MarketWatch

[Michael]

Originally Posted by lordgbengss

am confused,cashcraft recorded a lower index for yesterday which was 21652.2
pls help clarify this.tnx

If you keep on reporting reds every day, it's only a matter of time before some equipments gets stuck.

[Michael]

Originally Posted by lordgbengss

pls does anybody know the inflation rate of nigeria between 2003-2008/2009? i will really appreciate it,thanx

Nigeria only records what they call core inflation; This can be defined as the rate of increase in the price index without those things whoose prices went up e.g Food and energy.
We all know that food and energy increase every other price, so by disregarding them, you are only selling Nigerians a Fairy Tale.

[lordgbengss]

I hope the passage of the 2009 budget will bring some liquidity into the market.hoping it will aid little appreciation of the NSE

[zainabusman]

Originally Posted by knightofdelta

Earnings yield is the reciprocal of PE. It is used to assess companies with negative earnings which will give useless PE. The higher the earnings yield the better.

Correct.

I like to use the earnings yield because it also allows u to compare with money market investments. Earnings yield on Access is currently about 37%. U can compare this easily with what u get on a Time Deposit. Currently 13%+.

[lordgbengss]

Originally Posted by Michael

If you keep on reporting reds every day, it's only a matter of time before some equipments gets stuck.

the machine will probably bearish bais by now

[lordgbengss]

pls does anyone know from experience stocks that trail the NSE, i.e anyday NSE appreciates this stock will also appreciate

[hispy99]

Originally Posted by zainabusman

Correct.

I like to use the earnings yield because it also allows u to compare with money market investments. Earnings yield on Access is currently about 37%. U can compare this easily with what u get on a Time Deposit. Currently 13%+.

Ok, I guess I was thrown off when you said you use earnings yield and PE to compare companies. I either use one or the other, but I agree that earnings yield puts things in a better perspective.

[citizen]

A son asks his father, "What can you tell me about politics? I have to learn about it for school tomorrow." The father thought some and said, "OK, son, the best way I can describe politics is to use an analogy. Let's say that I'm a capitalist because I'm the breadwinner. Your mother will be the government because she controls everything, our maid will be the working class because she works for us, you will be the people because you answer to us, and your baby brother will be the future. Does that help any?" The little boy said, "Well, Dad, I don't know, but I'll think about what you said."

Later that night, after everyone had gone to bed, the little boy was awaken by his baby brother's crying. Upon further investigation, he found a dirty diaper. So, he went down the hall to his parent's bedroom and found his father's side of the bed empty and his mother wouldn't wake up. Then he saw a light on in the guest room down the hall, and when he reached the door, he saw through the crack that his father was in bed with the maid. The son then turned and went back to bed.

The next morning, he said to his father at the breakfast table, "Dad, I think I understand politics much better now." "Excellent, my boy," he answered, "What have you learned?" The little boy thought for a minute and said, "I learned that capitalism is screwing the working class, government is sound asleep ignoring the people, and the future's full of crap.

[Michael]

Originally Posted by lordgbengss

the machine will probably bearish bais by now

A bias means there is possibility of movement but likely tending towards a particular direction. But stuck Implies you are in a rut and can't move. Newton's first law of motion has to be applied for a change to occur.

[Michael]

Originally Posted by hispy99

Ok, I guess I was thrown off when you said you use earnings yield and PE to compare companies. I either use one or the other, but I agree that earnings yield puts things in a better perspective.

I think Zain would use Earnings yields to compare companies in Bull markets but Div Yields in Bear Markets like Now. Zain am I right?

I think there is no point in projecting how high a stock price will go in a bear market, since we know it won't be going anywhere. So In a bear market we siphon offf dividends for use in Investing in other dividend paying equities with high yields

[Michael]

Sack Soludo, Lukman, labour demands

At a press conference in Lagos yesterday, leaders of the National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN), argued that only the sacking of Soludo and Lukwan and their replacement with more focused and competent individuals could stop the economy from sinking deeper into doom.



General Secretary of the union, Comrade Issa Aremu, noted that Prof Soludo has exhausted his intellectual capacity to effectively manage the nation's monetary policy and lamented that the CBN Governor who once said what Nigeria needs is "revolution" not just reform, has now imposed a counter revolution which has left in its trail, weak consolidated banks, devalued Naira — almost by 50 per cent since December last year — at a time Central Banks worldwide are strengthening national currencies to respond to the global economic melt down.



Comrade Aremu who is also a vice-President of Nigeria Labour Congress (NLC), posited that Dr. Lukman, on his part, had no fresh ideas to revive the depressed oil and gas sector, having been in the system for over 30 years.



According to Comrade Aremu, Prof Soludo started well, but has now lost focus, stressing that "within two months alone, Naira has witnessed the worse devaluation of up to 50 per cent under Soludo."

FG issues N50bn bond

On its part, the Federal Government, yesterday, issued a 50 billion naira ($334 million) 20-year, 5-year and 3-year sovereign bonds at its first debt auction of the year, the Debt Management Office (DMO) said.



The debt office said the 20-year and 5-year bonds, which attracted 15 percent and 10.50 percent coupons respectively, were re-openings of previous issues.



The 3-year instrument, a new issue, attracted a 9.92 percent coupon. "Successful bids for the 3-year, 5-year and 20-year offers were allotted at the marginal rates of 9.92 percent, 11.40 percent and 13.32 percent, respectively, " the DMO said.



"However, the coupon for the 3-year was set at 9.92 percent, while the original coupon rates for the 5-year and 20-year would be maintained at 10.50 percent and 15 percent, respectively. "



The 20-year bond is the highest tenor debt instrument ever offered in Nigeria and was first issued in last November in a new step to deepen the nation's bond market. - Business Monitor/Vanguard

[Michael]

[

B]Nigeria not ready to host world under-17 championship - FIFA
[/B]Sat Jan 31, 3:01 pm ET FIFA – Nigeria was warned by a top FIFA official on Saturday that the country could be stripped of the 2009 … LAGOS (AFP) – Nigeria was warned by a top FIFA official on Saturday that the country could be stripped of the 2009 world under-17 championship, due to take place here in October.

"If Nigeria doesn't get its act together, Nigeria won't host it," warned FIFA vice-president Jack Warner, leading an inspection team.

"Technically speaking, only Abuja (the federal capital city) and (south west Ogun State) Ijebu-Ode stadiums are ready."

Warner's team has completed a 10-day inspection of facilities across the country.

Nine stadiums in as many cities were inspected by the officials.

Nigeria first staged a FIFA event in 1999, but Warner said that the standards expected of host countries now are a lot higher than they were 10 years ago.

According to the FIFA chief, some of the facilities in most of the grounds are not complete.

Warner said: "We have been given so many promises since February 28, 2007, but we are not pleased with the sanitation and some other things in some of the venues."

The inspection team is expected to table its findings to FIFA at a meeting of the Local Organising Committee on February 5.

I we actually struggling to host this event. When will our leaders learn. Or is this just another avanue to squander money that we don't have.

[hispy99]

Managing your investment portfolio during recession
By LAYI ADELOYE
Published: Sunday, 1 Feb 2009

Most of us, including financial experts and economists, are still shying away from facing it as it is – that a recession is here with us. Recession is defined by economists as ”a period of temporary economic decline during which trade and industrial activities are reduced. This is generally identified by a fall in the Gross Domestic Product of a country (or countries as the case is now) and prices of goods and services for two successive quarters. Joshua Kennon of About.com describes this as a period when ”business drops, on the whole, for six straight months.” People stop or reduce spending on non-essentials like dining out, new furniture, cars, jewellry and other so-called ‘discretionary‘ items, while businesses often cut capital expenditures such as new machinery, hiring employees, or moving to larger facilities. In the money market and capital market, the effect shows in falling prices of stocks and reduced operational performance.

A casual afternoon visit to the Nigerian Stock Exchange these days would not give an investor any hope on his stock investments. The mood of the stockbrokers after a typical daily trading mostly exhibits an avuncular submission to fatalism. After a similar visit on Wednesday, this writer made some attempts to gauge the mood of the brokers on the sliding trend of the stock prices, and possibly seek their views on how best an investor can manage his portfolio in times like this. In all, 12 stockbrokers were approached, with only four volunteering to ‘chat‘ with the writer. One of the brokers, a chief executive of a broking firm, merely waved me off with this fleeting remark: ”You can see it yourself. What is there to talk about?”

One of the stocks that might touch a lot of people, being a highly capitalised company, is the stock price of First Bank of Nigeria Plc, which tumbled from N41 to N14 on Wednesday. For now, market operators seem to be at their wit‘s end on how to halt the sliding stock prices.

However, while possible interventions in the forms of the expected emergence of market makers or a direct intervention by the government in terms of a mop up initiative (through a buy-and-hold strategy, possibly for two years or so) are either still being delayed or still seen as unnecessary, analysts believe that some needed steps must yet be taken on the part of investors in the management of their investment nest eggs so that they could survive the recession.

Having exploited all known dynamics in the kitty of professional stockbrokers and market regulators, should investors just give up and resign to fate on investment or stop investing outright? Stock market analysts and other market operators say ‘no‘. If at all, for those who still have the financial power, this is the time to invest more because what we have right now is the buyers‘ market.

Yet, it is important to consider those who may feel betrayed by the market and probably have no more power to invest ‘in the buyers‘ market that is littered with bears. Some stockbrokers and analysts have some varying words of counselling for such investors, especially as regards the general measures they can take to potentially reduce the long-term damage to their net worth in this time of economic stress. Their pieces of advice centre on what they can do to protect themselves, their families and their general investment nest eggs during this period.

According to the Chief Operating Officer, Kajola Investment Plc, Mr. Hakeem Subair, investors can, apart from generally investing more to mop up cheap stocks at the stock market, focus more on consumer staple stocks at this period.

No matter how bad things get, he says people are going to figure out how to eat, buy toilet paper and purchase other key essentials needed by families in their homes. The fact remains that when money is scarce, items and services such as these, popularly referred to as ‘consumer staples‘ and ‘energy‘, have been known to constantly churn out profits for companies that manufacture and sell them. It is unlikely that hard times and economic meltdown would stop people from using toothpaste, shaving cream, laundry detergent, dish soaps or other common consumables – unless things really get so bad for the majority of the populace or there is a war. The KJL boss says investing in the stocks of companies manufacturing or distributing such products can provide bastions of financial strength at such a time like this.

He also recommends investment in the stocks of firms producing ‘affordable luxuries‘ as another option. He identifies such firms to include those manufacturing carbonated water (minerals), beverages and other soft drink variants as good investment targets. The products‘ prices are usually low and affordable as well as they are needed daily for use and entertainment. Once other fundamentals are certified okay, you can be sure that your investments are safe. Even pay cut or job losses hardly affect their patronage; so their stocks will always pay back”, he says.

The Managing Director, Camry Securities Limited, Mr. Atiku Kafaru, believes that opting out of the market at this period may turn out to be a misguided move. Rather, he advises that an investor should buy into the market more. He specifically counsels investors to go for companies with high sustainable dividend yields.

Jeremy Siegel, author and respected professor, in his work, ”Why Boring is Almost Always More Profitable”, corroborates this position, saying that ”dividends can lower the amount of time it takes you to regain losses in an investment. This is because reinvested dividends during crashes and market corrections purchase more cheap shares that will, in the future, generate far higher profits when the market rebounds.”

Aggrey Otakpor, a stockbroker says selling off stocks at this period is bad. He, however, advises that while portfolio diversification may be a right way to survive the period, focused investment in stocks of firms with good fundamentals is the best approach.

Once the fundamentals are okay, the one major consideration should be does the firm you are investing into have high sustainable dividend yield potential?

Kennon paints the picture better: ”If the mutual fund manager has to sell off more shares, which one do you think he is going to choose? I can almost guarantee that if prospects for the firms are equal, the dividend paying stock makes it to the next round, while the non-dividend paying stock gets cut.”

International investors, wealthy individuals, and institutions are also likely to notice, at some point, better performance in the shares of companies trading at prices where the dividend yield grossly exceeds bond yields. If investors believe that the payout is sustainable (the company will continue to make enough profit to pay or service its dividend), they are going to be inclined to invest.

”The end result of this is that portfolios consisting of more cash-generating dividend stocks tend to have far less volatility and suffer gentler falls than their counterparts. This is a key area to invest at this time”, a stockbroker, who prefers anonymity, advises.

[hispy99]

Undervaluation of banking stocks: Myth or reality
By LAYI ADELOYE
Published: Sunday, 1 Feb 2009

In recent times, there have been questions over the real values of banking stocks on the Nigerian Stock Exchange. In this analysis, LAYI ADELOYE, examines how banks‘ positive fundamentals have been suppressed by the forces of the global economic meltdown

Banking and the Big Player status

The perception has always been there. About two years ago, it assumed the status of a grumbling. Today, with the global economic meltdown worsening the sector‘s plight, the perception has almost torn the evasive façade that clones banking as a conservative profession, advancing nearly to the level of an open agitation: that banking stocks are undervalued.

The underpinnings for this view are derived from the visible role of the banking sector in the economy. The sector, as an intermediary institution in all business and economic activities, no doubt, has attracted to itself an aura of an ubiquitous arranger in the economy. Accordingly, all the constituent organs in the sector get a natural rating of importance and, sometimes, notoriety. This explains the reason why a little cold in the banking sector sends shivers down the spines of the economy and all economic players.

Apart from these institutional roles, the banking sector has been noted as the chief catalyst behind some recent major reforms and innovations in the economy. The banking consolidation of 2005, according to the Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, has become a reference point on how to give an economy a new direction. Apart from stimulating the growth of the sector itself, the consolidation has succeeded in opening up the capital market to a level that had never been contemplated before.

Between 2005 and June 2007, the banking sector was the driver of activities on the Nigerian Stock Exchange, with between 65 and 70 per cent of daily activities taking place in the sector. Naturally, the All Share Index of the NSE and the Market Capitalisation danced to the sector‘s whims and caprices. As the main conduit line supplying the needed liquidity at the stock market, the sector, quite easily prided itself in the possession of stocks with the highest prices. Prices of banking stocks soared as more banks came to be listed on the Exchange.

With all the fundamental indicators pointing to the heavens year-in year-out, it did not take much time for the likes of Oando Plc and Nigeria Breweries Plc, the erstwhile most capitalised firms on the exchange, to begin an unwilling dialogue with banks like First bank of Nigeria, Zenith Bank Plc and Union Bank of Nigeria Plc.

With good performance almost reserved as an exclusive preserve of banks, the mouth-watering results, including high level of profitability, impressive dividend payment, robust bonus and the open lure of capital appreciation, quite easily put the banking sector as the most beautiful bride to court on the floor of the exchange. The result was electric, as investors (both knowledgeable and new class of IPO-lured investors) made banking stocks their choice purchases, sometimes against the advice of stockbrokers.

The zest for banking stocks progressed through the second half of 2007 (despite the entrance of key telecoms players into the stock market), and the bubble was well inflated into the first quarter of 2008. And then, the bubble began to burst! Even then, the sector still retained the status of the chief driver of the exchange‘s activities, based on the fact that the constituent members were among the most capitalised companies.

[hispy99]

Value, capital appreciation and global economic influence
By Agency reporter
Published: Sunday, 1 Feb 2009

At the height of the capital market boom (as in June 2008, for instance), virtually all the major market indicators favoured most of the listed banks. Profitability, attractive dividend and bonus payment and prospects of capital appreciation characterised the results churned out by banks. A particular attraction among investors is the Per Earning Ratio, which simply translates (in a layman‘s language) into the period or number of years it takes for an investor in the sector to recoup his investment. Day by day, this index kept moving upwards.

For instance, First Bank‘s stock perched on N52.24 mostly, with a PE Ratio of 25.77. Oceanic Bank International Plc hovered between N36 and N38 for most part of the month, with a PE ratio of 23.93; while Access Bank Plc was in the region of N25 and N30, with a PE Ratio of 21.31. Zenith Bank, during the month peaked at N51,25, with a PE Ratio of 15.12. Union Bank and Intercontinental Bank Plc were in the region of N40 and N45, with PE Ratio of 21.23 and 24. 34.

In spite of the apparent jolly group ride, there were grumblings bordering on undervaluation of individual banks‘ stocks. Of course, there was intra-sectoral grumbling over the perceived overvaluation of some banks‘ stocks, while some others were being undervalued.

The results turned out by these banks did much to fire up this controversy, as the performances attempted to obliterate the bases for polarity between the banks. The question then was: if the fundamental indicators were in all ramifications similar, competitive and rising, what then should have created the big divide in the value of the various stocks within the banking sector?

A stockbroker, Akin Ajewole, says the question of agitation between banks over the value of stocks within the banking sector is a non-issue, as the bases for valuation are always clear at inception. ”Valuation is a professional thing arrived at after due diligence has been done on the company‘s fundamental. The price arrived at during the company‘s listing on the NSE is a result of an interface work between various professionals. Though some prices could be seen to be suspect at the end, the fundamental principles underlining price decision for stocks are not subjects of controversy, no matter what the feelings in individual investors or market operators could be”, he explains.

But beyond the boom era, the depreciating values of stocks in the banking sector, which became much pronounced generally towards the end of 2008 and has continued since, has remained the central concern among market operators and investors.

Talking about impressive fundamentals, United Bank for Africa Plc, ave a final dividend of 75kobo per share and a bonus issue of one new share for every four existing shares, as proposed by the bank‘s board towards the end of 2008.

This brought to N1.38 kobo, the total amount of dividend paid out by the bank in the 2007/8 financial year. The board had, in July 2007, paid 25 kobo interim dividend and gave a bonus issue of one new share for two existing ones to the delight of shareholders.

The bank‘s 2008 financial results and performance indicators also showed significant improvements, with gross earning increasing by 55 per cent to N169.5bn, even as the bank said it continued to grow key business segments. Underlying profit also grew by 82 per cent to N56.8bn, despite the global economic meltdown, while dividend distribution for the year increased by 15 per cent.

First Bank‘s half-year result for 2008 showed gross earnings that increased by 45.77 per cent, from N66.50 billion in 2007 to N96.94 billion in 2008. Profit before tax was higher, as this figure increased by 55 per cent. This brought the half year pre-tax profit to N30.04 billion in 2008 as against N19.33 billion realised in 2007. Consequently, after tax profit moved along the same line as this grew by 55.65 per cent, from N15.27 billion in 2007 to N23.77 in 2008.

Access Bank Plc also recorded an impressive performance across key indices for the nine months ended December 31, 2008. The result showed that gross earnings and profit before tax increased by 82 per cent and 78 per cent respectively, compared to the corresponding period of 2007, having grown to N76.3bn from N41.9bn and N23.4 bn from N13.2bn, respectively. Profit after tax reflected a similar growth pattern, with an increase of 99 per cent having grown to N17.8 bn from the N 8.9 bn recorded in the corresponding period of 2007.

The bank probably worked hard to deliver on its promise of better and improved dividend and other fundamental indicators in the overall 2008 results, the awful truth is that despite returning 99 per cent profit, the stock price has sunk as low as N3.91 (as at Friday).

A similar trend of improved performance, with impressive indicators, has characterised most of the banks. Yet the basic need of capital appreciation has been lacking, courtesy of the tumbling stock prices.

This brings to the fore a serious question of what the real value of such stocks is and/or should be?

[hispy99]

What experts say...
By Agency reporter
Published: Sunday, 1 Feb 2009

Stockbrokers and analysts hold different views on this. But they are agreed that it might be fool-hardy to assume that the effects of the global economic meltdown are not yet with us. They say that no matter what the fundamental indicators of the banks may be, the fact that there is liquidity squeeze in the market will definitely affect the price and the value of their stocks. Another school of thought within the capital market believes that it is either most of the banks are not stating the whole truth or there are outright cover-ups somewhere. They are, however, agreed that this period presents a good opportunity for those who can dare, to buy more into the market because the market must definitely rise.

In his comments on the trend, the Managing Director, Camry Securities Limited, Mr. Atiku Kafaru, says a lot of factors account for the current travail of stocks, and not just banking stocks. In the case of banking stocks, he says the factors include the poor liquidity situation in the market and among the public, the pressure on the banks from foreign banks they could have been exposed to and the public‘s lack of confidence in the market at this period.

He says, ”There is poor liquidity on the part of the public. A lot of people, who got margin funds from banks to buy shares, are being put under pressure to sell those shares because banks need the money now. Most of the banks themselves are under pressure because the foreign banks or institutions they are exposed to are or about recalling their funds. In a situation where supply is more than demand, the price will definitely fall.”

In his view, no matter what the bank‘s fundamentals are, under this situation, there is not much that should be expected in terms of price and value.

For a seasoned stockbroker, Mr. Aggrey Nonye Otakpor, the question is not about the value of a bank‘s them into the market. Through this, activity will return to the market and stocks will begin to find their real values

[hispy99]

Exchange approves N2.2 trillion new issues in 2008
By Gbenga Agbana

DESPITE the global meltdown that enveloped the world stock markets last year, causing it to experience major crisis, the Nigerian Stock Exchange's council, its highest governing body, approved 70 applications for new issues and merger acquisitions in excess of N2.2 trillion last year.

Speaking at a yearly press briefing in Lagos, the Director-General of the Nigerian Stock Exchange (NSE), Professor Ndi Okereke-Onyuike said the amount represented 9.53 per cent of Gross Domestic Product (GDP), as against 65 applications for new issues valued at N2.4 trillion in 2007 or 10.5 per cent of GDP.

She explained that the primary market was active up to the third quarter in terms of issues offered for public subscription, but noted that the fourth quarter of 2008 was not too active, majorly attributable to liquidity constraints from the economy.

Breaking down the figures, she said the non-bank corporate issues accounted for 51.6 per cent with 59 applications valued at N1.124 trillion, while the banking sector accounted for 35.8 per cent with 10 applications valued at N779.8 billion.

Government bond issues accounted for N275 billion or 12.62 per cent of the total amount approved during the year.

Further breakdown of the non-bank application showed that the foreign listings and insurance sub-sectors accounted for N295 billion and N150.45 billion or 13.54 per cent and 6.9 per cent respectively of the total applications considered.

Also, the sum of N608 billion was raised through Initial Public Offerings (IPOs) and supplementary issues; N378.51 billion through rights issues and N279 billion through bond issue, including the Lagos State Government Bond.

Listing by introduction accounted for N368.85 billion in addition to 11 applications for supplementary listings valued at N277.4 billion, while shares placing accounted for N91.4 billion.

Also approved was one application for merger and acquisition valued at N3.8 billion and five applications by Unit Trusts for memorandum listings valued at N15.4 billion.

Besides, the council approved new tradeable instruments - Exchange Traded Funds (ETFs) - with one application valued at N2 billion.

New listings in 2008 stood at 21 and the securities listed on the Exchange dropped to 301 from 309 in 2007 due to delistings done in 2008.

[zainabusman]

Originally Posted by Michael

I think Zain would use Earnings yields to compare companies in Bull markets but Div Yields in Bear Markets like Now. Zain am I right?

I think there is no point in projecting how high a stock price will go in a bear market, since we know it won't be going anywhere. So In a bear market we siphon offf dividends for use in Investing in other dividend paying equities with high yields

The dividend yield is definetely the number one factor in investing in a bear market. Off course one eye must be kept on the earnings to ensure they can keep up with dividend payments.

[zainabusman]

Originally Posted by lordgbengss

pls does anyone know from experience stocks that trail the NSE, i.e anyday NSE appreciates this stock will also appreciate

This kind of analysis will definetely be useful. However, since 3rd qtr last year when the 1% downward rule was instituted most stocks move in Tandem with the NSE Index. For 40 days bw september and oct most stocks went down daily along with the Index. Infact for a couple of days no stock gained!Similarly for 20 days bw Nov & Dec most stocks went down with the Index. We have seen a similar pattern in Jan when most stocks went down with the Index From Jan 2 to Jan 29.

My conclusion is that bw 3rd qtr last year to date, such analysis will not yield much insight as practically every stock moved with the Index. The exceptions were stocks that could not go down due to the 50,000 units rule even then the intra day movement for most of these stocks was down in tandem with the Index.

[knightofdelta]

Originally Posted by lordgbengss

pls does anyone know from experience stocks that trail the NSE, i.e anyday NSE appreciates this stock will also appreciate

First Bank...