C M Y K 24 — Vanguard, MONDAY, FEBRUARY 19, 2018 FINANCIAL VANGUARD Industrial goods sector to benefit from increased CAPEX By Nkiruka Nnorom AGAINST the bear run that ruled the stock market last week and saw all the sectors close in the red, investment bankers and stockbrokers have said that the industrial goods sector will benefit immensely from the proposed N2.4 trillion capital expenditure in the 2018 budget. Consequently, they opined that the sector’s performance this year will be better compared to 2017. They added that investors would be positioning to take advantage of low prices in the equities market this week ahead of the earning season. On the performance of the industrial sectors, analysts at Cordros Capital said: “In 2017, growth in the industrial goods sector remained downbeat despite marked improvement in factors like energy shortages and foreign exchange illiquidity that impeded growth in the previous year. The slow growth in the sector can be attributed to low government spending in the real sector and a delay in the 2017 budget approval. “Looking ahead, we expect the sector’s performance to be better than 2017 as the proposed budget for 2018 contains another record capital expenditure, CapEx estimate of N2.4 trillion”. They noted that expected resurgence in consumer demand, as well as individual home owners discretionary spending is more likely to open up new grounds for construction activities will all combine to aid growth in the sector this year. Meanwhile, a review of activity in the stock market last NB beats Forte Oil, others to early release of 2017 financials •Posts N33bn profit By Nkiruka Nnorom shareholders. The D recommended dividend is ESPITE its huge inclusive of interim dividend operations, Nigerian of N8 billion, which is N1.00 Breweries, NB Plc has beaten per share earlier paid by the all quoted companies by company in November 2017. coming out first with the full The company’s Secretary/ year ended December 31, Legal Adviser, Mr. Uaboi 2017 financial statement. Agbebaku, said in a statement With this performance, NB that “while the foreign has upstaged companies like exchange situation improved Forte Oil Plc and the tier-1 in the course of the year, banks that are known for double digit inflation timely submission of their continued to impact both results ahead of the statutory businesses and consumers. deadline of March 31st for Nevertheless, the company submission of annual results. was able to end the year with Analysis of the result improved results through released, weekend, on the continuous focus and floor of the Exchange showed execution of the twin agenda that the company posted N33 of cost leadership and market billion Profit After Tax, PAT, leadership supported by which represents 16 percent innovation”. increase compared to N28 Agbebaku maintained that billion recorded in the while there are some early preceding year. signs of improvement in the The company’s revenue for macro-economic condition, it the review period was up 10 is yet to be reflected in percent to N334 billion from consumer confidence, adding N313 billion in 2016. that the Board is confident Consequently, the Board of that the company has a clear Directors have recommended strategy to deliver good return a dividend payment of N33 on investment to shareholders billion, amounting to N4.14 as part of its commitment to per share dividend to its winning with Nigeria. week showed that transaction closed in the negative territory for a second week in a row with investors losing N175 billion. At the end of the week’s trading, equities capitalisation dropped to N15.302 trillion from N15.477 trillion, representing 1.13 percent decrease. Also, the All Share Index, ASI, depreciated by 1.13 percent to 42,638.83 points Besides, there are strong indications that the new structure may usher in some additional responsibilities for the current executive members. The structure is coming on the heels of a new constitution which will take effect any moment from now. It will be recalled that ASHON’s Chairman, Mr. Patrick Ezeagu, had, at the association’s last Annual General Meeting, AGM, stated: “With our renewed energy and change in strategic plan, we are focusing on the challenges of the association and resolving them as they confront us. “The Executive Committee is taking steps to implement the provisions of the new constitution accordingly. We expect that the new structure provided for in the constitution will take effect as soon as we tidy up the processes. ASHON has been turning economic challenges from 43,127.92 points in the previous week. Performance across sectors was largely bearish as all sectors declined. The insurance sector depreciated the most, losing 1.7 percent on the back of losses in Consolidated Hallmark Insurance Plc, which went down by 22.9 percent and Prestige Assurance Plc that depreciated by 14.3 percent. The industrial goods sector, followed closely, falling by 1.1 percent as a result of 9.3 percent losses inChemical and Allied Products Plc and 2.5 percent decline in Dangote Cement Plc. The consumer goods sector declined by 0.9 percent on sustained profit taking in Guinness Nigeria Plc and Nigerian Breweries Plc. The banking and oil & gas sectors went down by 0.6 percent and 1.0 percent following price depreciation in Union Bank of Nigeria, Diamond Bank Plc, Forte Oil Plc and Total Nigeria Plc, which fell by 9.1 percent, 5.8 percent, 6.6 percent and 0.4 percent respectively. Repositioning: ASHON’s current exco may transform into Governing Council By Peter Egwuatu INDICATIONS have emerged that the current executive committee members of the Association of Stockbroking Houses of Nigeria (ASHON) may emerge as a Governing Council, the highest decision making body of the Group following its on-going restructuring exercise. Vanguard gathered that a new structure for the association would soon be unveiled as part of its plan to enhance corporate governance in line with its ongoing repositioning exercise. into opportunities for its members through strategic thinking and innovativeness aimed at solving problems.” Ezeagu explained that to seek additional income for its members, the Executive Committee commenced the establishment of Lagos Commodities and Futures Exchange (LCFE). “The birth of LCFE is to create another platform that will provide additional means of income for our members. In spite of the many challenges that have adversely impacted the Nigerian economy and the capital market, we have strived to maintain good working relationship with our regulators to moderate the impact of Minimum Operating Standard (MOS), brokers categorization, demutualization, debt capital, Direct Cash Settlement (DCS) and Universal Insurance Policy for Capital Market Operators (CMOs) among others.” He, however, advised ASHON members to support the executive by meeting their financial obligations promptly. Corroborating him, the Acting Chief Executive Officer of the proposed LCFE, Mr Akin Akeredolu-Ale, explained that the LCFE would create a big business opportunity for all dealing members. Akeredolu-Ale described the LCFE as a market that is just there waiting to be tapped. “It is a market that is just there waiting to be tapped. What we are just doing is bringing structure and organisation into an existing market system. We are going to be trading on the electronic receipt and the first thing is the documents, which are the electronic receipts. They are going to be passed on to the Central Securities Clearing System (CSCS)” he said.
C M Y K FINANCIAL VANGUARD Why we projected 25% returns for stock market this year — Capital Bancorp analyst Mr. Aigboje Higo, Chief Executive Officer, CEO, Capital Bancorp Plc, in this interview speaks on issues that will influence the Nigerian stock market, interest rate and the economy in general in 2018. Excerpts: By Peter Egwuatu HOW do you assess the performance of Nigerian stock market last year, and what is your expectation for this year? The Nigerian stock market had an impressive showing in 2017 having closed the year with return of 42.30% making it the third best performing stock market behind Argentina which returned 77% and Turkey which returned 48%. We have projected a 25% returns for the Nigeria stock market for 2018 though downside risk to achieving this target remain visible. The market gains in 2017 were driven by impressive returns in the Banking sector which returned 73.32%, the consumer goods sector which returned 36.97% and the industrial goods sector which returned 23.84% while other sectors of the market recorded gains except for the Alternative securities market (ASEM) which closed down by 8.60%. Increased investor confidence The trading aspect recorded significant recovery while the market witnessed increased issues compared to 2016 where there were no issues. The year 2018 is expected to witness a similar trend as economic indicators have improved and the world now projects increased investor confidence and GDP growth for Nigerian economy. Going forward we expect to see more trading activities in the secondary market as listed companies will begin to trade at new highs never seen before even as their profitability soars on the back of a vibrant economy. The primary market is also expected to be active in the year with expectation of new listings, Mergers and acquisitions, Rights issue, listing by introduction etc, all expected to drive overall market activity and deepen the market in the process. What is your take on the bullish run witnessed in the Nigerian stock market at the beginning of the year? This year is different from previous years as we saw the market being bullish. In previous years the markets use to be bearish at the beginning of the year. It is normal since the economy has continued to maintain growth from recession. We still expect further bullish market if the economic activities continue to improve. The stock market does not work in isolation of the economy. Our market has been experiencing growth across the sub sectors- banking, cement, Fast Moving Consuming Goods, FMCG, insurance etc. So, we don’t see any bubble burst at the moment because the growth is balanced. Don’t you think that speculators are the ones pushing the stock price upward, especially for those with no fundamentals? There are speculations no doubt especially when you see some stocks’ prices rising without good fundamentals. We do advise people to be wary of those stocks. Anyway these are the risk that goes in the market. These speculators may gain or lose from these stocks. Everything will depend on the full year results that the market is expecting. If the result of these companies turns out to be good, then the price would be sustained but if the reverse becomes the case then you will see people losing money. What really attracted the foreign investors into the Nigerian stock market? Investment and confidence in shares significantly improved in 2017 given the improved investor sentiments towards the Nigerian Year 2018 is expected to witness a similar trend as economic indicators have improved and the world now projects increased investor confidence and GDP growth for Nigerian economy Vanguard, MONDAY, FEBRUARY 19, 2018 — 25 economy. Significant improvement in corporate earnings for companies listed on the stock market drove investment back to the market even as foreign portfolio investors came back into the country on the back of a more stable and predictable Foreign Exchange, FX market. This drove the Nigerian stock market to close the year with a return of 42.30%, its first positive return since year 2014. Do you see interest rate falling below 14 percent this year? Having maintained the Monetary Policy Rate (MPR) and Cash Reserve Requirement (CRR) at 14% and 22.5% respectively while also retaining the asymmetric corridor of +200 bps above and -500 bps around the MPR for over a year, we expect a rate cut at the first meeting of the Monetary Policy Committee of the CBN in 2018, and we are of the opinion that the committee will cut the benchmark interest rate by 0.5 percent or 1.0 percent thereby taking the MPR to 13.5 percent or 13 percent. The projected cut in rate is imminent owing to the CBN’s continuous slash in stop rates for treasury bills which once stood at a high of about 18.8 percent in May 2017 and closed the last auction date at 15.57 percent in November 2017. The continuous decline in inflation figures has also supported the banks’ target to reduce the interest burden on its debt obligation and also offer real return on its securities. In a bid to reduce the country’s domestic debt obligation the CBN repaid all the maturing treasury bills that matured in December 2017 and have signalled that it would continue to drop its stop rate going forward into year 2018 even as the CBN targets and inflation rate below 12 percent for 2018. What are your expectations for Nigeria in terms of GDP growth for 2018 given the fact that the country would be entering into election period from the third quarter? We also hope that appropriate policies: both monetary and fiscal policies will be put in place in 2018 to drive economic growth. We also hope that the Federal Government will rapidly pass the 2018 budget into law and execute the projects in desirable time to boost economic activities. We are of opinion that if the government rides on the current events which presently are in the favour of Nigeria, Nigeria will grow by an average of 2.2 percent in 2018, despite downside risk to this growth forecast. The projected GDP growth rate for 2018 should become a reality if government continues to boost its non-oil sector revenues and properly deal with issues relating to wasteful government spending and non-friendly business policies. Stanbic IBTC Imaan Fund donates to charities STANBIC IBTC Asset Management Limited has donated the non-permissible income of its Shariah compliant mutual fund - the Stanbic IBTC Imaan Fund, to a registered charity, in line with the principles of Shariah. The Stanbic IBTC Imaan Fund, which was originally introduced to private investors in 2011 as a Shariah compliant portfolio, has the primary objective of achieving long-term capital appreciation of its assets by investing in Shariah-compliant equity securities approved by the Shariah Advisory Committee of Experts (ACE). The Fund invests a minimum of 60 percent of its assets in equities of Shariah-compliant companies listed on the Nigerian Stock Exchange, NSE, while retaining a maximum of 40 percent in non-interest bearing fixed income securities (Sukuk). The Fund prohibits investments in businesses that sell or produce alcohol, tobacco, pork products, conventional financial services, (banking and insurance), weapons, defense products and entertainment. The non-permissible income, which constitutes a certain percentage of the Fund’s dividend income, is usually donated to charities that have gone through screening and approval by ACE. The screening is undertaken to ensure that the benefiting charities are not involved in any activity that is contrary to Shariah principles. Speaking at the presentation of N787,037.02 cheque in Lagos, Mr. Aigboje Higo Mrs. Bunmi Dayo-Olagunju, Chief Executive, Stanbic IBTC Asset Management Limited, said as a company with strong corporate governance, adherence to ethical conduct, underlined by probity and transparency, will remain cardinal operational principles. The Stanbic IBTC Imaan Fund, she said, is tailored to meet the needs of those seeking investments compliant with their religious principles and beliefs, and specifically targeted at people seeking conformity with their religious beliefs and ethics. The pooled funds are invested in Shariah-compliant equity and non-interest bearing fixed income securities. The minimum subscription amount into the fund is N5,000 and subsequent investments of N5,000, Dayo-Olagunju said. She noted that Stanbic IBTC Asset Management Limited has amassed impeccable wealth of experience and expertise in managing funds on behalf of savings schemes, institutional and corporates bodies and high net-worth individuals for over two decades. “Mutual funds offer investors the advantages of portfolio diversification and professional management at low cost. These advantages are particularly important because diversification and professional management ensure steady returns when compared to other investment strategies” she said.