Speculative traders in limbo as Transcorp shed 31% in one week

TransNational Corporation of Nigeria (Transcorp) might be heading down to N1.40 kobo level, as the stock shed 30.96 per cent to close last week at N1.94 kobo which was earlier predicted. It opened the week at N2.81 kobo but caved in as traders dumped the share after a failed Femi Otedola’s buy-in, leading the losers’ table for the week.

The stock price had rallied to over N3 within two weeks, following Femi Otedola’s acquisition of a controlling state in the company through a deal with the Asset Management Corporation of Nigeria (AMCON).

Analysts predicted the stock could be on its way to the initial price at which it closed for transactions a day before the deal, following Otedola’s decision to pull out from the company.

Within the weeks of rally, the blue-chip traded 13.9 billion units valued at N38.4 billion, findings by The Guardian revealed.

A breakdown of the transactions indicated that 3.6 billion units exchanged hands as normal market trades, while 10.3 billion units were done by Heirs Holding via off-market deals.

A source privy to the transaction details told The Guardian that a significant number of investors are already trapped in the ‘mild drama’ that ended within a few days with the unimaginable price appreciation. Two days after Otedola reportedly sealed a deal with Chairman of the company and famous investor, Tony Elemelu, the stock value tumbled by 15.6 per cent.

“The company paid only five kobo as dividend for 2022 and had a significant fall in profit in Q1’2023. Yet, some investors bought the stock at over N3. That is wild speculation,” a market source said.

President, NewDimension Shareholders Association, Patrick Ajudua, said the power tussle had a declining effect on the stock because the upward movement of the stock was not based on fundamental rather than a power play.

“I believe that for Otedola to have sold his shares to Elumelu, they must have reached a common understanding in the interest and progress of the firm and to stop the distraction caused by the power play.

“With the settlement, you will see more decline in price value of stock in coming days,” he said.

Also speaking, the President of Independent Shareholders Association of Nigeria, Moses Igbrude, said the pullout is an indication that Otedola had achieved his aim since the market allows free entry and exit.

“Investors buy shares or invest because of strategic reasons, if those reasons are met, such investor is free to exit.”

National Coordinator of Ibadanzone Shareholders Association, Eric Akinduro said: “The major reason an investor will hold a stock for a long term is when the company has a very strong fundamentals aside this, investors should always take profit at any slight opportunity.

“Looking at Transcorp present situation, it has a very bright future for long-term investors.”
Otedola’s exit came barely few days after he had acquired 5.52 per cent, translating to in 2.245 billion shares worth N6 billion of the company in a deal between an entity owned by Otedola and AMCON, making the billionaire the second-largest shareholder of the company.

Coming behind Transcorp on losers’ table, last week, was Mcnichols Plc with 17.72 per cent decline to close at 65 kobo.
Other shares that recorded price depreciation last week are GEREGU, Living Trust Mortgage Bank, GlaxoSmithKline and Ikeja Hotel, shedding 10 per cent, 9.73 per ent, 8.73 per cent and 6.85 per cent to close at N290.70 kobo, N2.69 kobo, N5.75 kobo and N1.36 kobo

Meanwhile, a total turnover of 2.9 billion shares worth N22.8 billion was recorded in 23,765 deals was recorded by investors on the floor of the Nigerian Exchange Limited (NGX).

This volume of shares traded was however lower than 14.029 billion units worth N59 billion that changed hands in 24,048 deals on April 28, 2023.

The market opened for four trading days last week as the Federal government declared Monday, May 1, 2023, as a public holiday to mark Workers’ Day celebration.

The financial services industry (measured by volume) led the activity chart with 1.5 billion shares valued at N14 billion traded in 13,115 deals; thus contributing 49.04 per cent to the total equity turnover.

The conglomerate industry followed with 1.3 billion shares worth N3.1 billion in 1,662 deals. The consumer goods industry ranked third with a turnover of 71.4 million shares worth N1.5 billion in 3,177 deals.

Trading in the top three equities namely Transnational Corporation Plc, Access Holdings Plc and Fidelity Bank Plc, (measured by volume) accounted for 2.074 billion shares worth N11.3 billion in 5,966 deals, contributing 69.76per cent to the total equity turnover.

On the price movement, positive sentiments resurfaced on the NGX as investors’ interest in GTCO (+9.1 per cent), Zenith Bank (+5.5 per cent), and Accesscorp (+10.8 per cent), supported the market.

Consequently, the All-share index and market capitalisation appreciated by 0.12 per cent to close the week at 52,465.31 and N28.568 trillion respectively.

Similarly, all other indices finished higher except NGX Main Board, NGX 30, MERI Growth, and NGX Growth which depreciated by 0.61 per cent, 0.32 per cent, 0.62 per cent, and 8.96 per cent while the NGX ASeM and NGX sovereign bond indices closed flat.

Analysts predict a positive outlook for equities but added that increased fixed-income yields and a weak macro economy may continue to constrain buying activities.

Codros Capital said: “Looking ahead, we expect investors to rebalance their portfolios based on an assessment of corporate earnings released for Q1-23.

“Nevertheless, increased FI yields may continue to constrain buying activities. Thus, we expect market performance to remain mixed in the week ahead as investors rotate their portfolios towards stocks with attractive dividend yields amid intermittent profit-taking activities.

“Overall, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.”

Vetiva Dealings and Brokerage said: “Despite the bearish start to the week, the market recovered in the last two sessions due to gains recorded in some large/mid-cap counters across the banking and oil & gas space. We expect a mixed start next week, as investors continue to move in and out of their positions.”

SCM Capital Research said: “With the Q1, 2023 earning season already underway, we expect bullish sentiments to continue as investors seek to take advantage of fundamentally strong stocks at low prices. However, we believe there is room for pockets of profit-taking activities.”

Further breakdown of last week’s trading indicated that a total of 19,259 units of Exchange Traded Products (ETPs) valued at N2.7 million were traded last week in 44 deals compared to 2,385 units valued at N643, 140.13 transacted l in 39 deals during the preceding week.

A total of 49,861 units of bonds valued at N51.9 million were traded in 11 deals compared with a total of 23,782 units valued at N23.6 million transacted in 15 deals during the preceding week.

Fifty-one equities appreciated during the week higher than 49 equities in the previous week. 26 equities depreciated higher than 17 achieved in the previous week.