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Investors Shift to Low-priced Stocks to Beat Recession



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  • Investors Shift to Low-priced Stocks to Beat Recession

Investors appeared to be showing preference for low-priced equities, otherwise known as penny stocks, as continuing decline in share prices at the stock market brings several growth stocks around the 100 kobo mark.

Trading reports by the Nigerian Stock Exchange (NSE) showed that low-priced stocks have dominated activities charts in recent period, in what market analysts regarded as a shift of emphasis from liquidity to potential for higher dividend yield and capital appreciation.

In the immediate past week, three stocks, which trade around N1 were the most active. The trio of Sterling Bank PLC, FCMB Group PLC and Transnational Corporation of Nigeria accounted for 250.205 million shares worth N237.138 million in 3,654 deals, representing 28.6 per cent of the total equity turnover volume. Total turnover at the NSE last week stood at 873.838 million shares worth N8.024 billion in 15,944 deals.

In the previous week, the trio of FBN Holdings Plc, Access Bank PLC and FCMB Group PLC also accounted for 226.665 million shares worth N757.967 million in 1,879 deals, representing 33.4 per cent of the total equity turnover volume for the week.

Head, Financial Advisory Group, GTI Capital Limited, Mr Hassan Kehinde, said the trend showed that investors were taking earnings and dividend yields as major consideration in their portfolio allocation.

According to him, with the low share prices of several stocks, there is potential for good dividend yields by the end of this year notwithstanding the depressed bottom-line due to the tough operating environment.

FBN Holdings Plc, the holding company for First Bank of Nigeria and its previous subsidiaries, had grown its total balance sheet to N5.1 trillion by the third quarter of this year as the financial conglomerate pooled gross earnings of N417.3 billion within nine months.

Key extracts of the nine-month report showed that FBN Holdings retained its leading position as the largest bank in Nigeria, in terms of balance sheet position. Total assets rose to N5.1 trillion by September 2016, representing 21.6 per cent growth on N4.2 billion recorded at the beginning of this year. Customer deposits rose by 10.9 per cent to N3.3 trillion as against N2.97 trillion recorded by the year ended December 31, last year. Net customer loans and advances closed September 2016 at N2.2 trillion, an increase of 22.2 per cent on N1.8 trillion recorded at the beginning of the year.

The report indicated that gross earnings rose by 7.0 per cent to N417.3 billion in third quarter of the year as against N390 billion recorded in comparable period of 2015. Net-interest income had risen by 5.2 per cent to N202.9 billion in 2016 as against N192.9 billion in 2015. Non-interest income jumped by 56.5 per cent to N131 billion in third quarter 2016 as against N83.7 billion in third quarter of last year. Operating income rose by 20.7 per cent to N333.9 billion as against N276.6 billion. The group increased impairment charge for credit losses from N46.6 billion to N114.7 billion while operating expenses reduced by 5.1 per cent to N161.8 billion as against N170.4 billion. Profit before tax thus declined marginally by 3.5 per cent from N59.6 billion to N57.5 billion. Profit after tax also dropped by 15.3 per cent to N42.5 billion in third quarter 2016 as against N50.2 billion in third quarter 2015.

Also, Sterling Bank Plc rode on the back of increasingly better operating and credit management efficiency to build up the quality and profitability of its core banking business in the third quarter.

Key extracts of the interim report and accounts of Sterling Bank for the nine-month period ended September 30, this year showed considerable improvements in key underlying fundamentals of the bank as it continues to grow its main focus of retail banking.

The report showed that net interest margin, which measures the profitability of the core lending business, improved to 8.5 per cent in third quarter of the year as against 7.9 per cent in comparable period last year. The proportion of non-performing loans (NPL) to gross loans and advances, which indicates assets quality and the efficiency of the credit risk management, also improved significantly from 4.8 per cent December 2015 to 2.5 per cent in third quarter 2016. This brings Sterling Bank well ahead of the 5.0 per cent industry thresholds for NPL set by the Central Bank of Nigeria (CBN). The bank’s cost of funds also improved to 5.3 per cent in third quarter 2016 compared with 6.2 per cent in corresponding period of 2015.

Further analysis of the financial statement showed that net interest income rose by 37.6 per cent from N30.2 billion in third quarter 2015 to N41.5 billion in third quarter 2016. Non-interest income, however, reduced by 47.6 per cent to N10.8 billion as against N20.5 billion mainly because of 34.2 per cent decline in fees and commission. This moderated the gross earnings to N79.65 billion in third quarter 2016 as against N81.81 billion in comparable period of 2015.

With curtailed increase of five per cent in total expenses in spite of a 17.9 per cent inflation rate year-on-year as at last September, profits before and after tax stood at N6.07 billion and N5.54 billion in third quarter of the year. Profits before and after tax were N8.30 billion and N7.55 billion in third quarter of last year.

The balance sheet of the bank emerged stronger during the period. Net loans & advances increased by 46.2 per cent to N495.3 billion last September as against N338.7 billion recorded at the beginning of this year. This was driven primarily by foreign exchange revaluation. Customer deposits also improved from N590.9 billion as at December 31, 2015 to N595.1 billion last September. Total assets excluding contingent liabilities increased by 11.4 per cent to N890.3 billion as against N799.5 billion at the start of the year.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


Union Bank Launches Investment App M36 for Fixed-income Products, Others



M36, a new digital platform designed to deliver a wide range of investment products directly to individuals, has launched in Nigeria.

Through an innovative, user-friendly app, M36 offers investment options not typically available on self-service digital platforms including foreign currency transactions, commercial papers, local and foreign denominated bonds, treasury bills and other fixed income products.

M36 also offers bespoke solutions for both new and experienced investors as well as a 24-hour lifestyle concierge service to meet the needs of discerning customers.

In a rapidly evolving environment with changing consumer behavior fueled by technology and growing access to information, M36 is looking to expand opportunities for investors at all levels, while also simplifying the process of investing.

M36 was developed by Union Bank as part of its strategic focus on delivering superior customer solutions leveraging technology and innovation.

The Bank partnered with several asset management companies to deliver the broad range of investment products on the M36 platform.

Chuka Emerole, Head, Treasury at Union Bank said about M36:

“M36 eliminates the traditional barriers to investing and offers investors direct access to financial instruments that would usually require the service of an investment or relationship manager.

“We’ve designed M36 to ensure simplicity in the onboarding and investing process while also empowering the customer to make sound investment choices based on their financial objectives.

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United States Firms Operating in Nigeria Plans to Invest $2.4 Billion in Nigeria – Report



United States Firms Operating in Nigeria Plans to Invest $2.4 Billion in Nigeria – Report

A report compiled by the American Business Council, the United States Embassy, Verraki, KPMG and PwC showed American firms operating in Nigeria plans to invest $2.37 billion in the country in the next three years.

In the 2020 Nigeria Economic Impact Survey, the impact of US firms on the Nigerian economy was analysed while changes in business revenue, foreign investment, job creation, gross value added and plans for expansion were measured.

45 United States companies operating in Nigeria were surveyed and data obtained analysed, according to the report.

The report revealed that US companies in Nigeria created over 30,000 indirect jobs in 2019, a decline from three million in 2018 and over 13,100 direct jobs, down from 18,000 in 2018.

The firms realised N1.08 trillion in revenue in 2019, representing a decline from N1.47 trillion when compared to N1.47 trillion generated in 2018.

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Afreximbank, AAAM to Drive Automotive Investment




Afreximbank, AAAM to Drive Automotive Investment

The African Export-Import Bank (Afreximbank) and the African Association of Automotive Manufacturers (AAAM) have entered into a Memorandum of Understanding (MoU) for the financing and promotion of the automotive industry in Africa.

President of Afreximbank, Prof. Benedict Oramah and President of AAAM/Managing Director of Nissan Africa, Mike Whitfield, signed the MoU in early February, according to a statement yesterday.

The deal formalised the basis for a partnership aimed at boosting regional automotive value chains and financing for the automotive industry while supporting the development of enabling policies, technical assistance, and capacity building initiatives.

Oramah, said, “the strategic partnership with AAAM will facilitate the implementation of the Bank’s Automotive programme which aims to catalyze the development of the automotive industry in Africa as the continent commences trade under the African Continental Free Trade Area (AfCFTA).”

Under the terms of the MoU, Afreximbank and AAAM will work together to foster the emergence of regional value chains with a focus on value-added manufacturing created through partnerships between global Original Equipment Manufacturers (OEM), suppliers, and local partners.

The two organisations plan to undertake comprehensive studies to map potential regional automotive value chains on the continent in regional economic clusters, in order to enable the manufacture of automotive components for supply to hub assemblers.

“To support the emergence of the African automotive industry, they will collaborate to provide financing to industry players along the whole automotive value chain. The potential interventions include lines of credit, direct financing, project financing, supply chain financing, guarantees, and equity financing, amongst others.

“The MoU also provides for them to support, in conjunction with the African Union Commission and the AfCFTA Secretariat, the development of coherent national, regional and continental automotive policies, and strategies.

“With an integrated market under the AfCFTA, abundant and cheap labour, natural resource wealth, and a growing middle class, African countries are increasingly turning their attention to support the emergence of their automotive industries.

“Therefore, the collaboration between Afreximbank and AAAM will be an opportunity to empower the aspirations of African countries towards re-focusing their economies on industrialisation and export manufacturing and fostering the emergence of regional value chains,” the statement added.

“The signing of the MoU with Afreximbank is an exciting milestone for the development of the automotive industry in Africa. At the 2020 digital Africa Auto Forum, the lack of affordable financing available for the automotive sector was identified as one of the key inhibiters for the growth and development of the automotive industry in Africa and having Afreximbank on board is a game changer and a hugely positive development,” CEO of AAAM, David Coffey said.

“It is wonderful to have a partner that is as committed as the AAAM to driving the development and growth of our sector on the continent; this collaboration will ensure genuine progress for our industry in Africa,” Coffey added.

Other areas covered by the MoU include working with the African Union and the African Organisation for Standardisation to harmonise automotive standards across the continent and developing an automotive focused training program for both the public and private sector.

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