Nigerian Bourse Closes Lower on Profit Warning

Photo L-R: Mr. Oscar Onyema, Chief Executive Officer, The Nigerian Stock Exchange (NSE) and Mr. Sunil Sawhney, Managing Director, Seven-Up Bottling Company Plc at the Closing Gong Ceremony at the Exchange.

At the end of today’s trading session, the All Share Index declined 0.4% to close at 24,745.13 points as the Nigerian bourse continued its retreat into the negative zone. Congruent to the ASI, market capitalization also declined N37.3bn to settle at N8.9tn. Today’s decline was driven  by price depreciation in key Banking counters such as ETI (-9.7%), DIAMOND (-8.8%) and GUARANTY (-2.5%) as ETI issued a profit warning today to join FBNH, FCMB and DIAMOND who have all issued a similar notification. On the contrary, market activity strengthened as volume and value traded increased 64% and 90% to close at 287.0m units and N2.7bn respectively. 
UBA’s FY:2015 PAT expanded 24.5% to N59.7bn
Bargain hunting in DANGCEM (+1.2%) pushed the Industrial Goods index into the green zone to emerge as the sole advancing index at the end of trade. The Banking index shed 2.1% on sell pressure in ETI (- 9.7%), DIAMOND (-8.8%) and GUARANTY (-2.5%). The huge decline in ETI and DIAMOND was triggered by profit warnings issued by both bank as noted above. As against the above, UBA reported a 9.8% Y-O-Y growth in Gross Earnings  to N314.8bn and a remarkable 24.5% Y-o-Y expansion in PAT to N59.7bn while also proposing a dividend of N0.40 in its  FY: 2015 financial result released late yesterday. Consequently, UBA surged 9.7% as investors jumped at the 11.7% dividend yield implied at N3.41 closing price as at yesterday.  The Consumer Goods index also declined 1.5% on profit taking in HONYWELL (-4.1%) and FLOURMILLS (-1.2%) as well as 4.1% depreciation in NIGERIAN BREWERIES. The Insurance and Oil & Gas indices also declined 0.8% and 0.2% respectively on the back of price depreciation in  NEM (-2.6%), CONTINSURE (-1.1%), OANDO (-9.6%)  and SEPLAT (-0.3%).
Performance to be driven by Market Dynamics
Negative sentiment in the equities market was sustained today as market breadth - advancers’/decliners’ ratio- closed at 0.5x owing to 12 advancing stocks against 26 declining stocks. At the top of the gainers’ list were CONOIL (+10.2%), UBA (+9.7%) and OKOMUOIL (+5.0%) while ETI (-9.7%), OANDO (-9.6%) and DIAMOND (-8.8%) led losers. We are of the view that current dynamic in the market is driven by a cocktail of profit warnings - as highlighted by selloffs in DIAMOND and ETI-, earnings releases – as seen in UBA (+9.7%) - as well as profit taking, given the volume of news flow filtering into the system. With the above in mind, we strongly advise investors to stick to stocks with sound fundamentals and solid dividend history.