Otedola, Adenuga’s firms, 3 others lose N265.4 b in 6 months

Otedola, Adenuga’s firms, 3 others lose N265.4 b in 6 months

 …Investors regain N314.74 bn as stock market value hits N10.2 trn in June

…Shareholders decry neglect of retail investors

Femi Otedola, Mike Adenga and three other entities quoted on the Nigerian Stock Exchange, NSE, lost N265.4 billion in the first half of 2016. However, other investors on the Nigerian Stock market regained over N314.74 billion in the six months trading as the Year to Date, YtD, return on market value as at 30th June, 2016 appreciated by 3.20 per cent to close at N10.165 trillion from N9.850 trillion it closed on December 31, 2015. Meanwhile, shareholders of quoted companies reacting to the dwindling performance of the stock market decried neglect of retail investors by regulators of the market.

Vanguard’s findings showed that Femi Otedola’s Forte Oil Plc recorded the highest loss in investment value as it declined by N181.9 billion, from a capitalisation of N429.8 billion in December, 2015 to N247.9 billion at the end of June, 2016. Mike Adenuga lost N1.1 billion as Conoil share price plunged. Trailing behind Forte Oil is Lafarge Africa Plc, which investment value declined by N76.6 billion from N440.9 billion in December, 2015 to N368.3 billion at the end of June 2016.

The other three firms which investment value dropped substantially include: MRS Oil Nigeria Plc N3.8 .billion, from N12.6 billion in December 2015 to N8.8 billion in June 30, 2016, followed by CAP Plc which declined by N2.0billion, from N26.3 billion in December 2015 to N24.3 billion in June 2016 and Conoil Plc which declined byN1.1 billion, from N17.2 billion in December 2015 to N16.0 billion in June 2016. The implication of this drop in investment values is that as share prices of these companies continue to fall, investors’ gains also fall. Meanwhile, the marginal gain recorded in the half year, according to stakeholders was fuelled by portfolio investors’ sentiments following the introduction of flexible exchange rate by the Central Bank of Nigeria, CBN on June 14, 2016.

Gainers & Losers

Analysis of market performance during the period showed that the top five share price gainers on the NSE for the month of June, 2016 were Nestle Foods Nigeria Plc, which appreciated by N65. 34 to close at N850.00 per share from N784.66 .It was followed by Dangote Cement Plc, which appreciated by N24.99 to close at N192.00 per share from N167.01 per share. Others are Totalfinaelf Nigeria Plc, which garnered N20 per share to close at N190 per share from N170 per share, followed by Julius Berger, which rose by N7.43 per share to close at N50.93 from N43.50 per share and Guinness Nigeria Plc went up by N4.93 per share to close at N109.25 per share FROM 104.32 per share.

On the losers’ chart, Seplat Petroleum Development Company Plc recorded the highest loss of N30.00 per share during the six months period, from N360 per share to close at N330 per share, followed by Forte Oil Plc which depreciated by N5.56 to close at N190.34 per share from N195.90 per share. Trailing behind Forte Oil was Lafarge Africa Plc , which dropped by N3.06 per share to close at N73.51from N76.57 per share. Others are Fortis Microfinance Bank Plc, which nosedive by N2.57 per share to close at N2.58 per share, and CAP Plc that declined by N2.12 per share to close at N43.68 per share.

Shareholders react

Commenting on the half year performance of the Nigerian stock market ended June30, 2016, the Chairman, Progressive Shareholders Association of Nigeria, PSA, Mr. Boniface Okezie said “The first half that just ended is not impressive. The marginal gain that was recorded occurred in June when the flexible foreign exchange was introduced. It was the institutional and portfolio investors that buoyed the market. It was not sustainable as you can see that the prices have started dropping. This category of investors are not interested in the development of the market and the economy. These are investors that just take advantage of the falling prices and when the price rise, they just offload and make their profit and leave.”

Continuing he said “The retail investors are not playing in the market as you can see; the incentives to attract them are not there. The regulators are not doing anything. There is liquidity crisis in the market and people do not have the cash to invest. The federal government is yet to release money into the economy and purchasing power has really gone down with high inflation. Many contractors and civil servants are being owed and unemployment is on the increase. So these are some of the problems killing the market.

The flexible exchange rate policy has just opened a way for foreign investors to bring their money and buy cheap stocks and repatriate their returns. They are not the real investors that will grow the market and that is where the regulators are getting it wrong. I do not see much difference in the remaining second half of the year unless proactive measures are taken to address some of these anomalies.”

In his own reactions, the National Secretary of Independent Shareholders Association, ISAN, Mr. Adebayo Adeleke said “The slight change we witnessed in the first half of the year was recorded in June following the introduction of flexible exchange rate policy by the CBN. It is the sentiment by institutional investors and high net worth investors that spike the market and the previous losses was wiped out. So, you can see that the gain is marginal.”

Continuing, he said “Not much expectation has been experienced in the market, there is still market apathy by retail investors that has been neglected by regulators. The market is not likely to record much gain as nothing significant at the moment to push the market. In fact, the retail segment of the market should be looked at as they are the ones that can develop the market to sustainable level.”

Speaking as well, the Chairman, Renaissance Shareholders Association of Nigera, RSAN, Ambassador Timothy Olufemi said: “The stock market in the half year did not interest retail investors. The regulators have their own agenda which is not in tandem with us the retail investors. The regulators target is on foreign investors, they go for road show abroad and never organise anyone in the country. The confidence has not yet really returned as foreign investors just come in to trade, make profit and disappear.

The federal government should encourage the capital market to grow. The infrastructural gap should be financed through the capital market, the idea of going to borrow aboard should be limited. Government is just helping the capital market of the developed economies, while its own is left to crumble. The market at the moment is not reflective of the economy. More of public entities should be taken to the public and listed on the NSE.

Commenting, the Co-ordinator, Proactive Shareholders Association of Nigeria, PSAN, Mr. Oderinde Taiwo said: “I am really perturbed about our market, nothing has changed. We are still crawling. I hope the government will put its house in order. We need revolutionary policies that will impact on the market. The interest rate is on the high side and inflation is on the rise. Where do you want people to get money to invest? This is serious, until liquidity is boosted in the economy, we would not expect any significant change in our market. Companies are struggling to survive the harsh operating environment, so the federal government should quickly intervene to reduce the cost of running businesses.”

Analysts’ reaction

Also reacting, Vetiva Capital Management Limited, said: “With the second quarter, Q2 earnings season drawing nearer as market moves into half year 2016, we do not rule out the possibility of investors positioning ahead of these releases from next week. We foresee mixed performances across stocks as trading opens next week. “Meanwhile, the bond market remained bullish as buying momentum strengthened across the space. Overall, yields declined 35 bases points ( bps) on average across maturities, with the 15.10 per cent FGN April 2017 and 12.1493 per cent FGN July 2034 recording the most notable declines, down by 47 basis points apiece to 12.01 per cent and 13.90 per cent respectively.

“Given the strength of the buying interest observed across the fixed income space (yield moderated all through the week), we expect gains to filter into the coming sessions albeit cautiously.” Furthermore, analysts from Afrinvest West Africa, said: “The decline in the market last week was indicative of the fact that investors may have overreacted to the foreign exchange reforms. However, there is an expectation of a change in performance once investors get a better understanding of the operations of the foreign exchange market.

While it appears trading momentum currently remains soft, there is still the prospect of domestic investors taking position in fundamentally sound stocks in anticipation of the return of foreign participants in the market.” Further analysis revealed that the NSE Premium Index appreciated by 17.53 per cent or 277.87 points to close in the month under review at 1.862.79 points from 1,584.92 points it closed on 31st December, 2015.

The Premium Board Index is an equity index designed to provide a benchmark to capture the performance of companies listed on the Premium Board. The Premium Board is the listing segment for the elite group of issuers that meet the NSE’s most stringent corporate governance and listing standards. The Board is a platform for showcasing companies who are industry leaders in their sectors. Premium Board features companies that adhere to international best practices on corporate governance and meet the Exchange’s highest standards of capitalization and liquidity. There are three companies on the Premium Board of the NSE.

The NSE Main-Board Index dropped b y 0.88 per cent or 277 points to close at 1.326.03 from 1,337.85 points in December 2015. The NSE’s Main Board gives companies from diverse sectors the opportunity to raise funding from the public. In Nigeria’s increasingly global marketplace, NSE-listed companies enjoy access to a deep pool of local and international investors. Admittance to this board is based on profitability or market capitalisation criteria.

The Alternative Securities Market, ASeM Index, according to Vanguard’s finding on the YtD ended June grew by 0.41 per cent or 5.03 points to close at 1,213.68 points from 1,208.65 in December, 2015. The ASeM is a specialized board for emerging businesses – small and mid-sized companies with high growth potential. It gives such companies the opportunity to raise long-term capital from the capital market at relatively low cost, allowing them to grow and institutionalize. Nine companies are currently listed on this board.

VANGUARD