Investors Reposition For Dividend, Expected Numbers Ahead Of Earnings Season Peak

Market Update for Week Ended March 9 and Outlook for March 12-16

The nation’s equity market last week sustained its uptrend to consolidate the previous week’s positive performance on strong earnings and February inflation data expectations, as the scorecards released so far have been impressive, just as some beat investor estimates. Market reaction to these numbers have however been mixed to reveal discounting of these high payout by companies following the rally of share prices on the floor of the exchange, particularly in January.

Meanwhile, the market has continued to recover from February lows, even as the NSE’s composite All-Share index broke out the first resistance level of 43,670.57 to retest its highs of 44,062.47 from intraweek lows of 42,777.92 points before closing the period under review at 43,167.87 on a high volume traded. This reveals an increase in buying interest by market players, especially as all eyes are on the 2017 full-year corporate earnings, especially of the blue-chip stocks and ahead of the 2018 Q1 financials as well as economic reports expected to give clearer direction. We would not forget the continued delay in the passage of the 2018 budget by National Assembly. So far, there is the usual blame game, with Vice President Yemi Osinbajo discreetly blaming the legislators for the delay, while the lawmakers say some Ministers, Department and Agencies of the Federal Government have not defended their own budget, just as the majority have never audited their accounts since they were established, against the demand of the Nigerian Constitution that President Muhammadu Buhari swore to uphold and defend.

There is also the continued delay in the approval by the Senate of nominees to fill vacancies created on the board of the Central Bank of Nigeria (CBN) and its Monetary Policy Committee (MPC), which would make it unable to meet for the second consecutive time this year over lack of quorum. The legislators are miffed over the Federal Government’s insistence on keeping 56 year-old Ibrahim Magu as acting chairman of the Economic & Financial Crimes Commission (EFCC), even after the Senate failed to clear him for the second time he was presented by the Federal Government. But while the muscle flexing continues, the economy is suffering, hence the need for a political solution to the looming crisis.
Meanwhile, the mixed performance witnessed within the period under review followed the price adjustment of Nigerian Breweries, Transcorp Hotel and United Capital for their respective dividend of N3.13, N0.1245 and N0.35 as recommended by their directors. More full-year audited and quarterly earnings reports were released to the investing community last week, the results of which were mixed, with MedView and NASCON Allied Industries announcing 3 kobo and N1.50 respectively for approval by their shareholders.

As the earnings season enters its peak period at the mid-month, investors and traders are reshuffling and repositioning for dividend qualification and expected numbers before they hit the market. This has reflected on the huge volume traded so far, but investors should be very careful and go for value stocks at this point that volume is increasing while prices are still lagging. On this note set reasonable target for exit if you are a trader while investors should go high dividend paying stocks.

The composite index NSEASI for the period continue to retrace up above the psychological line 43,000 due to positive buying pressure in low and medium cap stocks in expectation of earnings reports as numbers from the consumer goods sector beating market and analysts forecast with high dividend payout, while banking stocks are suffering setback despite posting strong numbers in Q3 that reveal high possibility of good dividend payout. This situation may not be unconnected with realignments ahead of the recent CBN guideline for dividend payment by banks, the implications of which many investors are still interpreting.

Market technicals for the week were positive and strong as traded volume was huge on positive market breadth and strong selling pressure of 70% and buying volume at 30% of the week’s total transaction to continue a two-week positive market performance after the February shakeout.

The NSE ASI for the period gained 291.63 points to close at 43,167.86 points, after opening from 42,876.23 points, representing a 0.70% growth on a huge volume, which was higher than previous week’s. Similarly, market capitalisation increased by N104.8bn to close higher at N15.51tr from its opening value of N15.4tr, representing 0.70% appreciation in investors positions.
The positive sentiments in the market was maintain during the period with increased buying positions targeted at low and medium stocks, with particular attention on Access Bank, Capital Oil, Cadbury, Japaul Oil, and Zenith Bank, among others. With anticipation of more numbers, there is the high possibility of the results beating estimates to reflect the positive economic data. Last week’s gains raised the NSE’s year-to-date returns to 12.88%, even as market capitalisation growth for the period stood at N2.01tr, representing a 14.01% gain from the year’s opening value.

Low and medium cap stocks were the best performing to dominate the top advancers table. These are low price stocks with positive market sentiment and medium cap companies with high possibility of dividend payment. Transactions were driven by activities in the financial services and Oil/Gas sectors.
Market breadth was positive with advancers outweighing decliners in the ratio of 45:40 on a higher volume of trades to continue two-week bull transition.

Back home, the market was mixed for the period as the Index kicked off on a positive note with gain of 1.5% and it was sustained on the second trading day with another gain of 0.22%, but pulled back at the end of midweek trading when it shed 1.51%. There was a rebound on Thursday with 0.33% which was extended till last trading day of the week as the index notched 0.2%, bringing total gains to 0.70% as traders and investors continued to reposition ahead of the release of more earnings reports in the market.
The NSE index and all sectoral indices closed higher for the period, except the NSE AseM, NSE Banking and NSE Insurance that were lower with 1.76%, 1.08% and 0.74% respectively. Market activities in volume and value were up by 41.94% and 2.30% to 3.08bn shares worth N39.99bn from the previous week 2.17bn units valued at N39.09bn.

Japaul Oil and Consolidated Hallmark Insurance were the best performing stocks during the week, gaining 54% and 34.5% respectively to close at N0.89 and N0.39 per share, due to market sentiments for low price stock with strong potential of paying dividend in the case of Hallmark insurance, while Japual’s was due to speculations on the strength of the $350m financing deal with a foreign investor. The worst performing stocks for the period were Regency Insurance and Africa Alliance Insurance that lost 27.1% and 13.8%, closing at N0.35 and N0.31 respectively on the back of market forces.

Market Outlook
Being the mid-month, more earnings reports are expected to hit the market alongside with the February inflation data which is expected to add more positive momentum, a situation that would have positive impact on the market this new week, even as more traders and investors take position in value and dividend paying stocks, ahead of 2018 Q1 corporate earnings and economic data.
Also, expect volatility and repositioning to continue, while profit taking will reduce on the strength of expected payout and earnings surprises.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is approaching.

We advise investors to allow numbers guide their decisions while repositioning for the rest of the year’s trading activities, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.

Get your home study pack of the INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy, thereby ensuring that you invest and trade with knowledge. You can also access stocks analysed in the home study pack of the INVEST 2018 traders and the investors’ summit held on February 24, 2018, including the 15 stock-picks for 2018 are available now to guide your positioning as trading for the year.

Comprehensive training materials on stock Trading and Investing for Financial Independence series are Available, you can play and watch on your mobile phone, laptop, desktop and TV set. Kindly call or send yes to 08032055467, 08028164086 or 08111811223
Meanwhile, the Investdata equity trading and investment education train moves to Port Harcourt this month in line with its resolve to encourage and enhance the return of more retail investors to the Nigerian Stock Exchange (NSE) as a veritable instrument for mobilizing savings, wealth creation and redistribution.

At the Port Harcourt edition investment summit tagged: “Power of Earnings Season For Profitable Trading and Investing” we would be simplifying stock market investing is billed for Saturday, March 17, 2018 at Emerald Hotel Limited, Rumuola. From there, it moves to Abuja on Saturday, April 14, 2018.
As the Nigerian economy continues on its recovery path, participants would learn how to trade intelligently, beginning with setting investment objectives and applying simple tools to help decision making even on impulse.

A statement by Investdata quoted Mr. Ambrose Omordion, its Chief Research Officer as saying: “The training is also to help participants appreciate the changing pattern of the Nigerian economy since its emergence from recession, its effect on company fundamentals, which calls for new strategies for profitable investing. Investors are recovering from the recent market correction due to price decline suffered by equities over the past three weeks.
“Participants will learn how to effectively combine fundamental and technical tools for profiting from the market transformation, while protecting their capital.
“As independent research analysts, InvestData Consulting Limited will also unveil simple steps for surviving any market situation profitably and how to manage profit and loss positions using simple technical analysis tools. We would also be looking at equity investment in a pre-election year and beyond.”
Participants at the Port Harcourt and Abuja legs of the summit would learn how to be among the lucky 10% who manage to consistently play the stock market profitably on their own, guided by our simple trading strategies and buy & sell signal setup.
At Investdata we have been teaching investors simple and proven strategies which when implemented makes you a successful trader and investor in any market situation, especially when it comes to equipping you well enough to know how to protect you portfolios and profit from market corrections in a recovering economy.

We have also, over time, focused attention on attuning the mindset of investors and traders to managing risk, while eliminating emotions when trading so as to avoid irrational investment decisions.
At each of the events, all our stock trading and investing materials that will enhance the knowledge of participants and boost their returns on investment will be available at a discount.
As is our tradition, at our workshop of December 9, 2017, Investdata recommended the following 16 stocks to participants:

African Prudential Plc
Dangote Flour Mills Plc
Dangote Sugar Refinery Plc
Fidson Healthcare Plc
Fidelity Bank Plc
FBN Holdings Plc
Eterna Plc
Access Bank Plc
Dangote Cement Plc
Flour Mills of Nigeria Plc
Honeywell Flour Mills Plc
Presco Plc
Okomu Oil Palm Plc
Total Nigeria Plc
Unilever Nigeria Plc
Zenith Bank Plc

“An analysis of the stocks after four months and one week since December 9 when the summit in Lagos shows that Dangote Flour for example has returned 42.11% from N11.40 each to N16.20. This was after it touched a peak of N17.81 within the period, representing a 56.22% ROI; followed by Eterna, which chalked 35.63%, after its share price climbed from N4.35 on Friday, December 9, 2017, to N5.90 each, just as it recorded a high of 60% returns. FBN Holdings, another of the recommended stock climbed 26.39% from N9.02 per share to close at N11.40 on March 2, 2018, hitting a high of N15.16 each, or 68.07%; while Honeywell Flour notched 23.18%, after closing at N2.71 from N2.20 per share and attaining a price of N3.69, or 67.72% for investors and traders who exited at that price,” Omordion explained.

Also, he added that investors who followed Investdata’s advice to position in African Prudential have gained 22.36% from N3.98 per share at the beginning of the period to N4.87, attaining a 30.65% height within the period; just as investors in Unilever Nigeria creamed 23.89%, which makes it the stock that is closed to its peak during the period. Fidelity Bank’s shares have within the period appreciated by 12.45% to N2.80, but rose as high as N4.33 each, representing 73.89% RoI; while Fidson Healthcare returned 23.68% to close at N4.70, after reaching N5.05 per share, representing RoI of 32.89%; among others.

Two stocks in the pack however underperformed slightly, with Okomu Oil Palm lost 4%, opening for the period at N75.00 and falling to N72.00 per share, after attaining a height of N75.75; just as Flour Mills of Nigeria shed 4% from N35.00 to N33.60; after rising to N37.35 each.
That means a basket built around the above stocks has within the period, without doubt, yielded bountiful returns.

Ambrose Omordion
CRO | Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
http://investdata.com.ng/2018/03/investors-reposition-dividend-expected-numbers-ahead-earnings-season-peak/