Despite the Nigerian Exchange Limited (NGX) All-Share Index or ASI closing positive, two sectors, the Alternative Securities Market (ASeM) and Industrial Goods indices have emerged as worst performing on the bourse in 2021.
Analysis of market performance for 2021 revealed that while the NGX ASI closed 2021 with a gain of 6.07 per cent to 42,716.44 basis points, the ASeM and Industrial goods indices depreciated by 8.11per cent and 2.15per cent respectively.
THISDAY checks revealed that investors’ profit-taking in the two indices heavy-weight affected overall performances in the year under review.
Specifically, investors’ profit-taking in Juli Plc weakened the ASeM index, while downward in stock price of BUA Cement Plc depreciated the industrial good index in 2021.
The stock price of BUA cement dropped by 13.32 per cent to N67.05 in 2021 from N77.35 it opened for trading.
BUA cement’s 13.3 per cent decline in stock price was related to its Basic Earnings Per Share.
The company closed nine months ended September 30, 2021 with N0.66 Basic Earnings Per Share as against N0.55 recorded in prior nine months of 2020.
“For BUA cement, the stock price in 2021 was not commensurate with the company’s Basic Earnings Per Share and investors decided to selloff, ””said Capital market analyst, Mr. Rotimi Fakeyejo.
Other stocks in the industrial goods recorded decline in the year on the heels of poor corporate earnings.
For einstance, stock price of CAP Plc dropped by 2.75 per cent to close at N19.45 from N20.00 it opened in 2021, while Beta Glass Plc. Dropped by 4.4 per cent to N52.95 from N55.40.
Four companies are listed on the AseM board of the Exchange such as; Smart Products Nigeria Plc, Capital Oil Plc and Rak Unity Pet. Company Plc that closed flat last year.
The stock price of Juli dropped by nearly 40 per cent to N0.91 in 2021 from N1.51, while Smart Products Nigeria traded flat at N0.20 for the second consecutive year.
Both Capital Oil and Rak Unity Pet. Company also traded flat N0.2 and N0.30 in 2021 respectively.
Reacting on the AseM index poor performance, analyst at PAC Holdings, Mr. Wole Adeyeye attributed the decline to investors profit-taking in Juli.
According to him: “The share price of Juli declined by 39.74 per cent to N0.91 kobo in 2021. The prices of other stocks under ASeM Index (such as Smart Products Nigeria Plc, Capital Oil Plc, Rak Unity Pet. Comp. Plc) remained flat in 2021.
“Of course, investors are expected to react over the company’s poor corporate earnings due to economy challenges. Juli in 2020 financial year reported N56.5million loss as against N1.57million loss reported in 2019.”
The Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf said the manufacturing sector in Nigeria is too dependent on import, which is a major shortcoming of the Nigerian manufacturing sector.
According to him: “The sector accounts for about three per cent of foreign exchange earnings andover 30% of import bill. This demonstrates that the sector is not properly aligned with the vision of self-reliance being promoted by the current government.
“Local value addition is still very weak. The most sustainable segment of the manufacturing sector are the food & beverage industries, and the cement industries where the local content is well over 60%. This explains the competitive strength of the sector.”
The current challenges he highlighted are, “Weak infrastructural base – power, transportation, Apapatraffic issues, railway system, and the ports; High cost of fund, absence of long-term funds, challenges of access to credit by SMEs as well as other firms in the sector, because of perception of manufacturing is very risky in the economy. Except for intervention funds, especially from the Bank of Industry (BoI), the cost of fund in the Nigerian economy has been well over 20% for industrialists. It is difficult to achieve a competitive manufacturing investment with this kind of fund.”
He added that the sector also suffer from the challenges of weak institutions. This makes regulation ineffective – faking and counterfeiting, smuggling, under invoicing , among others.
Meanwhile, the Oil & gas index on the NGX emerged as the best performing index on the NGX amid impressive profit and revenue driven by hike in prices of Premium Motor Spirits (PMS), among others.
The index gained 52.52 per cent to close 2021 at 345.01 basis points from 226.20basis points it closed in 2020.
The three drivers in the index, Totalenergies Marketing Nigeria, Oando Plc, and Conoil Plc appreciated in prices.
The stock price of Totalenergies Marketing Nigeria gained 71 per cent to close 2021 at N221.9 from N130.00, while Oando gained 19.5 per cent from N3.70 it closed in 2020 to N4.42.
In addition, Conoil gained 5.52 per cent in stock price to close at N22 from N20.85 it opened for trading.
The federal government this year tends to suspend subsidy payment on crude importation and the global oil price gained significantly over Crude oil production cut by the Organization of the Petroleum Exporting Countries (OPEC).
A report by National Bureau of Statistic (NBS) revealed that average retail of premium Motor Spirit (petrol) paid by consumers increased by 0.19 per cent on a year-on-year basis from a lower cost of N167.27 per litre recorded in corresponding month of last year to a higher cost of N167.60 per litre in November 2021.
However, the fact that the price of the commodity is still been sold at an average of N162/N163 per litre stations across the country, meant that the Federal Government, through the Nigerian National Petroleum Corporation (NNPC) is still subsiding a litre of the commodity for Nigerians.
Capital market analysts have urged investors to invest in listed Oil and gas stocks with strong fundamentals rather than patronizing banking stocks as most are struggling to survive numerous policies of the regulating bodies.
TotalEnergies Marketing Nigeria in its third quarter 2021 unaudited results for the period ended September 30, 2021 reported 881 per cent increase in profit before tax to N19.7billion, driven by 50 per cent growth in revenue that moved from N152billion in Q3 2020 to N242billion in Q3 2021.
In the period, multinational petroleum marketing company declared interim dividend of N4.00.
Conoil also grew profit before tax by 44 per cent to N2.36billion in Q3 2021 as revenue gained 15 per cent from N88billion in Q3 2020 to N101billion in Q3 2021.
The growth in profit drive the company’s Earning Per Share to N2.30 in Q3 2021, about 43.8 per cent increase over N1.60 reported in Q3 2020.
Speaking further, Fakayejo attributed the Oil & Gas performance to higher margin in crude oil products, stressing that the ease of movement also contributed to revenue and profit.
According to him, “These companies reported increase in revenue due to higher margin in products the sale this year. The restriction of movement eroded their revenue last year but with the ease on COVID-19 lockdown, they were able to grow revenue that translates into profit.”
He maintained that investors can always consider buying Total Nigeria shares over its intrinsic fundamentals on the NGX.
In his words, “Total Nigeria is one of the most reliable Oil & gas stock on NGX and the company by year end is going to have EPS of N35.00. The company’s payout is always 70 to 80 per cent every year and they may still pay dividend of N20.00 at the end of 2021 financial year. It makes a lot of sense for investors to buy Total Nigeria and Seplat Petroleum shares on NGX.”