Investors repositioning for interim dividend pay out

•Analysts predict gloomy outlook amid higher fuel, electricity prices, inflation
•As banks lift NSE index by 1.17 percent

Investors are currently repositioning for interim dividend-paying banking stocks, as the half-year (H1) scorecards continued to spur transactions on the equities sector of the Nigeria Stock Exchange (NSE), in which the market witnessed five consecutive bull runs at the end of last week’s transactions.

Consequently, the NSE All-share index and market capitalisation appreciated by 1.17 percent to close the week at 25,605.64 and N13.358 trillion respectively.

All other indices finished higher with the exception of the NSE ASeM Index, which depreciated by 1.63%. However, the scorecards came with mixed numbers that point to what the full-year earnings reports of the banks and others could be, reflecting the devastating effects of Coronavirus pandemic on the entire economy, as already shown in the 2020 Q2 GDP contraction of -6.1%.

A look at the scorecards churned out by the banks showed that the top and bottom lines of Stanbic IBTC Holdings for the half-year rose by 7.83 percent and 24.72 percent, respectively to N126.57 billion and N45.2 billion, which translated to earnings per share of N4.20. The bank recommended interim dividend of 40 kobo per share, against N1.00 paid in a similar period of 2019, representing a 60 percent decline.

Also, Guaranty Trust Bank presented its H1 scorecard, which was also a mixed performance with gross earnings rising marginally from N221.87 billion in 2019 to N225.14 billion.

Profit however declined marginally to N94.27 billion, from N99.13 billion in H1 2019. Analysts expressed concerns on the rate of policy inconsistency in Nigeria, noting that this would further deepen the anticipated recession and delay economic recovery despite the intervention packages by the government and Central Bank of Nigeria (CBN) in critical sectors of the economy.

The Chief Research Officer, Investdata Consulting, Ambrose Omordion, said: “This is due to lack of coordination among economic managers, government agencies and policy makers may prolong the nation’s economic recovery.

“This also showed in the fact that while the same government is bailing out the economy with different stimulus packages, an increase in the pump price of premium motor spirit (petrol), was also announced on Wednesday, September 2, 2020 from N148.50 per litre to N160, the fourth of such price change in five months, the highest in the history of Nigeria.

He continued: “Just the day before, the electricity tariff was raised by 175 per cent to N66 from N24 kw/h. These will have a direct impact on every facet of life, sending inflation rate skyward across the country in no time, with increased operating cost for businesses, and cost of living for individuals and families making the cost of living unbearable.

“Already, inflation rate is 12.82 per cent, while the economy has contracted by 6.1 per cent, with the combination of unemployment and under-employment rates at 55.7 per cent, amidst the growing insecurity across the country.

“We expect the current trend to continue on profit-taking and portfolio adjustment, as the market reacts to the 40 kobo and 30 kobo interim dividends from Stanbic IBTC Holdings and Guaranty Trust Bank, and looking forward to dividend announcements by Zenith Bank and Access Bank,” he said.

Analysts at Codros Capital said: “Our view continues to favour cautious trading as risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions.

“Thus, we continue to advise investors to seek trading opportunities in only fundamentally justified stocks.”Further analysis of last week’s transactions showed that a turnover of 2.209 billion shares worth N10.957 billion was recorded in 18,013 deals by investors on the floor of the exchange, in contrast to a total of 1.072 billion shares valued at N7.384 billion that was exchanged in 16,684 deals during the preceding week.
The construction/real estate industry (measured by volume) led the activity chart with 954.529 million shares worth N681.392 million traded in 218 deals; thus contributing 43.21 per cent to the total equity turnover volume

The financial services industry followed with 889.888 million shares worth N6.538 billion in 10,107 deals. The third place was the conglomerates industry, with a turnover of 209.437 million shares worth N579.990 million in 677 deals.

Trading in top three equities namely UACN- Property Development Company Plc, Zenith Bank Plc, and LASACO Assurance Plc. (measured by volume) accounted for 1.229 billion shares worth N3.243 billion in 2,148 deals, contributing 55.61% to the total equity turnover volume.

A total of 126,119 units of ETF valued at N655.919 million were traded this week in 36 deals, compared with 107,424 units worth N520.306 million transacted last week in 18 deals.

Also, a total of 1,016 units of bond, valued at N1.099 million were traded this week in eight deals compared with the 8,285 units worth N10.658 million transacted a week earlier in 15 deals.

About 41 equities appreciated in price during the week, higher than 29 in the previous week, and 19 equities experienced price depreciation, lower than 36 a week ago, while 103 equities remained unchanged, higher than 98 equities recorded in the previous week.