Friday September 01, 2017 REGENCY RESEARCH MACROECONOMIC ENVIRONMENT The infrastructural deficit witnessed in Nigeria especially in critical sectors such as Energy and Rail has held back the growth of real asset in the country. This has further stalled the ability of the nation to deliver public goods required to enhance the wellbeing of its people. The fallout from this glut has led to an increase in the burden of inelastic goods on the income of house hold. Thus, providing critical infrastructure has become a necessity in addressing the quality of living of every Nigerian. At the same time, Nigeria cannot experience a take off without an improvement in its energy and railway infrastructure. Evidently, the present poor state of energy infrastructure has made technology transfer in Nigeria harder and caused an increase in the cost of doing business. In addition the need for a more robust railway system which will force price conversion especially in food items has become inevitable. The spill over effect from expanding railway lines, will lead to an increase in demand for steel, cable wires and cement. Obviously the impact of deeper railway penetration will rub positively on the construction sector, while investment in such critical infrastructure will help to improve labor productivity thus leading to wider agglomeration. Certainly the need to address such infrastructural gap has become inevitable in order to bolster gross fixed asset. The report admitted that the lean resources of government has put public financing in a limited position, therefore alternative form of financing is important to complement government role. It also went a step further in proffering alternative funding to infrastructure while encouraging government to leverage on the nation s pension funds and sovereign wealth fund to beef up its sources of revenue. More importantly it is expedient for government to tilt to foreign institutional investors to reduce this infrastructure gap due to the huge resources at their disposal. In the same vein, it has to make the institutional environment better by improving its business concern and infrastructural index s. The intense need for private capital to drive capital spending and drive growth cannot be shrugged off, given the country s low capacity utilization and weak manufacturing index s. As a matter of urgency institutional challenges such as poor stake holder consultation, absence of a viable private public partnership legal frame work and poor credibility in public infrastructure have to be resolved. Resolving these institutional challenges will foster private capital participation in infrastructure. Nigeria has not experienced her vertical take- off; such can only be experienced when a robust energy and railway system is in place, as the presence of this will have a positive impact on internal trade, which will create the right impetus for a take-off. Rail lines and robust energy infrastructure create new trading routes and eliminate barriers to trade. They form new bonds of partnership and reinforce old ones; simultaneously they provide the right answers to nationhood. Capital Market Review. Analysis of the market activity in the week ended September 01, 2017 technically reveal speculative trading pattern as investors displayed active profit taking on stocks that have appreciated in the past few weeks. The Nigerian Stock Market thereby closed on a negative note during the week with the All Share Index and market capitalization of listed equities depreciating by 3.12% each from the opening figures of 36,646.46 and N12,631 trillion to close at 35,504.62 and N12,237 trillion respectively. Its year to date (YTD) return stands at +32.11%. MACROECONOMIC INDICATORS GDP Growth Rate -12.97% March, 2017 Un-employment Rate 14.20% December, 2016 Broad Money Supply (M2) N21,674 Bn June, 2017 Money Supply (M1) N9,883,821 June, 2017 Consumer Price Index (YOY) 16.05 August 31,,2017 Monetary Policy Rate (MPR) 14% July 27, 2017 Cash Reserve Ratio (CRR) 22.50% August.,2017 Average Prime Lending Rate 17.58% May, 2017 Nigeria s Bonny Light Crude Oil US$52.07 September 1, 2017 Nigeria s Gross External Reserves Source: Central Bank of Nigeria (CBN) ALL SHARE INDEX & MKT. CAP PERFORMANCE OF THE NSE INDICES NSE INDICATORS US$30.33Bn July 28, 2017 INDEX TITLE prev week curr week CHANGE % NSE PREMIUM 2,350.15 2,248.63 (4.32) NSE MAIN BOARD 1,687.35 1,646.49 (2.42) NSE 30 INDEX 1,687.47 1,637.95 (2.93) NSE CONS. GOODS 974.94 946.88 (2.88) NSE BANKING 450.37 439.69 (2.37) NSE INSURANCE 134.98 137.54 1.90 NSE OIL & Gas 298.07 298.93 0.29 NSE LOTUS 2,266.29 2,222.42 (1.94) NSE IND. GOODS 2,104.00 2,051.96 (2.47) NSE ASeM 1,161.80 1,160.78 (0.09) NSE PENSION 1,260.30 1,228.62 (2.51) Regency Research Weekly Market Report Committed to grow your wealth 1
Domestic Market Review Nineteen stocks appreciated in price during the week, as against Thirty Two stocks in the preceding week. The top ten price gainers during the week were: MARKET SUMMARY Last Week Previous % Change week Volume 0.998.973 M 1,538 M -35.05 Value N= N=11,455 B N=24,218 B -52.70 Total Gain 19 32-40.63 Forty Eight Stocks depreciated in price during the week as against forty stocks in the preceding week. The top ten price losers during the week were: Total Loss 48 40-20.00 Deals 13,626 19,187-28.98 All Share Index 35,504.62 36,646.46-3.12 Market Cap. N=12,237 N=12,631-3.12 EXCHANGE TRADED PRODUCTS (ETP) Trillion TOP TEN GAINERS Trillion A total of 86,063 units of Exchange Traded Stocks valued at N838,754.79 in 8deals were traded during the week compared with 390 units of Exchange Traded Products valued at N6,511.60 in 5 deals executed in the previous week. Company Op.Price cl. Price Gain Gain in % CUTIX 2.01 2.50 0.49 24.38 CONTRE 1.29 1.47 0.18 13.95 TOTAL 216.80 245.00 28.20 13.01 FIDSON 3.15 3.34 0.19 6.03 CUSTODY 3.42 3.60 0.18 5.26 MAYBAKER 2.86 3.01 0.15 5.24 PZ 26.00 27.30 1.30 5.00 ASL 5.41 5.68 0.27 4.99 NEIMETH 0.83 0.87 0.04 4.82 VITAFOAM 2.67 2.79 0.12 4.49 BOND MARKET A total of 12,244 units of FGN bonds valued at N12,373,792.10 11 deals were traded during the week compared with 3,657 units of FGN bond valued at N2,866,267.02 in 9 deals traded in the previous auction. TOP TEN LOSERS Company Op.Price Cl. Price Loss Loss in % 11PLC 192.55 165.11 (27.44) (14.25) FIRSTLAU 0.63 0.55 (0.08) (12.70) CILEASING 1.11 1.00 (0.11) (9.91) JBERGER 35.99 32.49 (3.50) (9.72) MORISON 0.90 0.82 (0.08) (8.89) GUINNESS 81.50 75.50 (6.00) (7.36) FCMB 1.15 1.07 (0.08) (6.96) LINKAGE 0.72 0.67 (0.05) (6.94) UBA 9.70 9.10 (0.60) (6.19) NB 190.00 180.03 (9.97) (5.25) Regency Research Weekly Market Report 2 Committed to grow your wealth
Domestic Market Review OUTLOOK AND STOCK RECOMMENDATION FOR THE WEEK (05/09/17-08/09/2017) The Nigerian Stock Market depreciated during the week under review. Investors continued to take profit on stocks that have been appreciating in the past few weeks. We expect the market to turn around during the week as prices are becoming more attractive and nearly all the companies have released their half year reports. We therefore recommend the stocks below for the coming week. WAPCO, Access bank, UBA, Fidelity, and Zenith Bank prices are attractive. The payment of interim dividend by Zenith, UBA and Access will enhance investors sentiment. The fundamentals of these stocks are strong and they have good ROI. We expect the prices to enjoy upward trend in the market during the week. Transcorp Plc, FCMB and FO currently are good stocks for speculative investment because their prices are very attractive. The declaration of improved half year may comtinue to impact positively on the prices. RECOMMENDED STOCKS TO BUY Stocks Current Price Expected Target price WAPCO 56.98 80.00 40.40 ACCESS 9.67 15.00 55.12 UBA 9.10 15.00 64.84 FIDELITY 1.3 2.00 53.85 ZENITH 23.00 30.00 30.43 TRANSCORP 1.30 2.00 53.85 FCMB 1.05 1.50 42.86 FO 49.00 75.00 53.06 Expected % Change FINANCIAL HIGHLIGHTS OF RECOMMENDED STOCKS Company Result Turnover PAT Current Last yr Current FIDELITY BANK 1st qter N=bill N=bil N=bill Last yr N=bil Curr EPS Last Div. Paid 31/03/2017 40.84 34.35 4.32 3.58 N=0.16 N=0.14 in 2016 FY ZENITH PLC 2nd qter N0.25 2017 interim 30/06/2017 380.44 214.81 75.32 35.47 N2.40 dividend UBA PLC 2nd qter N0.20 Interim 30/06/2017 222.72 165.58 42.34 27.11 N1.21 2017 WAPCO PLC 2nd Quarter N1.05 Year end 30/06/17 154.86 107.37 19.73-30.25 N3.68 2016 DANSUGAR 2nd qter N=0.50 interim 30/6/2017 118.68 169.72 17.10 14.40 N2.85 2017 TRANSCORP PLC 2nd qter N0.05 2013 year 30/06/2017 34.17 24.78 4.16-12.19 N0.10 end FORTE OIL PLC 2nd qter 20/6/2017 65.65 84.42 4.11 2.23 N1.05 N3.45 2015 FY end 3
MARKET DEVELOPMENTS (LAST WEEK ) Following the announcement that it will float a N50 billion rights issue in 2017, Union Bank has now received the required approvals from the Securities and Exchange Commission (SEC) to move forward on raising the Tier 1 capital. The Bank anticipates that the Rights Issue will be open for subscription in September 2017. During the offer period, 12.1 billion ordinary shares of 50 kobo each will be available at N4.10 per share, on the basis of five new shares for every seven shares held. The Qualification Date for the Rights Issue, which has already been announced by The Nigerian Stock Exchange, is August 21, 2017. Commenting on the SEC approval, Mr. Emeka Emuwa, Chief Executive Officer said, The approval by the Securities and Exchange Commission brings us to the final stages of this important transaction for Union Bank which is critical to our short to medium term business objectives. The capital raised from the rights issue will support our strategy to accelerate business growth and position Union Bank as a leading commercial bank in Nigeria.. Chapel Hill Advisory Partners Limited is the Lead Issuing House to the Bank; and FSDH Merchant Bank Limited and Stanbic IBTC Capital Limited are the Joint Issuing Houses. INVESTMENT BASICS This is the 6th consecutive monthly decline in the headline inflation in 2017. This drop in the year-on-year price level is contrary to some analysts expectations, but within the acceptable margin of error of (+/- 0.1%). Core inflation moved in the same direction as headline rate, declining by 0.3% to 12.2% in July. Core inflation has declined consistently in the last seven months and is a good sign, as it measures price change minus seasonality. Globally, there was a marginal increase in the inflation rate, with countries such as the US and Germany both recording an uptick to 1.7%. However, inflation in the Euro area, Japan and the UK was relatively unchanged. Regionally, inflation is tapering with declines recorded in Angola, Ghana, South Africa, Kenya and ivory Coast to name a few. Core inflation maintained a declining trend although at a slower rate. The contributions with the highest increases were in medical services, clothing materials, furniture and furnishings, glassware and household utensils, books and stationery, accommodation services, household textiles. Housing, water, electricity, gas and other fuels, a category under the core index which often filters into the price of other goods, recorded a slowdown. A decline to 9.5% was recorded in this sub index from 11% in June. Month-on-month core inflation also moved in tandem with the yearly core index, with a decline to 1% from 1.32% in June. The food basket rose to 20.28% from 19.91% year-on-year in the month of July. The trend in food inflation continues to support the general increase in price level. Major contributors to the increase included meat, fish, bread and cereals, potatoes, yam and other tubers, vegetables and coffee, tea and cocoa. Imported food inflation moved contrary to this trend, as it eased marginally to 14.11% from 14.2% in June. This trend can be ascribed to the relative stability in the exchange rate. The urban and rural sub indices showed a mixed pattern. The urban index slowed to 16.04% from 16.15% in the previous month while the rural index inched up slightly to 16.08% from 16.01% in June. Month-on-month inflation declined to 1.21% (15.53% annualized) in July from 1.58% (20.69% annualized) in the previous month. 4
FIXED INCOME MARKET REPORT Money Market At the end of the week ended September 01, 2017, the Nigerian Interbank Offer Rates (NIBOR) closed positive for all the tenors. The NIBOR rate increased by 49.81%, 3.49%, 4.04% and 3.78% for overnight, 1, 3 and 6 months tenors to close at 16.04, 19.60, 22.17 and 23.64 respectively. Treasury Bills The Central Bank of Nigeria during the week sold N32.44 billion 91-day treasury bills at 13.35% and N30billion 182-day treasury bills at 17.35% compared with N23.06 billion 91-day treasury bills at 13.43%, N69.57billion 182-day treasury bills at 17.4%, and N136.52 billion 365-day treasury bills at 18.33% executed in the previous week Foreign Currency (EXCHANGE RATE). The official dollar rate closed at N305.85 to a Dollar during the week under review. The naira during the week depreciated against some major currencies. It depreciated by 0.76%, 0.98% and 0.40%, against Pound Sterling, Euro, and Swiss Franc to close at N395.28, N364.85 and N319.33 respectively. OIL PRICE The Nigeria s oil price appreciated during the week under review. According to the latest data given by the Central Bank of Nigeria, the oil prices went up and closed at $52.07 compared with $50.79 recorded in the previous week. NIGERIAN INTER BANK OFFER RATE NIBOR Source: Financial Markets Dealers Quotations (FMDQ) SDR 435.20 431.55 0.85 Source: Central Bank of Nigeria (CBN) This Week (%) Last Week (%) Open-Buy-Back (OBB) 7.33 12.00 Overnight (O/N) TENOR Curr. Rate Prev.Rate % Change Overnight 16.0417 10.7083 49.81 1Month 19.5998 18.9386 3.49 3Months 22.1728 21.3118 4.04 6Months 23.4926 22.6365 3.78 NAIRA EXCHANGE RATES Currency Cur. Rate Prev. Rate Change% US$ 305.85 305.80 0.02 POUNDS 395.28 392.31 0.76 EURO 364.85 361.30 0.98 FRANC 319.33 318.04 0.40 YEN 2.78 2.80 (0.60) CFA 0.56 0.54 3.77 WAUA 434.49 430.51 0.93 YUAN 46.38 45.92 0.99 DANISH KRO 49.04 48.57 0.97 SA RAND 23.45 23.22 1.01 MONEY MARKET RATES 8.42 12.59 Source: Financial Markets Dealers Quotations (FMDQ) % Change -38.92% -33.12% 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 5