05 June ( Lagos)

Nigeria’s IPO market coming back to life 

Public Offerings in the Nigerian Equity market essentially dried up post- 2008 following the market crash that wiped off c.60% of market capitalization. Although the market has attempted to stage a few come backs since then, investors have remained cautious, keeping market sentiment weak. Whilst the All Share Index posted its first positive return in 4 years in 2017– rallying 42% over the course of the year, the primary market has remained relatively soft, with SEPLAT’s 2014 dual listing in Lagos and London being the most notable public offering in recent years. 

However, the primary market has begun to show signs of recovery, with companies such as Skyway Aviation Handling Company (SAHCOL) and Nigerian Reinsurance Corporation reportedly looking to list whilst Singapore-owned Indorama Eleme Petrochemicals Ltd has confirmed it is planning a public float in 2019. These firms would be following in the footsteps of the MTN Group, which is expected to list its Nigerian business in the second half of the year. A resurgent public offering would help deepen equity market, provide more investment options and trigger greater investor participation in the long run. 

Apex bank puts squeeze on system liquidity 

The CBN conducted an OMO auction for the third consecutive session, offering N350 billion across the 108DTM and 234DTM bills. While the apex bank made no sale on the shorter dated bill, the bank sold N41 billion on the 234DTM bill at a stop rate of 12.15% (effective yield: 13.18%) – same rate as the previous auction. Following this, the Interbank Call rate advanced 59bps to 3.92%.

Trading in the T-bills space was mixed, albeit with a slightly positive tilt as yields moderated 3bps on average. Notably, whilst yields on the 45DTM (+47bps to 12.85%) and 164DTM (+30bps to 13.01%) bills advanced, yields on the 101DTM (-128bps to 12.18%) and 304DTM (- 50bps to 13.63%) bills declined. Meanwhile, sentiment in the bond space was largely bearish as yields on benchmark bonds rose 11bps on average. In particular, yields on the 15.54% FGN FEB 2020 and 16.39% FGN JAN 2022 bonds advanced 33bps and 19bps to settle at 12.86% and 13.38% respectively.

Given the CBN’s efforts to tighten system liquidity, analysts anticipate another OMO auction today as system liquidity is still relatively healthy (N203 billion), and foresee another mixed session with a bearish tilt.

Nigerian bourse makes a mild recovery at week open 

The Nigerian Stock Exchange snapped it’s eleven session losing streak yesterday in a mixed session that saw the NSE ASI rise 37bps. 

The Banking (+160bps) sector was the biggest gainer on the day as advances in ( GUARANTY ) (+453bps), ( ZENITHBANK ) (+196bps) and ( ETI ) (+53bps) overshadowed declines in ( UBN ) (-450bps) and ( ACCESS ) (- 274bps). Likewise, the Oil & Gas (+33bps) sector closed in the green after gains in ( ETERNA ) (+490bps), ( FO ) (+100bps) and ( MOBIL ) (+91bps) lifted the sector. On the other hand, the Industrial Goods (-112bps) sector led laggards on the back of a loss in ( WAPCO ) (-265bps). Lastly, the Consumer Goods sector closed relatively flat shedding a meagre 2bps on the day with a rise in ( NB ) (+291bps) outweighed by dips in ( PZ ) (-481bps), ( FLOURMILL ) (-322bps) and ( INTBREW ) (-299bps). 

Market breadth remained negative with 19 advances and 24 declines. 

Market Outlook 

Sentiment on the exchange yesterday was largely mixed with a bullish bias. Thus, analysts expect mixed sentiment to filter into today’s session, albeit with a positive tilt as investors bargain hunt on already beaten down stocks. 

Stock Watch:

( INTBREW ) has shed 25% over the last four sessions. The stock currently trades at its year low of N39.00 and has declined 28% YTD compared to the Consumer Goods sector’s YTD decline of 12%. 

Corporate Disclosures 

Guaranty Trust Bank Plc. announced the impending retirement of Mrs. Omotola and Mr. Wale Oyedeji as Executive Directors of the Company with effect from August 11, 2018. 

Source: Analysts from Vetiva Capital Management Limited