End of Second Qtr to Herald Next Round of Rally
- By Business World
- Published May 3rd, 2010
- Back Page
- Unrated
Profit taking and adjustment of share prices in line with the dividend paid saw the price of shares rolling down last week. The trend will continue this week as more investors continue to take profit. There is nothing alarming in the whole situation. Rather, it is a normal occurrence as the market has to correct itself after such measures. With dividend and bonus largesse being declared, not a few investors took advantage of the rally and dumped on those who could not do so quickly.
However, it is okay for those who have been angling to get some bluechip stocks at lower prices. Now is their opportunity to do so. Moreover, liquidity has been scarce to support the rally for a long while. The Acting President has only just signed the budget into law and it will take sometime after disbursement for the money to trickle down and boost the economy. The down market only offers another opportunity for the next round of rally. Operators are looking toward the tail end of the second quarter for another round of the bull market. Thus as many stocks as would have been adjusted downwards for whatever reason would have stabilized and ready for a northward movement. The next sectors for another rally before the banking sector are the beverages, daily need, and conglomerate.
But the banks still can command some price appreciation at the tail end of their second quarterly results. So the lull will not be for a long time. In fact, operators believe it’ll be very short. The main reason is that the rate of returns in the money market will still remain low compared to the stock market.
Thus, the stock market will still be the place to be until the reward from the bond market, term deposits and savings become better than the returns from the stock market.
The following stocks can be considered for possible profit-taking.
Nigerian Aviation Handling Plc
The historical data of NAHCO shows that it has been consistently improving in its quarterly earnings and yearly earnings as well. In the last five years, it has been paying dividend to its shareholders and capped it in 2009 with a bonus of one new share for every four shares previously held.
The global economic meltdown of 2008 did not stop it from growing its quarterly EPS by 21 percent and paying a handsome dividend of 55 kobo. Its business has been sort of monopolistic in nature and is patronized by good business organisations and foreign missions for the handling their effects. In 2009, it increased its 4th quarter earnings to N1.01 and paid a dividend of 70kobo.
In its first quarter result expected anytime from now, operators are expecting the EPS to hit 52kobo which might be the highest 1st quarter so far in the history of the company.
The company is planning to expand and modernise its operations by sourcing funds in the bond market. But operators are wondering if it will not be an expensive route compared to rights. Operators believe this will be more expensive when interest on the issued bonds falls due for payment and will therefore reduce the earnings per share. As the global market and cargo handling business soars, NAHCO is to be held in close view.
Nigeria Breweries Plc
Through out the years, NB has always been posting good results in bad and good economic times. It is no surprise because of the kind of products it has - alcoholic and non alcoholic drinks. Again turnover and profitability have always been helped by the way the company packages, distributes and sells its products.
These strategies as well as the quality of the products have translated into handsome dividend and bonuses to the shareholders. Shareholders have also benefited from price appreciation over the years.
Notwithstanding the ever-increasing number of outstanding shares as a result of bonus issues, the company has always matched it with profitability. Having gone through the historical date of NB for six years, it has consistently increased both its quarterly and yearly earnings.
The company overwhelmed its shareholders in 2008 when it gave back its entire earnings for that year as dividend to them when the company completed its ultramodern brewery in Enugu.
The 1st quarter result which is expected anytime soon will have its EPS heading towards 120kobo. However operators say the banking reform might curtail its operations as lending has become difficult. Others say its reserves can see it through. But they were all agreed that which ever the source, NB will still make profit.
Therefore any investment style-Short, medium or long term will be okay with Nigerian Breweries.
First Bank Plc
The eagerly awaited nine month adjusted December 31, 2009 audited result of FBN Plc was recently released. But the usually handsome reward was not quite there. However, the management was quick to explain that it was only a nine month result and provisions were further made for bad debts. In spite of this, the company gave a dividend of 10kobo and a bonus of one new share for every eight previously held. The consistency of rewarding shareholders has been maintained though smaller but nevertheless a reward all the same.
The nine months adjusted audited result showed a rise in the top line but a drop in the profit level.
Operators in the market and the banking industry are also agreed that the very poor customer relations of the bank also contributed in the decline in its profit. They are therefore of the opinion that if they are to see more profitability, attitude to the banking public should change for the better.
In the report, gross earnings was improved by 28 percent from N152.50 billion in December 2008 to N196.40 billion in December 2009. Profit after tax dropped by a staggering 90.6 percent from a high of N33.90billion in December 2008 to a miserly N3.20 billion in December 2009.
The earnings per share likewise decreased from 52kobo to 11kobo. Perhaps, to keep the hope of shareholders alive, it went into its reserve to declare a dividend of 10kobo per share and one new share for every eight shares held. Operators are frightened that the outstanding number of shares is getting bloated and might seriously affect the earnings per share unless profits match the ever expanding units.
The fear might not be founded as the first quarter results released along side the adjusted nine month audited result shows that earnings have already reached 43kobo and projected to reach 160kobo at the full year in December. Shareholders and operators might have nothing to fear after all. FBN is on course. Investors should buy on or before May 3. Payment starts May 31.
However, it is okay for those who have been angling to get some bluechip stocks at lower prices. Now is their opportunity to do so. Moreover, liquidity has been scarce to support the rally for a long while. The Acting President has only just signed the budget into law and it will take sometime after disbursement for the money to trickle down and boost the economy. The down market only offers another opportunity for the next round of rally. Operators are looking toward the tail end of the second quarter for another round of the bull market. Thus as many stocks as would have been adjusted downwards for whatever reason would have stabilized and ready for a northward movement. The next sectors for another rally before the banking sector are the beverages, daily need, and conglomerate.
But the banks still can command some price appreciation at the tail end of their second quarterly results. So the lull will not be for a long time. In fact, operators believe it’ll be very short. The main reason is that the rate of returns in the money market will still remain low compared to the stock market.
Thus, the stock market will still be the place to be until the reward from the bond market, term deposits and savings become better than the returns from the stock market.
The following stocks can be considered for possible profit-taking.
Nigerian Aviation Handling Plc
The historical data of NAHCO shows that it has been consistently improving in its quarterly earnings and yearly earnings as well. In the last five years, it has been paying dividend to its shareholders and capped it in 2009 with a bonus of one new share for every four shares previously held.
The global economic meltdown of 2008 did not stop it from growing its quarterly EPS by 21 percent and paying a handsome dividend of 55 kobo. Its business has been sort of monopolistic in nature and is patronized by good business organisations and foreign missions for the handling their effects. In 2009, it increased its 4th quarter earnings to N1.01 and paid a dividend of 70kobo.
In its first quarter result expected anytime from now, operators are expecting the EPS to hit 52kobo which might be the highest 1st quarter so far in the history of the company.
The company is planning to expand and modernise its operations by sourcing funds in the bond market. But operators are wondering if it will not be an expensive route compared to rights. Operators believe this will be more expensive when interest on the issued bonds falls due for payment and will therefore reduce the earnings per share. As the global market and cargo handling business soars, NAHCO is to be held in close view.
Nigeria Breweries Plc
Through out the years, NB has always been posting good results in bad and good economic times. It is no surprise because of the kind of products it has - alcoholic and non alcoholic drinks. Again turnover and profitability have always been helped by the way the company packages, distributes and sells its products.
These strategies as well as the quality of the products have translated into handsome dividend and bonuses to the shareholders. Shareholders have also benefited from price appreciation over the years.
Notwithstanding the ever-increasing number of outstanding shares as a result of bonus issues, the company has always matched it with profitability. Having gone through the historical date of NB for six years, it has consistently increased both its quarterly and yearly earnings.
The company overwhelmed its shareholders in 2008 when it gave back its entire earnings for that year as dividend to them when the company completed its ultramodern brewery in Enugu.
The 1st quarter result which is expected anytime soon will have its EPS heading towards 120kobo. However operators say the banking reform might curtail its operations as lending has become difficult. Others say its reserves can see it through. But they were all agreed that which ever the source, NB will still make profit.
Therefore any investment style-Short, medium or long term will be okay with Nigerian Breweries.
First Bank Plc
The eagerly awaited nine month adjusted December 31, 2009 audited result of FBN Plc was recently released. But the usually handsome reward was not quite there. However, the management was quick to explain that it was only a nine month result and provisions were further made for bad debts. In spite of this, the company gave a dividend of 10kobo and a bonus of one new share for every eight previously held. The consistency of rewarding shareholders has been maintained though smaller but nevertheless a reward all the same.
The nine months adjusted audited result showed a rise in the top line but a drop in the profit level.
Operators in the market and the banking industry are also agreed that the very poor customer relations of the bank also contributed in the decline in its profit. They are therefore of the opinion that if they are to see more profitability, attitude to the banking public should change for the better.
In the report, gross earnings was improved by 28 percent from N152.50 billion in December 2008 to N196.40 billion in December 2009. Profit after tax dropped by a staggering 90.6 percent from a high of N33.90billion in December 2008 to a miserly N3.20 billion in December 2009.
The earnings per share likewise decreased from 52kobo to 11kobo. Perhaps, to keep the hope of shareholders alive, it went into its reserve to declare a dividend of 10kobo per share and one new share for every eight shares held. Operators are frightened that the outstanding number of shares is getting bloated and might seriously affect the earnings per share unless profits match the ever expanding units.
The fear might not be founded as the first quarter results released along side the adjusted nine month audited result shows that earnings have already reached 43kobo and projected to reach 160kobo at the full year in December. Shareholders and operators might have nothing to fear after all. FBN is on course. Investors should buy on or before May 3. Payment starts May 31.
