REGENCY RESEARCH WEEKLY MARKET REPORT MACROECONOMIC ENVIRONMENT MACROECONOMIC INDICATORS

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1 Friday December 30, 2016 REGENCY RESEARCH WEEKLY MARKET REPORT MACROECONOMIC ENVIRONMENT Job Creation Statistics The National Bureau of Statistics (NBS) says the country s unemployment rate has risen from 13.3 per cent in the 2nd quarter to 13.9 per cent in the 3rd quarter of This is contained in the Unemployment/Under-employment Report for 3rd Quarter of However, In the third quarter of 2016, the total number of jobs generated rose to 187,226 from the 155,444 generated in quarter 2, representing an increase of 20.4% quarter on quarter, but a decline of 60.6% year on year. The formal sector recorded 49,587 jobs, representing 26.5% share of new jobs in quarter 3. The informal sector recorded a larger share of new jobs in quarter 3 when compared to the previous quarter, reporting a figure of 144,651 jobs, which represents 77.3% of new jobs in quarter 3. The Public sector again recorded a negative growth in employment, with a figure of -7,012 in quarter 3. The reported negative growth in public sector job numbers over the last year has not been entirely surprising, as many state governments across the country have struggled to pay salaries, hence restricting the number of new intakes and in some instances placing a complete embargo on new employment into the public service. Overall, the magnitude of employment in the economy has not been sufficient or adequate to meet the ever-growing labour market; hence the continuous rise in the level of unemployment in the country which stood at 13.3% in Q2 and 13.9% in Q Despite negative economic growth since 2016, the net jobs created still remains positive on the whole in both the formal and informal sectors meaning more jobs are being created despite job losses especially informal low paying jobs. Positive net formal jobs in both q2 and q were driven by the human health and social services sectors as well as agriculture and accommodation and food services, which accounted for about 90% and was responsible for keeping net jobs created positive in both q2 and q This reflects the current economic realities with only a few businesses still growing and employing, while many others are shedding jobs. While 18 of the 46 economic activities recorded negative net jobs created in q2 2016, 21 of the 46 economic activities recorded negative net jobs created in q With the Nigerian labour force population rising by a five year average of over 2.6 million annually, the economy needs to generate the same level of jobs annually just to hold the unemployment rate at the current level of 13.9%. Between Q1-Q3 2016, 3.7million people have entered the labour force with net jobs of 422,135 created within that period, giving a shortfall of 3.2million for Q1-Q This has resulted in a rise in the combined unemployment and underemployment levels from 29.2% (10.4% for unemployment alone) at the beginning of 2016 to 33.6% (13.9% for unemployment alone) by end of Q Capital Market Review. Analysis of the market activity in the week ended December 30, 2016 technically reveal improved optimistic trading pattern and share accumulation as investors displayed active value investing approach in the week. The Nigerian Stock Market thereby closed on positive note during the week with the All Share Index and market capitalization of listed equities appreciating by 1.47% each from the opening figures of and N9,113 trillion to close at 26, and N9,247 trillion respectively. Its year to date (YTD) return stands at 6.17%. MACROECONOMIC INDICATORS GDP Growth Rate % March, 2016 Un-employment Rate 13.90% November, 2016 Broad Money Supply (M2) N21,634 Bn June, 2016 Credit to Private sector N21,425 Bn June.,2016 Consumer Index (YOY) 18.48% November 30,,2016 Monetary Policy Rate (MPR) 14% July 26, 2016 Deposit Rate of Banks (3 Months) Source: Central Bank of Nigeria (CBN) 9.34% August.,2016 Average Prime Lending Rate 16.78% August, 2016 Nigeria s Bonny Light Crude Oil US$55.59 December 30, 2016 Nigeria s Gross External Reserves ALL SHARE INDEX & MKT. CAP PERFORMANCE OF THE NSE INDICES NSE INDICATORS US$24.80Bn October. 31, 2016 INDEX TITLE prev week curr week CHANGE % NSE PREMIUM 1, , NSE MAIN BOA 1, , NSE 30 INDEX 1, , NSE CONS. GO NSE BANKING NSE INSURANC NSE OIL & Gas (1.47) NSE LOTUS 1, , NSE IND. GOO 1, , (0.15) NSE ASeM 1, , (2.35) NSE PENSION Regency Research Weekly Market Report Committed to grow your wealth

2 Domestic Market Review Thirty seven stocks appreciated in price during the week as against Twenty six stocks in the preceding week. The top ten price gainers during the week were: MARKET SUMMARY Last Week Previous % Change week Volume M 1,261 M Value N= N=3,724 B N=17,520 B Total Gain Twenty One stocks depreciated in price during the week as against Thirty Six stocks in the preceding week. The top ten price losers during the week were: Total Loss Deals 6,369 14, All Share Index 26, , Market Cap. N=9,247 N=9, EXCHANGE TRADED PRODUCTS (ETP) Trillion TOP TEN GAINERS Trillion Traded during the week were a total of 9,963 units of Exchange Traded Products valued at N56, in 16 deals compared with 10,170 units Exchange Traded Products valued at N123, in 22 deals traded in the preceding week. Company Op. cl. Gain Gain in % NAHCO LAWUNION NEM UBN UAC-PROP UPL AGLEV NASCON ASHAKA NB BOND MARKET There were no transactions recorded on Federal Government bond during the week under review, however, a total of 25,219 units Federal Government Bond valued at N24,458, in 3 deals were executed in the previous auction. TOP TEN LOSERS Company Op. Cl. Loss Loss in % FO (19.44) (18.72) STERLING (0.09) (10.59) PORTLAND (0.18) (9.09) ETI (0.60) (5.51) UNITY (0.03) (5.17) EKOCORPS (0.16) (4.75) BETA (1.51) (4.74) JULI (0.08) (4.57) FIDELITY (0.04) (4.55) OMOSAV (0.04) (4.35) Regency Research Weekly Market Report 2 Committed to grow your wealth

3 Domestic Market Review OUTLOOK AND STOCK RECOMMENDATION FOR THE WEEK (02/01/17-06/01/2017) The Nigerian Stock Market appreciated during the week review as investors displayed active share accumulation pattern and value investing approach. We expect this to continue during the coming week as investors may likely start positioning for year end results. We therefore recommend the under-listed stocks in the week. DANFLOUR, UACN, NASCON, UBA, UCAP, DANSUGAR, and ZENITH, are recommended due to impressive quarterly results, attractive prices and sound fundamentals. These companies are valued stocks and most of them have consistent dividend payment over the years. Investors may consider it wise to start taking position as the companies have ended their FY. We also advise our investors to continue with buy and hold of GTbank, TOTAL, NB, and DANCEM because the fundamentals are strong, shareholding structure is good (prices may not likely depreciate significantly), good ROI, good perception, good patronage and their prices may continue to appreciate or remain stable in the current economic recession. RECOMMENDED STOCKS TO BUY Stocks Current STOCKS ON HOLD 52 wks Low 6 Mths Target N= price UACN DANFLOUR NASCON UBA UCAP DANSUGAR ZENITH BANK Stocks Current 52 weeks LOW 6 Mths Target Expected % Change % Change GUARANTY TOTAL NB DANCEM FINANCIAL HIGHLIGHTS OF RECOMMENDED STOCKS Company Result Turnover PAT DANSUGAR Current N Last yr N Current N Last yr N Curr EPS Last Div. Paid 3RD QTER 115,253BILL 101,058 BILL 10,117 BILL 11,535 BILL N0.84 N0.50 YEAR END GTbank PLC 3RD QTER 181,910 bn 172,964 bn N interim 30/9/2016 (Int. Income) (Int. Income) 119,927 bill 75,160 bill N4.24 dividend FLOUR MILLS 2ND QTER PLC 30/09/ ,805 Bill 177,583 bill 6,468 BILL 24,019 Mill N2.23 N=1.00 at 31/3/16 UBA 3RD QTER 30/09/ ,527 bill 245,492 bill 52,269 bill 48,557 bill N=1.50 TOTAL PLC 3RD QTER 30/9/ ,217 bill 159,299 bill 11,632 bill 2,770 bill N34.26 NB 3RD QTER 222,717 30/09/2016 UCAP 3RD QTER bill 214,918 bill 20,111 Bill 26,175 BILL N=1.09 N= interim dividend N Interim dividend N= IN- TERRIM 30/09/2016 5,689 bill 4,088 bill 4,696 bill 1,910 bill N0.78 N0.35 at 31/12/15 NASCON PLC 3RD QTER 30/9/ ,795 BILL 10,192 BILL 1,763 BILL 1,618 BILL N0.66 N0.55 YEAR END 2

4 MARKET DEVELOPMENTS (LAST WEEK ) Guinness Nigeria PLC plans to raise about N40 billion from its shareholders as part of strategic plan to deepen its balance sheet and provide long-term financial support for its business. A notification issued by the company indicates that the Board of Directors of Guinness Nigeria has fixed an Extraordinary General Meeting (EGM) for January 24, next year to place the new capital raising plan before the shareholders and secure the shareholders resolutions to proceed with the fund raising. While the details of the capital raising are still sketchy, Guinness Nigeria plans to undertake a rights issue to raise up to N40 billion, limiting the new capital issue to predetermined exixting shareholders of the company. The new shares on offer will be proportionately allotted to the existing shareholders based on their shareholdings as at a particular date. According to Guinness Nigeria, the rights issue will allow the company to optimise its balance sheet while improving its financial and operational flexibility. Guinness Nigeria closed the last trading session at the Nigerian Stock Exchange (NSE) at N It has traded between a high of N and a low of N71.82 in the past 12 months. The new capital raising is, however, still subject to approval of the Securities and Exchange Commission (SEC) and NSE. The proposed capital issue will provide another window for Diageo PLC, the parent company and majority shareholder of Guinness Nigeria PLC, to inject capital into the Nigerian subsidiary after the multinational backed down from its earlier proposal to acquire additional equity shares in Guinness Nigeria MARKET ANALYSIS AND EXPECTATION) Analysis of the market activity in the week ended December 30, 2016 technically reveal improved optimistic trading pattern and share accumulation as investors displayed active value investing approach in the week. Volume analysis revealed active bargain tendencies towards GUARANTY, NEM, NPFMCRFBK and FCMB while investors sustained sell postures towards TRANSCORP, FBNH, STERLNBANK and BETAGLAS. The bulls dominated the week, strengthening the key benchmark index by points against loss recorded in the previous week to close at 26, The All Share Index traded within the range of 26, (week-high) and 26, (week-low) to settle at 26, In the coming week, we expect end of year result to aid trading pattern as investors may remain value-driven during the week INVESTMENT BASICS BULL AND BEAR MARKET movement in the stock market can be up, down or sideways. The movement is dynamic and perpetual. The upward movement is followed by a steady downward movement, although with occasional interruptions by small rallies. The market is defined as bullish if it moves up steadily and bearish if it moves down steadily. A common definition uses benchmark of at least a 20% increase or 30% decrease in market prices for the market to be defined as bullish or bearish respectively. The market indicators that confirm Bullish and Bearish market are: Advance Line confirms the bullish case of a stock while Decline Line confirms a bearish case of a stock. The Advance/Decline line and market indexes move in the same direction and trending up wards for bullish and downward for bearish. New Highs and Lows called a Market Health Barometer indicates the health of the market. When more stocks make new Highs relative to new Lows, it is bullish and vice versa for bearish market. Economy. Government commitment to fiscal responsibilities and its strong determination to address the major economic problems of the country may provide a powerful stimulant to economic and stock market growth. If the GDP increases at healthy pace, stock will rise, the market will be bullish because the potential for higher profits resulting from a healthy business climate will be high. As the economy gets in gear, and industrial production, capacity utilization and personal incomes increase, stock market prices will rise and market will be bullish. Consumer Sentiment. Consumer sentiment about the current economic conditions and their own personal financial situation, when positive, is a powerful engine of economy, and a bullish sign for the market. Market indexes or averages can be used to get a better overall view of the stock market health. They measure the performances of the market, they are used to compare the market sector s rise and fall over time. Indexes are used to compare the performances of a portfolio. An unfavorable comparison points to the need for a change in investment strategy. Moving Averages: A moving average is simply the arithmetic average of a given number of past closing prices of a stock or index. When prices are rising, moving average trails the market and technically analyst claim, forms a support level for stock prices. A support level is a level at which a stock will find support during a downward trend and will prevent it from declining further. When prices are falling, the moving average is above current prices and forms a resistance level, which is the price at which a stock should peak. 2

5 FIXED INCOME MARKET REPORT Money Market At the end of the week ended December 30, 2016, the Nigerian Interbank Offer Rates (NIBOR) closed positive for most of the tenors. The NIBOR rate increased by %, 4.44%, and 1.75% for overnight 1, and 3 months tenors to close at 11.33, 17.85, and respectively. Treasury Bills There were no transactions recorded in treasury bills during the week under review, however the Central Bank of Nigeria during the previous week sold a total of N13.18 billion of 91 day treasury bills at 16%, and N26.56billion of 182day treasury bills at 17.5% Foreign Currency (EXCHANGE RATE). The official dollar rate closed at N305$ during the week under review. The naira during the week depreciated against some major currencies. It depreciated by 0.96%, 0.59% and 0.52 against Euro, Swiss Franc and Japanese Yen to close at N322.11, N299.63, and N2.61 respectively. NIGERIAN INTER BANK OFFER RATE NIBOR TENOR Curr. Rate Prev.Rate % Change Overnight Month Months Months Source: Financial Markets Dealers Quotations (FMDQ) NAIRA EXCHANGE RATES Currency Cur. Rate Prev. Rate Change% US$ (0.08) POUNDS (0.40) EURO FRANC YEN CFA WAUA YUAN (0.05) DANISH KRO SDR (0.04) Source: Central Bank of Nigeria (CBN) OIL PRICE The Nigeria s oil price continued to appreciate during the week under review. According to the latest data given by the Central Bank of Nigeria, the oil prices which have been trading above $50 a barrel in the last few weeks also went up slightly during the week and closed at $55.59 compared with $54.31 recorded in the previous week. MONEY MARKET RATES This Week (%) Last Week (%) Open-Buy-Back (OBB) Overnight (O/N) % Change % -0.57% Source: Financial Markets Dealers Quotations (FMDQ) Disclaimer This report was prepared, issued and approved by Regency Assets Management Limited (RAML). The report is based on information from various sources that we believe are reliable. While due care has been taken in preparing it, investors are reminded that the stock prices fluctuate based on stock market forces. This report is provided solely for the information of clients of RAML who are expected to make their own investment decisions. Regency Assets Management Limited accepts neither responsibility nor liability whatsoever for any loss arising from the use of this report. All opinions on this report constitute the authors best estimate judgement as of this date and are subject to change without notice This report is for private circulation only. The report may not be reproduced distributed or published by any recipient for any 3