The weeks ahead

The weeks ahead are certainly going to be critical for the market. With the House of Representative insisting that the government must bail out the market and the government saying it has not got any money to do so, it certainly will be interesting times as we head into the last week of February. Another scenario that is going to make this weeks critical is the issue of market makers. The Securities and Exchange Commission (Sec) has approved two billion naira (N2bn) for the market, but the Nigerian Stock Exchange (NSE) that runs the market is insisting that the market makers have  N10 billion for effective impact on the market. NSE is also insisting that the financial backers of the market makers should be made known.   Both parties have a point in their argument. NSE is saying for effective impact, it has to be N10 billion for each of the five market makers. SEC is saying that because of the credit and financial crunch in the economy, the market makers should begin with N2 billion and gradually work up to the amount required by NSE. So let us, the shareholders and stakeholders, see how this situation pans out. A frustrated shareholder fumed, “We do not care from where this money comes from, whether from individuals or government; we want to see this market buoyed up”. According to observers, the financial backers of these market makers are also fine tuning operation modalities to disburse their money in view of the tight liquidity situation. We have not known the mind of the Senators, whether they are in support of their colleagues in the House of Representatives or the Central Bank of Nigeria which says it can not afford a bail out. So, certainly we can only watch the next weeks with bated breath. Be that as it may, however, investors will go on investing like they have been doing with or without market makers. Like one writer said, “Because children have been lost through miscarriages do not mean couples will not continue to make babies”. They, in fact, should make babies. That we have had our worth reduced should not stop us from investing. In the way of continuing to invest, let us look the way of these stocks: perhaps in the next 90 days, we can get a bonus, dividend or price appreciation.

Diamond Bank Plc

This bank just released its third quarter results for the period up to January 31, 2009 and showed improvement in its performance indices. Observers believe that chances are very strong that with its conservative banking culture, indices will further improve into the fourth quarter which will end in April 2009. The earnings per share is already at N1.09. In this particular stock, investors who have an eye for capital appreciation and dividend are already taking position. In the next 60 to 90 days, as they say, “something must surely happen”. In the financial year ended April 30, 2008, a dividend of 56 kobo was paid. Analysts are saying that if it paid 56 kobo last year and the third quarter EPS has already hit N1.09 kobo, then something must happen. In the latest financial report, growth increased from N41.72 billion in the period January 31, 2008 to N72.43 billion in January 31, 2009, a growth of 74 per cent. Profit after tax also grew by a handsome 63 per cent from N9.6 billion in January 31, 2008 to N15.8billion in January 31, 2009. Earnings per share grew by can impressive 49 per cent from 79 kobo to an outstanding N1.09 in the third quarter. With the market price at an unbelievable N5.20, having been hit hard by the bears, though fundamentals are strong, and earnings at N1.09, the price-to-earnings (P/E) ratio is 4.75 times. These statistics point to a very strong buy option at this time. This bank, truly speaking, is among the cheapest stocks in the most vibrant sector of the market. It is, looking from the assets column, one of the equities with the biggest Net Assets of N105.2 billion in January 31, 2008 to N109 billion in January 31, 2009. It grew its assets by 4.24 per cent within the last twelve months. This is a buy-and-wait stock.

Oceanic Bank International Plc

This bank shifted its financial year end from September to December, giving it a 15 month audited result. It, therefore, means that anytime from now, it will be releasing its end-of-the-year financial result. At the end of September, EPS was N1.56. Analysts believe that it’ll surpass it as it has extended its financial year end to December 31. For this reason market operators are optimistic that a bonus or dividend is likely to be declared; but they are surer of a dividend than bonus because of the huge cost of a bonus issue and because of a huge outstanding number of shares from its last public offer. Because of the very favourable result being expected from Oceanic Bank, savvy investors are already taking advantage of the good news and are buying into the company.

First Bank Nig Plc

Are we are expecting anything from First Bank Plc and Union Bank by March when their audited results will be released? To answer this question, we’ll look at their historical data in the last four years of rewarding shareholders before giving an answer to the question.

With the above historical data of First Bank Plc over the last four years, dividend has consistently been paid. Earnings per share keeps hitting over N3.00 over the years but declined in 2007, due to the addition of more outstanding shares from the last public offer. Out of these yearly EPS, dividends were consistently paid out to the shareholders. From the historical data above, analysts strongly believe that there must be something for shareholders this March, its end of year. In view of this fact, avid investors are already taking position in this income stock that has age, fundamental and prestige behind it. Those who are buying into this company are already expecting a dividend and price appreciation. The forecast for fourth quarter EPS for March 31, 2009 is between N2.05 and N2.30. From this, analysts are optimistic that there will be some benefit for shareholders.

Union Bank Nig Plc

For Union Bank Plc, the earnings have been declining due to more outstanding shares from the public offer. However, the bank has consistently been paying dividend over the last four years. It has been one of the banks that age, prestige and expansion have always been speaking for. Decline in earnings should not deter investors from laying their hands on it. Union Bank, it has been proven, is an income stock. Shareholders are looking forward to its rewards of either a dividend or capital appreciation.

Union Bank Plc (Historical data for 4 years)

Year    Q4 (EPS)         Dividend

2004    3.3       paid

2005    3.89     paid

2006    1.18     paid

2007    1.18                 paid

First Bank Plc (Historical data for 4 years)

Year    Q4 (EPS)         Dividend

2004    3.28     Paid

2005    3.25     Paid

2006    3.36     Paid

2006    1.85     Paid