect on the firm’s earnings per share which stood at 57 kobo in 2018, according to Aluko Paul, a research analyst at MBC Securities Limited. Vitafoam posted 46.67 percent return to emerge the seventh-best performing stock on the floor of NSE in 2018. This was triggered by a 10 percent gain to N4.40 recorded by the consumer goods firm on Monday, December 31, 2018 after it declared a whooping profit of N601.92 million for the year ended September 30, 2018. The stock rallied to N4.99 on Thursday, January 3, it highest in over two years. Part of the gains was however reversed Friday, January 4 after it shed 9.82 percent to N4.50 per share on profit-taking activity. In spite of this, Paul said “in the coming days, we might see more activities on the stock as it has not been very liquid in the past and we expect long-term investors to key into it at this price which Edited by LOLADE AKINMURELE (loladeakinmurele@gmail.com) Graphics: CHINEDUM ONYEMA might likely push up.” BusinessDay check shows that Vitafoam recorded unimpressive financial performance in 2016 and 2017, posting a loss of N127.69 million in 2017 down from a loss after tax of N32.03 million in 2016. However, the company bounced back in 2018 with a ballooned profit of N601.92 million despite paying N191.03 million as tax. Also, revenue surged 10.38 percent to N19.53 billion as against N17.69 billion recorded in the previous year.
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