Tell Magazine

Despite the downturn in the capital market, some stocks have been performing consistently well on the trading floors of tnhe Nigerian Stock Exchange, with impressive returns to investors

Despite the lull in the Nigerian capital market, some investors still find the market irresistible. Stocks in the building materials, petroleum, food and beverages and banking sub-sectors have constantly engaged the attention of investors by offering irresistible rewards. The ongoing banking reforms, coupled with the vibrancy recorded in the building materials, food and beverages sub-sectors and return of normalcy in oil production in 2011, have ensured that stocks of major companies in those sectors offer investors fantastic returns.

Femi Adelaja, a teacher, is one of the investors that have been reaping from stocks in the building sub-sector. A year ago, Adelaja bought shares of Dangote Cement Plc worth N100,000. By May 2011, the value of the same stock with the dividend obtained grew to about N147,233 in five months. Apart from the price appreciation, the company also issued a N2.25 dividend to its shareholders when other stocks in the same sub-sector declared losses at the end of their financial year. To Adelaja, this is an indication that no other stock in the sub-sector can be as rewarding as Dangote Cement Plc.

Segun Meyungbo, a public servant, is also reaping good returns from the capital market at a time many investors are shying away from it for fear of getting their fingers burnt. In 2009, Meyungbo bought shares of Dangote Flour Plc worth N50,000. By September 2011, the value of the same stock with the dividends obtained grew to about N73,333. The company also has a record of consistent dividend and bonus issued to its shareholders. For instance, it issued 50 kobo and 20 kobo to the investors in 2010 and 2011 respectively at a time some of its counterparts declared a loss. “It is a stock a discerning investor would love to buy and keep till the end of the financial year,” he told the magazine.

In the food and beverages sub-sector, stocks of Nestle Nigeria Plc are also among the sought after in the entire capital market. The company’s share price has witnessed an unprecedented rise over years. For instance, as at January 18, 2012, the shares were sold at N419.50 per unit, the highest valued stock listed on the floor of the stock exchange, with 62,530 units traded. The low figure of transaction was an indication that investors were still holding on to their shares. Nestle Nigeria is regarded as a cash cow because it consistently declares and it has paid an average dividend of N11.45 per share every year for the past 15 years. From 2005, Nestle has been paying as dividends N10, N10.35, N10.71, N12.55, N12.55, N12.55 per share each financial year. “I have been a shareholder of the company for 20 years and it has never disappointed me in terms of dividend payout and bonus issues,” said Tawaf Oluwole, 72, a retired nurse.

Taye Taiwo, a teacher, is an investor that sticks to the petroleum sub-sector year in year out. Six years back, she bought shares of Mobil Oil worth N100,000. By December 2011, the capital appreciation of the stock with the dividends obtained had grown to about N250, 000. The growth is due to the consistent mouth-watering dividend and bonus issued to the numerous shareholders. For instance, Mobil Oil has since 2006 paid dividends of N5, N6.20, N7, N8 and N9.60 per share each financial year. This for Taiwo is an indication that no other investment can be as rewarding as Mobil stocks.

Stocks of Total Nigeria Plc also hold sway in the capital market. The company’s share price also witnessed an unprecedented rise over time before it issued dividends and thereafter the company’s share price was marked down. 
For instance, as at January 18, 2012, the company’s share was sold at N188.10 per unit, the highest in the sub-sector with 54,937 units traded. Total Nigeria, like Nestle, is also regarded as a cash cow because it consistently pays an average dividend of N6 per share every year.

MRS Oil Nigeria is another stock that enjoys investors’ patronage despite the lull in the market. As at last week, the stock traded at N59 per unit when about 2,643 units were sold. Stock market analysts noted that the volume traded was a pointer to the robustness of its value in the estimation of investors who are finding it unwise to offload their shares.

Another thriving sector in the capital market where investors are constantly scrambling for shares is Guaranty Trust Bank, GTBank. For instance, as at January 18, 2012, GTBank was among the top five trades recorded on the floor of the exchange. As at the close of trading on January 18, 2012, GTBank enjoyed a notable patronage from investors who were said to be responding to the company’s latest impressive performance. While the stock closed at N14.15 as 12.6 million of its shares traded valued at N179.3 million, the financial institution also issued 75 kobo and one-for-four dividend and bonus respectively. Over the past four years, GTBank has sustained an exemplary dividend payout profile.

Stocks of Zenith International Bank are equally highly patronised in the capital market. As at close of trading on January 18, 2012, over 4.40 million units of the shares of the bank valued at N54.1 million were traded. Other banking stocks in this category include Diamond Bank, First Bank, Access Bank and Skye bank.

Experts attribute the good outing of these stocks to their track record of consistent good performance. Ayobami Adeniji, an investment analyst, said that one could predict the bright future ahead of the companies looking at their previous results. For instance, a cursory look at the Oando Group’s financial results for 2010 shows that its turnover increased from N336.9 billion in 2009 to N378.925 billion in 2010. Profit Before Tax, PBT, stood at N24.318 billion as against N13.512 billion in 2009. The company seems poised to surpass this performance in 2011 as its half-year turnover grew by 55 per cent to N267.8 billion, from N172.9 billion in 2010. Its profit after tax, PAT, grew by 25 per cent to N6.7 billion, compared to N5.3 billion in 2009. While MRS Oil, in its half year performance for 2011, declared PBT of N1.57 billion, PAT of N1.1 billion and a turnover of N40 billion, Conoil’s unaudited result for the third quarter as at September 30, 2011 shows that its PAT jumped to N2.397 billion compared with N1.973 billion in 2010.

Similarly, GTBank’s financial result for 2010 shows that its PAT increased from N23.8 billion in 2009 to N36.51 billion in 2010. The 2011 result of the financial institution is expected to surpass the 2010 performance by mid 2012 when the financial result is expected to be released. Already, its half year PAT increased from N16.9 billion in 2010 to N27 billion and a gross earning of N84 billion. While Zenith Bank grew its PAT by 85 per cent to N37.4 billion in 2010, compared to N20.6 billion in 2009, Access Bank’s audited result for the year ended 2010 shows that its PAT grew by 564 per cent to N16.1 billion, compared to a loss of N3.48 billion in 2009.

Adeleke Adebayo, general secretary, Independent Shareholders Association of Nigeria, ISAN, said that high trading activities were recorded on the stocks because investors were positioning themselves to acquire the shares hoping that the companies would pay dividends and bonuses this year in the next two or three months. “That normally accounts for upheave of activities at this period of the year. Over 75 per cent of the listed companies now have a uniformed December 31, year-end,” as against the different  dates chosen in the epast he explained.

Adeniji added that some laudable projects embarked upon by some of the oil firms could also be responsible for the development in the sector. For instance, she believes the result of Oando was driven by factors which include the commencement of revenue generation from the Akute Power Plant commissioned for the Lagos State Water Corporation in 2009. “The company’s exploration and production division also booked relatively higher earnings on the back of increased oil production from OML 125, and the commencement of production in OML 56 added to its earnings,” she observed.

Segun Owolabi, chairman, Graceville Investment, explained that Conoil’s investments were noticeable in core segments of the downstream business. The segments include retail, lubricants, aviation, specialised products and non-retail business. “Its business plan is hinged on massive investment in new retail outlets and the upgrade of its over 400 stations nationwide. It also includes the construction of mega stations in the 36 states and the federal capital territory,” he told the magazine.

Some investors who demonstrated a rising appetite for these stocks explained that the combination of positive cash flow and strong earnings influenced their decision to buy those shares. Owolabi adds: “The coast is clear for stocks in building and construction, oil, food and beverages firms with some banks to post bumper results from their activities. The strength and attraction to these stocks remain their positive cash flow and strong earnings, in comparison with some other sub-sectors of the NSE, such as the insurance and other financial sub-sectors, whose equities have largely been weighed down by debt and other liabilities.”

In all these, analysts believe that although the current high yield on these stocks may reduce the inflow of funds to other sub-sectors, a few of them however are optimistic that investors who seek positive returns will spread their investments across the other sub-sectors of the capital market.

Stocks that Hold The Aces (January – December 2011)

The table shows the price movement of the stocks before adjustment after dividend and bonus payments.