Stock Advice

The Nigerian Equities market closed higher last week to reverse the previous week’s down trend as a result of increasing mixed sentiment due to more first quarter earnings reports that came with mixed performance. Some companies’ numbers were impressive enough to beat market expectation while others were not. The illiquidity in the system lingered as President Muhammadu Buhari continues to withhold assent to the 2016 Appropriation Bill approved by the National Assembly a stalemate that has further slowed down the economy leading to a nosedive of national economic fundamental indices.

These are in addition to the lingering fuel scarcity and lack of public power supply that has pushed commodity prices higher and at the same time pushing inflation in the north direction, making cost of living higher for Nigerians. Recently it was reported that commodities price have gone up by 50 percent in the open market.

Meanwhile, the global markets, during the week under review, were mixed as the United States’ market closed up on the strength of its first quarter earnings reports as 76 percent of the reported numbers beat their earnings estimates. Whereas the global economic challenges and low crude price continue to affect the major sectors of the economy. Also the failure of member of the Organisation of Petroleum Exporting Countries (OPEC) at their meeting to agree on supply cut has also taken its toll on oil price as traders equally take profit from energy stocks that had rallied.

In Europe, the ECB’s decision to retain interest rate may pullback the economic progress and affect positive trend recorded early in the week.  Japan’s currency continued to wax strong as the prices of stocks remain upbeat, while china’s economy continued to slowdown as a reflection of the world’s economic situation.

The Composite NSE All Share Index gained  103.84 points to close at 24, 850.11 from an opening figure of 24,719.27 after hitting a high of 24,916.15 within the period representing 0.53 percent increased  for the week. This was attributed to a combination of market reactions to published first quarter financials, price adjustment for companies that declared dividend and profit taking by traders thereby halting the three-day rally to close Friday’s trading in the red.

In the same direction, market capitalisation for the period closed higher at N8.55 trillion from opening value of N8.50 trillion. The leading index’s year-to-date returns stood at a negative 13.24 percent, while market capitalisation for the same period lost N1.30 trillion.

The market breath was positive as the bulls dominated trading for the week with the number of advancers for the period under view out-pacing decliners in the ratio of 35 to 32. The NSE ASI opened the week’s trading session on a negative note, which was revered on the second trading session and the trend sustained till the forth traded sessions, shedding 0.28 percent on last trading day of the week. This signaled the return of bulls as was confirmed that profit taking was responsible for the pull back, as many traders on the strength of the numbers release so far were indifferent to the earning because they were yet to study the numbers.

All other NSE sectorial indices for the week finished higher, except for the NSE Consumer, NSE Oil/Gas and NSE Lotus that declined by 0.83 percent, 0.73 percent and 0.77 percent respectively. The week’s transaction levels, measured by aggregate volume and value decreased by 808.92 percent and 128.64 percent respectively in contrast to last week’s closing levels. In the week under review, a total of 885.92 million shares valued at N5.83 billion were exchanged in 13,870 deals compared to 8.05 billion shares valued at N13.33 billion exchanged in 15,212 deals recorded in the previous trading week.

NSEASI WEEKLY TIME FRAME

Despite the reversal in the weekly trend, the NSE ASI is still trading below its weekly 20 and 50-day moving average and at the same time has broken the support line of the bullish channel on a negative sentiment. This borders on weak demand and falling macro-economic concerns to continue its one-year bearish trend in the absence of an approved fiscal spending plan and a lack of liquidity as the subsisting supplementary budget ended since March 31. The short term index formation of symmetrical triangle which is a reversal or continuation chart pattern indicates that this trend may continue, if the expected Q1 financials do not meet market expectations.

Looking at other technical indicators, the NSEASI closed above the lower band by 39.6%., during the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 19 white candles and 31 black candles for a net of 12 black candles. Currently the MACD is bullish since it is trading above its signal line. The MACD crossed above its signal line 6 period(s) ago. Since the MACD crossed its moving average, NSEASI’s has decreased 4.26%, and has ranged from a high of 26,250.34 to a low of 24,181.51.

The current value of the RSI is 39.71, Stochastic Oscillator and MACD are signaling a sell while others like CCI and RSI are indicating buy. Whereas money flow index is still signaling funds are exiting the market.

During the week under review, the following stocks: Fidelity Bank, Forte oil, Total, Infinity Trust Bank, Regency Alliance, as well as May and Baker, were adjusted for cash or script dividend declare. Also, 16 companies released their first quarter earnings. They include: Dangote Sugar, Zenith Bank, GTBank, NEM, CAP and many others.

Market Outlook

The market closed positively on a mixed sentiment which may continue this week as more companies release their scorecards. The rate at which companies would beat their earnings estimates by the market will determine price direction. Investors should take advantage of the low prices to accumulate in stages, stakes in good companies with long term investment goal and benefit from the ongoing dividend market now as first quarter earnings have started hitting the market to guide your stay and exit in some stocks.

STOCKS TO WATCH

NEM Insurance, Dangote Sugar,  Access  Bank, Fcmb, Dangote Cement AND UCAP.

Dividend yield at any time measures how much cash flow you as investors are getting for every Naira invested in an equity. It also tells what percentage return a company pays out in form of dividend. This is one of the main factors you need to consider when investing in dividend paying stocks, as higher dividend yield has been considered as desirable among income investors today.  NSE dividend yield has recently continued to increase as a result of persistent free fall of equity prices on the exchange. The down market has boosted yield, especially in the financial sector and other sectors of the market. The banks and other financial services providers are the power houses of any economy growth, just as they are intermediaries and agents of development. For investors interested in buying high dividend paying stocks with yield above the prevailing inflation and minimum interest rate (MPR) should see the table below for companies that have seen the biggest jumps in yield over the period. Dividend investing have become necessary in this prolonged bear market that has been characterized with decline of equity price. This has eroded investors’ capital and confidence in the economy as a result of falling macro-economic indices and lack of clear economic policies from the government.

Let the current earnings per share and the yield percentage guide you as you study the numbers in the table. For companies with December as it year end, third quarter 2015 EPS is the latest and current earnings.

The Nigerian Equity market maintained it three days positive rally to close in the green. As the composite index NSEASI gained 124.93 points to close at 24,909.88 from opening figure of 24,784.95 representing 0.50 percent growth. This was attributed to positive sentiment resulting from the seemingly improving first quarter earnings reports notwithstanding the prevailing economic situation. Trading for yesterday opened on a strong momentum but slowdown in the mid-day to reverse up at the close of the day on improved volume as capitalized stocks like Zenith, Mobil, NB, Flourmills and Seplat  appreciated in price.  Similarly the market capitalization gained N42.98 billion to close at N8.57 trillion representing 0.50 percent increase in value for the day under review.

The bull transition continue as the market breadth remain strong and positive with the number of advancers outpaced that of decliners in the ratio of 27 to 17.   The volume of trades for the day were up  at 178 million shares in contrast to 158 million shares, representing 13 percent  increase while value recorded N1.18 billion as against N1.11 billion which represents 6 percent  improvement from their previous trading levels. Transactions in the shares of ZENITH, GUARANTY, FBNH, SKYEBANK and UCAP topped the activity chart as most traded equities as measured by volume. The increasing volume of trades in the banking stocks despite the poor performance of some banks in 2015 financial year result with profit warning here and there.  The few performing bank stocks have started out with strong first quarter earnings which is the point of attraction at the market arena as shown by deals and volume of trades in those banks.

The leading indicator NSEASI and all sector indices closed upbeat with NSEBNK topping the trend with 1.47 percent gain for the day under review.

NSEASI DAILY TIME FRAME

NSEASI is currently trending up as triggered in three days ago by positive earnings reports of the few banking stocks and consumer goods that had hit the market so far. The first quarter scorecards will determine the market direction as it’s the only factor to drive prices up or lower at this point.  With the symmetrical triangle chart pattern of the market which is a continuation or reversal, the market is likely to breakout but profit taking from the few days rally may pullback the trend especially as today is the last trading day of the week.

MARKET NEW

Champion Breweries released its first quarter earnings report to the market and it was positive but low earnings per share of 1 kobo from a zero position in the previous year.

Lafarge Africa notify the exchange of the new date of its AGM, which comes up on 27, June 2016 at Zinna-Jasmine Hall, Eko Hotels & Suites, Victoria Island, Lagos.

OTHER MARKET PERFORMANCE INDEX

TOP 5 ADVANCERS & DECLINERS FOR THE DAY

Market Outlook

The market is likely to slow down as traders will be taking profit from the few days rally, which is also likely to trigger mixed sentiment on the floor of trading today. Let the first quarter earnings guide your entry and exit, since the economic fundamentals are yet to start looking up.

STOCKS TO BUY

Fcmb, Access Bank, Uba, Dangote Cement, Dangote Sugar, and Africa Prudential

The Nigerian Equity market gained 33.15 points to close at 24,659.17 as against its opening figure of 24,626.02 representing 0.13 percent growth to  reverse Monday negative  position on the strength of marginal improved demand as few banking first quarter earnings reports were not bad for  new financial year start.  In the same vain market capitalization was up by 0.13 percent to closed higher at N8.48 trillion gaining N11.41 billion. The leading index NSEASI year to date returns is currently at negative 13.91 percent while the market capitalization for same period had lost N1.33 trillion. The market breadth turned bullish as the number of advancers outpaced that decliners in the ratio of 22:16.  Despite the technical hitches on the trading floor for two days and it is expected that the market will open today at the normal

The volume of trades stood at 228 million shares in contrast to 129 million shares representing 76 percent improvement while value recorded N1.44 billion as against N580 million naira, representing 147 percent growth from their previous trading levels. Transactions in the shares of UBA, GUARANTY, ZENITH, NEM and UCAP topped the activity chart as most traded equities as measured by volume. NSEASI and all sector indices closed in mixed directions with NSEBNK leading the gainers with 2.04 percent daily gains while NSECNSMRGDS led the losers with 0.91 percent daily loss.

NSEASI DAILY TIME FRAME

NSEASI is currently ranging waiting for trigger in the positive direction or otherwise as economic situation has not help the first quarter scorecards released so far. NSEASI closed above the lower band by 17.9%. Bollinger Bands are 23.18% narrower than normal.  The current width of the bands does not suggest anything conclusive about the future volatility or movement of prices.  The recent price action around the bands compared to the action of the Relative Strength Index (RSI) does not suggest any trading opportunities at this time. During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles.  During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.

Currently MACD is bearish since it is trading below its signal line. The MACD crossed below its signal line 16 period(s) ago.  Since the MACD crossed its moving average, NSEASI’s price has decreased 4.19%, and has ranged from a high of 26,026.48 to a low of 24,569.72.  RSI is currently reading 36.55 while technical indicators like Stochastic Oscillator and CCI are signaling buy since Monday trading.

Analyst Opinion

Investors should position with long term goal in fundamentally sound stocks and take short term profit opportunity when it comes up.

Stocks to watch

Access Bank, Dangote Cement, Dangote Sugar, Zenith, FCMB and Ucap

Dividend yield at any time measures how much cash flow you as investors are getting for every Naira invested in an equity. It also tells what percentage return a company pays out in form of dividend. This is one of the main factors you need to consider when investing in dividend paying stocks, as higher dividend yield has been considered as desirable among income investors today.  NSE dividend yield has recently continued to increase as a result of persistent free fall of equity prices on the exchange. The down market has boosted yield, especially in the financial sector and other sectors of the market. The banks and other financial services providers are the power houses of any economy growth, just as they are intermediaries and agents of development. For investors interested in buying high dividend paying stocks with yield above the prevailing inflation and minimum interest rate (MPR) should see the table below for companies that have seen the biggest jumps in yield over the period. Dividend investing have become necessary in this prolonged bear market that has been characterized with decline of equity price. This has eroded investors’ capital and confidence in the economy as a result of falling macro-economic indices and lack of clear economic policies from the government.

Let the current earnings per share and the yield percentage guide you as you study the numbers in the table. For companies with December as it year end, third quarter 2015 EPS is the latest and current earnings.

Dividend yield at any time measures how much cash flow you as investors are getting for every Naira invested in an equity. It also tells what percentage return a company pays out in form of dividend. This is one of the main factors you need to consider when investing in dividend paying stocks, as higher dividend yield has been considered as desirable among income investors today.  NSE dividend yield has recently continued to increase as a result of persistent free fall of equity prices on the exchange. The down market has boosted yield, especially in the financial sector and other sectors of the market. The banks and other financial services providers are the power houses of any economy growth, just as they are intermediaries and agents of development. For investors interested in buying high dividend paying stocks with yield above the prevailing inflation and minimum interest rate (MPR) should see the table below for companies that have seen the biggest jumps in yield over the period. Dividend investing have become necessary in this prolonged bear market that has been characterized with decline of equity price. This has eroded investors’ capital and confidence in the economy as a result of falling macro-economic indices and lack of clear economic policies from the government.

Let the current earnings per share and the yield percentage guide you as you study the numbers in the table. For companies with December as it year end, third quarter 2015 EPS is the latest and current earnings.

The peak of NSE earnings season is March/April of every year, when more than 120 companies with December as year-end would make their full-year earnings report available to the market for the investing community. The report would necessarily come with corporate actions of how the boards plan to reward shareholders of their companies in form of dividend (in cash or bonus shares), this is expected to influence share prices. If the earnings beat market expectations and the dividend is good enough in the thinking of shareholders and investors, it would be seen in price appreciation of the various stocks.

This has made traders and investors to always look forward to this period of the year as market reacts to the released numbers and rewards given to shareholders at the end of every financial year.

It is better to be in the stocks  between  two to three weeks before the results hit the market finally and if your expectations are not met, you can jump out immediately to preserved your capital and cut losses.  Yes there would be dividend cut and lower earnings numbers but due to relatively low equities prices these might support rally for new entrance at this point.

Below is the list of companies set to report their scorecards in Feb/March.