Shareholders of Forte Oil PLC recently approved management’s plan to divest all non-downstream businesses of the company. We recall that management had recently announced a business restructuring plan that would involve divesting the following businesses: Forte Upstream Servicing Ltd (FUSL), Amperion Power Distribution Company Ltd and AP Oil & Gas Ltd. The proceeds of this divestment would be used to fund expansion of its flagship petroleum products retailing business in Nigeria. We note that this strategic shift is hinged on management’s more optimistic outlook of the petroleum downstream segment given their view of market liberalization in the near-to-medium term. Following the shareholder approval, the company would now seek regulatory assent to carry out the restructuring. 

Market trades mixed, OMO auction undersubscribed 

The CBN conducted an OMO auction yesterday, selling N113 billion (offer: N300 billion) across the 112DTM and 231DTM bills at respective stop rates of 11.05% and 12.15% (effective yields: 11.44% and 13.16%). Despite this, the Interbank Call rate declined 892bps to 7.75%.

Sentiment in the bond space was mixed albeit with notable sell pressure on long-dated maturities driving yields 9bps higher on average. In particular, yields on the 16.39% FGN JAN 2022, 12.40% FGN MAR 2036 and 16.2499% FGN APR 2037 bonds advanced 21bps, 15bps and 10bps to settle at 13.65%, 13.55% and 13.55% respectively. Trading on T-bills was flatter and more tilted towards buying as yields moderated 3bps on average. Notably, whilst the 105DTM (+27bps to 12.78%) and 252DTM (+22bps to 13.26) bills advanced, the 133DTM (-81bps to 13.11%) and 315DTM (-56bps to 13.76%) bills declined. 

Given the undersubscribed OMO auction and healthy system liquidity (N270 billion), we anticipate strong buying momentum today. However, this may be dampened by another liquidity mop up by the apex bank. 

Nigerian Bourse suffers steeper losses 

The Nigerian Stock Exchange recorded a sizeable loss yesterday (ASI down 106bps) with all key sectors closing in the red. 

The Consumer Goods (-179bps) sector was the biggest loser, wighed by declines in NB (-499bps), DANGFLOUR (-498bps) and DANGSUGAR (-478bps). Following closely, the Banking (-170bps) sector shed points as losses in DIAMONDBNK (-828bps), ZENITHBANK (-340bps) and GUARANTY (-161bps) erased gains in ETI (+224bps). Likewise, the Industrial Goods (-20bps) sector closed under on the back of a 476bps dip in CCNN. Meanwhile, the Oil & Gas sector closed flat, dipping by just 1bp after a loss in ETERNA (-466bps) evened out advances in MRSOIL (+10.10%). 
Market breadth remained negative with 8 advances and 35 declines. 

Market Outlook 

With sentiment markedly negative at session end and widely negative market breadth, we anticipate a bearish open to the market today. 

Stock Watch: 

At their 39th Annual General Meeting on Wednesday, the shareholders of Forte Oil approved the divestment of its Upstream Services Business, its power generating business and its downstream business in Ghana. The proceeds from the divestment will be used to fund their downstream marketing business. FO currently trades at a price of N40.70 and has declined 6% ytd. 

CORPORATE DISCLOSURES:

• Sterling Bank Plc. announced the retirement of Mr. Mudathir Kayode 

Lawal and Mrs. Egbichi Akinsanya as Executive and Non-Executive 

Directors of the company respectively. 

• The Management of Chellarams Plc. announced that it will hold a board 

meeting on the 7th of June, 2018 to discuss matters such as the 

consideration and approval of the audited accound for the year ended 

March 31st, 2018 and decide on dividend declaration. 

• Forte Oil Plc (the Company) notified the NSE that at the 39th Annual 

General Meeting of the company the report of the Directors, the 

Consolidated Statement of Financial Position with the Consolidated 

Statement of Profit or Loss and other Comprehensive Income for the 

year ended 31st December, 2017 and the report of the Auditors and 

Audit Committee were approved. 

• The Management of Royal Exchange Plc. announced that they are 

unable to file the audited financial statements for the year ended 

December 31, 2017 within the extended due date of May 31, 2018 as 

approved by the NSE. 

• Medview Airline Plc. announced that the Board at its meeting arrived at 

the Ratification and adoption of the unaudited Management Accounts 

for the first quarter ended 31 March, 2018.