Daily Independent (Lagos)
Kingsley Ighomwenghian
7 January 2009
The curtain finally fell on the 2008 trading year on Wednesday December 31, thus bringing to a close a year when many investors regrettably agree is the worst yet, as against the situation at the same time of previous year when the same investors celebrated a year that unarguably unleashed the growth potentials of the same indicators.
At the close of last mid-week's trading session the All-Share-Index at 31,450.78 basis points represented a 26,539.44 or 45.76 per cent plunge from the 56,863.41 points figure in the corresponding period of 2007, equities' capitalisation dropped by N3.223 trillion to N6.957 trillion representing a drop of 31.66 per cent from N10.18 trillion. The difference in the percentage decline resulted from the new listings on the Nigerian Stock Exchange (NSE) during the year. However, the level of decline is worse when benchmarked against the 2008 all-year of 66,371.20 points and N12.64 trillion attained on March 5, after a 40-month bull run following the Central Bank of Nigeria (CBN) inspired 18-month banking sector consolidation that ended on December 31, 2005 among other fiscal and financial policies that caused a boom in the capital market in 2007 due to foreign investment inflow and increased participation by Pension Fund Administrators (PFA). This resulted in several stocks becoming overvalued, according to one equities' analyst, as 'so much funds found its way into the market due to the hype and the effect was a demand for all kinds of invest-able equities (including many that had no fundamentals and whose business premises had long being under lock)'. This, he lamented further, 'drove stock prices beyond their fair values (such that a market correction became inevitable) in order to restore value'.
The huge amount of fund that found its way to the stock market as many turned it into a gambling or money doubling machine while many invested without the benefit of informed analyst opinion some believe was also encouraged by the huge 74.73 per cent returns recorded by the NSE index at the end of 2007 over the preceding year's level. Factors that also contributed to the decline in 2008, according to analysts, include the global financial turmoil that started as the sub-prime mortgage crisis in U.S., before spreading to Europe and Asia, policy summersaults on the side of regulators and government, liquidity drought, loss of investors' confidence, among others. Daily Independent in a report on Monday quoted Jacob Erhabor, Managing Director of International Energy Insurance, as lamenting that 'all insurance companies are in trouble in terms of investment income. No single insurance company can say that it is not affected by the crisis in the (Nigeria) capital market, which has seen share prices crash significantly. It is only a matter of degree and investment mix by individual companies, but all insurance companies are affected'. Commenting on the situation, the report quoted another insurance chief as describing spread sheets of insurance companies' investment as 'mournful', with returns on investments of some companies falling in excess of 300 per cent. "A share that one bought at N70 earlier in the year is now selling for N27, that is tragic," the reported quoted him as saying.
Several investors - whether individual or corporate, small or big, indeed have reasons to lament after watching their investment pitter into near insignificance over the past 10 months.
According to a report by UBA Global Markets Limited, a major player on the Nigerian capital market, banks, insurance and building material stocks dominated the list of 20 biggest laggards in the year 2008. While the banking sub-sector, which contributed 54 per cent of the NSE market capitalisation within the same period had for eight stocks namely - United Bank for Africa, Access Bank, Afribank Nigeria, First City Monument Bank, Intercontinental Bank, Unity Bank and Sterling Bank it was followed by with five insurers - Linkage Assurance, Sovereign Trust Insurance, UNIC Insurance, Guinea Insurance and Mutual Benefit Assurance and thee building materials making giants - Cement Company of Northern Nigeria, Lafarge Cement WAPCO and Ashaka Cement.
Linkage Assurance led recording the worst percentage loss on the table as it closed at 68 kobo on December 31, representing 82.43 per cent drop from the 2007 closing figure, after rising to 628 kobo within the year. It was followed closely by parent company of Ecobank Nigeria - Ecobank Transnational Incorporated, which at N40.60 each dropped by 81.83, not so much because it suffered from the market meltdown, but due to a share split of three new shares for every one, undertaken by its directors and in line with a shareholders' approval. A statement by the group explained that "the share split is aimed at enhancing liquidity in the company's shares and making the shares more accessible to the majority of the African population in line with the founding ideals of the Ecobank Group." The company last year followed this with a bid to raise $2.5 billion or N295 billion across the three exchanges on which it was cross-border listed, poised to further enhance the group's pan-African financial supermarket status. Arnold Ekpe, the group's chief executive said the proceeds of the offer would be utilised to finance the group's growth and expansion across the globe while increasing returns on investment both on the long and short-run and offering more than the two cents or N2.40 per share dividend and bonus of five new shares for every one that was approved at the company's last annual general meeting.
The share price of Cement Company of Northern Nigeria (CCNN) fell by 76.83 per cent within the year 2008 ahead of conglomerate Transnational Corporation of Nigeria (TransCorp) with 74.84 per cent, which has so far failed to significantly perform to the expectations expressed at its launch during the period former President Olusegun Obasanjo presided over the affairs of the country while UBA recorded a share price decline of 73.43 per cent, closing the year at N13.15. The group's directors in its latest result have offered to pay a 75 kobo dividend per share on Friday, January 8, 2009, in addition to a bonus of one new share for every four held from earnings per share of 189 kobo. Sovereign Trust Insurance was in the red also with a 72.34 per cent decline, followed by sub-sector peer - UNIC Insurance, whose share price fell from a peak of 630 kobo to last Wednesday's 120 kobo and paid a five kobo dividend from 17 kobo EPS, despite which its share price fell by 72.66 per cent. Also on the table of biggest laggards in percentage terms during the year were Guinea Insurance with 71.43 per cent, telecoms giant - Starcomms, which closed for the year at 405 kobo, after dropping by 960 kobo or 70.32 per cent off the N13.65 at which its 6.878 billion ordinary shares were listed by introduction on the NSE on July 14, 2008. The drop in share price may not be also unconnected with the loss before tax of N1.85 billion, representing a loss of about N1.469 billion or 385.56 per cent from previous level of N381 million and net loss of about N1.01 billion or 165.09 per cent in the 2008 second quarter performance, despite a N8.71 billion or 100.23 per cent growth in turnover of N17.4 billion, as against previous N8.69 billion. Chief Executive Officer of Starcomms, Maher Qubain, linked the turnover growth to continued aggressive market strategy, which resulted in a 137 per cent growth in subscriber base to 1.92 million, the first CDMA 3G network to cross the one-million subscriber base in Nigeria, thereby building 'a strong foundation of quality subscribers on which to base future growth'. While warning that 'earnings will remain below forecast for the balance of this year' he blamed the loss on 'the costs of subsidies on handsets and dealer commissions based on the much higher level of subscriber acquisitions'.
The list biggest decliners in 2008 also included Dunlop Nigeria, which some months ago told shareholders of plans to adopt the strategy of closing its giant manufacturing plant as did rival Michelin Nigeria some years ago because the activities of importers and smugglers that has now made the business very unattractive. Dunlop's decision is coming several months after investors sank billions of funds raised from the capital market to enable it refinance its debt, providing more working capital and engaging in the production of All Steel Radial Truck Tyre (ASRT) expansion project, in a bid to reap bountifully from the estimated 20.5 per cent growth in the truck tyre market in the months leading to 2010. The company in 2006 offered 1.504 billion ordinary shares to the public for subscription and 756 million shares by way of rights at N2.50 and N2.30 each respectively. The capital raising exercise is primarily to refinance part of the debt used for the with long-term equity funds, apart from providing enhanced working capital.
Access Bank's share price fell by 69.26 per cent according to the UBAGM report while Afribank Nigeria's dropped by 68.48, followed by FCMB and Intercontinental Bank with 68.22 per cent and 68.13 per cent respectively, just as Lafarge Cement WAPCO's suffered a 68.05 per cent drop. Ashaka Cement, another building materials maker, lost 67.78 per cent of its share price at the end of 2007, Oceanic Bank International lost 67.78 per cent, Unity Bank followed with 67.50 per cent and Sterling Bank shed 66.67 per cent while Mutual Benefit Assurance occupied the 20th position with a share price decline of about 66.68 per cent for the year.
There are, however, those, even if minimal, who would argue that the year 2008 may not have been totally horrible, as some stocks still recorded robust share price appreciation worthy of celebration. Most of the stocks on the top 20 gainers' table for 2008 were predominantly penny stocks before now. According to the table by UBA Global Markets Limited, the list is topped by emerging markets player - Krabo Nigeria with 969.23 per cent, ahead of construction company - Arbico, which closed at N26 each, after rising 802.78 per cent up while Ferdinand Oil Mills, which was last traded on September 11, according to the NSE *****Daily Official List*****, and paid its most recent dividend of 20 kobo on July 22, 1996. Also atop the list of biggest gainers for the year was Aboseldehyde Laboratory, which last paid a dividend (15 kobo) on December 12, 1997 and a scrip the previous year, whose share price grew by 733.90 per closing at 492 kobo, industrial/domestic products maker - Alumaco's share price grew by 728.21 per cent, Juli Plc recorded 610.91 per cent, Grief Nigeria, 573.99 per cent; Morison Industries, 458.67 per cent; Nigerian Enamelware Company's N65.33 price on Wednesday December 31 means it grew by 444.42 per cent for the year, Aluminum Extrusion chalked 421.40 per cent, just as Liz-Olofin & Company recorded 328.16 per cent growth. The top gainers for 2008 also included G. Cappa, 319.86 per cent; Abplast Products, 294.06 per cent; Oluwa Glass, 273.02 per cent; Nigerian Sports Lottery, 262.50 per cent, 262.50 per cent; Interlinked Technologies, 240.88 per cent; Nigerian Ropes, 234.65 per cent; Lennards, 217.73 per cent; Footwear, 215.88 per cent and conglomerates - John Holt Nigeria, 210.69 per cent.
Most of the top gainers on the table also occupied prime positions on the year 2008 returns table, according to analysts at Cashcraft Investment Limited, led by Arbico with a 922.22 per cent, ahead of Aboseldehyde and 733.90 per cent and 728.21 per cent respectively among others.
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