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Nestle, GTB, Others Boost Market Sentiment

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Nigerian stock market
  • Nestle, GTB, Others Boost Market Sentiment

Mouth-watering dividends from companies boosted market sentiment last week as investors were delighted with positive financial results.

The total proposed dividends rose to N499.97 billion last week Friday from N371 billion in the previous week. The surge in the proposed dividends came from Nestle Nigeria, GTB, Stanbic IBTC, Seplat Petroleum and McNichols Consolidated.

Guaranty Trust Bank (GTB) has proposed N2.45 final dividend per share for the full year ended December 31, 2018. This brought its total dividend for 2018 to N2.75 per share having earlier paid N0.30 interim dividend. This compares with N2.70 total dividend per share paid in 2017.

GTB’s 2018 interest income declined to N306.96 billion compared with N327.33 billion made in the previous year. A 4.8 percent increase in interest expense from N80.67 billion in 2017 to N84.53 billion in 2018 caused a 9.8 percent slide in net interest income which fell to N222.43 billion from N246.66 billion in 2017.

Interestingly, fee and commission income rose to N52.4 billion in 2018 in contrast to N42.9 billion realised in 2017. Net fee and commission income increased to N50.47 billion up from N40.73 billion in 2017. Profit before tax for 2018 was much better at N215.59 billion in contrast to N197.69 billion made in 2017. Profit for the year rose by 9.96 percent from N167.9 billion in 2017 to N184.6 billion in 2018.

In the course of the year, community and corporate social responsibility projects gulped N928.08 million up from N687.1 million expended on similar projects in 2017. The African Drum Festival and Art 635 Gallery were the major beneficiaries o f the arts CSR projects in 2018. Also, the Africa Centre Development, Orange Cycle Initiatives, Orange Ribbon-Autism Project, Simple Change Impact and the Swiss Red Cross Partnership topped the list of GTB’s 2018 community projects. And in education CSR, the annual Principals’ Cup and Financial Inclusion were the major beneficiaries.

Stanbic IBTC has proposed to pay N1.50 final dividend for the financial year 2018, an improvement over N1 that was paid in 2017. Gross earnings rose by 4.67 percent from N212.4 billion in 2017 to N222.36 billion in 2018. Net interest income fell to N78.2 billion in 2018 down from N83.6 billion in 2017. Non-interest revenue boosted IBTC’s profitability, rising by 15 percent from N89.2 billion in 2017 to N102.6 billion.

Profit for the year rose to N74.44 billion in 2018 up from N48.4 billion in 2017. Corporate social responsibility projects gulped N233.4 million in 2018 down from N436.6 million in 2017. The major beneficiaries were Deeping Financial Inclusion, N35 million; Lagos State Security Trust Fund, N35 million and the Global Fund for the eradication of Malaria, HIV/AIDS and Tuberculosis, N21.8 million.

Seplat has proposed $0.05 final dividend per share for the financial ended December 31, 2018 just as McNichols will be paying its shareholders N0.05 final dividend per share.

Meanwhile, more than 43 stocks have appreciated by different degrees year to date. C & I Leasing still tops with 308.4 percent year to date gain. Others are Dangote Flour, 52.6 percent; Royal Exchange, 45.5 percent; Ikeja Hotel, 39.2 percent; Cutix, 37.2 percent among others.

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

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Crude Oil

Oil Rises as Threat of Immediate Iran Supply Recedes

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Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.

Brent crude was up by 82 cents, or 1.13%, to $73.68 per barrel, having risen 0.2% on Monday. U.S. oil gained 91 cents, or 1.3%, to $71.79 a barrel, having slipped 3 cents in the previous session.

Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.

A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.

It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.

Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.

“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.

To meet rising demand, U.S. drillers are also increasing output.

U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.

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Crude Oil

Oil Prices Rise as Demand Improves, Supplies Tighten

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Oil prices rose on Monday, hitting their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.

Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its highest since May 2019.

U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a barrel, its highest since October 2018.

“The two leading crude markers are trading at (almost) two-and-a-half-year highs amid a potent bullish cocktail of demand optimism and OPEC+ supply cuts,” said Stephen Brennock of oil broker PVM.

“This backdrop of strengthening oil fundamentals have helped underpin heightened levels of trading activity.”

Motor vehicle traffic is returning to pre-pandemic levels in North America and much of Europe, and more planes are in the air as anti-coronavirus lockdowns and other restrictions are being eased, driving three weeks of increases for the oil benchmarks.

The mood was also buoyed by the G7 summit where the world’s wealthiest Western countries sought to project an image of cooperation on key issues such as recovery from the COVID-19 pandemic and the donation of 1 billion vaccine doses to poor nations.

“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” said Rystad Energy analyst Louise Dickson.

The International Energy Agency (IEA) said on Friday that it expected global demand to return to pre-pandemic levels at the end of 2022, more quickly than previously anticipated.

IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to increase output to meet the rising demand.

The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020, maintaining strong compliance with agreed targets in May.

On the supply side, heavy maintenance seasons in Canada and the North Sea also helped prices stay high, Dickson said.

U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.

It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.

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Crude Oil

FG Spends N197.74 Billion on Subsidy in Q1 2021

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The Federal Government has spent a total sum of N197.74 billion on fuel subsidy in the first quarter (Q1) of 2021, according to the Federal Account Allocation Committee (FAAC) report for May.

The report noted that the value of shortfall, the amount the NNPC paid as subsidy, in the March receipts stood at N111.97 billion while N60.40 billion was paid in February.

In the three months ended March, the Federal Government spent N197.74 billion on subsidy.

The increase in subsidy was a result of rising oil prices, Brent crude oil, against which Nigerian oil is priced, rose to $73.13 per barrel on Monday.

The difference in landing price and selling price of a single litre is the subsidy paid by the government.

On May 19, the Nigerian Governors Forum suggested that the Federal Government removed the subsidy completely and pegged the pump price of PMS at N380 per litre.

The governors’ suggestion followed the non-remittance of the NNPC into the April FAAC payments, the money required by most states to meet their expenditure such as salaries and building of infrastructure.

However, experts have said Nigeria is not gaining from the present surge in global oil prices given the huge money spent on subsidy.

Kalu Aja, Abuja-based financial planner and economic expert, said “If Nigeria is importing Premium Motor Spirit and still paying subsidy, then there is no seismic shift.”

“Nigeria needs oil at $130 to meet the deficit. In the short term, however, more dollar cash flow is expected and with depreciated Naira, it will reduce short term deficit.”

Adedayo Bakare, a research analyst, said that the current prices do not really mean much for the country economically.

He said, “The ongoing transition away from fossil fuels and weak oil production from the output cuts by the Organisation of Petroleum Exporting Countries will not make the country benefit much from the rising oil prices.

“Oil production used to be over two million barrels but now around 1.5 million barrels. We need OPEC to relax the output cuts for the naira to gain.”

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