The Nigerian stock market ended the past week cumulatively on a bearish note.
The NSE All-Share Index and Market Capitalization depreciated by 0.63% and 0.61% to close the week at 40,186.70 index points and N21.026 trillion respectively.
Local investors are currently hunting for greater returns on investment thus increasingly selling off their equity positions and plowing the proceeds in fixed income instruments at a time majority of companies’ earnings reports for 2020 are yet to be issued.
The latest outcome of the Nigerian Treasury Bill auction points towards yield elevation in the short term.
The most recent data retrieved from CardinalStone Research revealed benchmark yields advanced by an average of 10 basis points.
The overnight and open buyback rates rose by c.17.00% apiece to 20.50% and 20.00% respectively, following the retail FX auction conducted last Friday alongside OMO and bond auction settlements.
Also, the sentiment seems to have reversed given the mixed signal from the fixed income market that yields may begin to rise faster-than-anticipated after the outcome of the last OMO and NTB auctions conducted by the CBN,” said Abiodun Keripe, Managing Director, Afrinvest Research.
On the foreign side, Stephen Innes, Chief Global Market Strategist at Axi in a note to our source spoke on the same prevailing conditions weighing hard on the world’s biggest and most liquid stock market. He buttressed more on rising U.S Treasury yields, an arch-enemy to U.S stocks, as investors switch their attention momentarily to the bond market;
“US equities were weaker Friday while US 10-year yields rose a further 4bps to 1.34%. Those moves were capping off the overriding trend in markets last week: growing concerns about inflation risks pushing nominal bond yields higher and weighing on the equity rally.
“The Biden administration continues to stay on message stressing Congress’s need to pass a significant fiscal package downplaying recent more robust economic data as its full-throttle as a package exceeding US$1.9 trillion heads for a House vote this week in a fast and furious attempt to get the US back to full employment next year.
“The unprecedented and highly stimulatory policy is an attempt to exceed one million jobs a month from April to September. Still, it underscores the narrower timeline from easing to tightening than post-GFC. And suggest taper tantrum fears are understandable even if severe inflation is still a 2022 issue,” Innes said.
What to expect: That being said, timing is still everything. The next leg of the reflation will have to be carried more and more by a continued recovery in economic growth, as fiscal and monetary stimulus gets increasingly packed into the prices of global equities.
Julius Berger Plc reveals 8 major contracts won in 2021
Nigeria’s leading construction company, Julius Berger Plc, won 8 new major construction projects for 2021, its company annual financials revealed. The company makes money by taking on construction projects from state and federal governments as well as corporations and private individuals.
According to information contained in its latest annual report, Julius Berger Plc won projects spanning the construction of flyovers, bridges, roads and buildings. These projects are expected to drive the company’s revenue growth for Full-Year 2021. Currently, the company has 13 ongoing projects and has secured 8 new projects, which are:
1. Department of Petroleum Resources, New Headquarters, Abuja which is estimated to cost a total of N35 billion.
2. Office rehabilitation, Bill & Melinda Gates Foundation, Abuja.
3. Construction of Flyover at New GRA Junction and Dualization of Tombia Road, Port Harcourt – Estimated to cost N36.8 billion.
4. Reconstruction of Oro-Abali and Rumuola Flyovers, Port Harcourt.
5. Construction of Access Roads to the Second River Niger Bridge, which is estimated to cost N208 billion.
6. Rehabilitation of Township Roads at New GRA, Woji Road, Port Harcourt.
7. Regency Hotel, Lagos.
8. Maintenance of Governor’s Residence, Lagos.
The company made a recovery in the first quarter of this year, reporting a 590.24% growth in net profit from N412.45 million in the corresponding quarter of 2020 to N2.83 billion. Profits were mostly driven by topline revenue growth from N55.9 billion in Q1 last year to N71.2 billion same period this year.
What they are saying
According to the Chairman of the company, Mutiu Sunmonu, CON, during the year, the Board of Directors approved the Company’s first diversification case. In his words, “The company will continue to progress Julius Berger Nigeria Plc’s corporate development activities to achieve long-term diversification strategy regarding client mix and business areas – assessing, exploring and activating opportunities beyond core construction business to strategically reduce risk, promote growth and strengthen cashflow and profitability.”
Julius Berger share price closed at N20.03 at the time of writing this report, up 35% in the last one year.
U.S leading stocks suffer biggest daily plunge since October 28, 2020
The Dow Jones Industrial Average plunged by 1.3%, closing with 30,223.89 and dropping about 700 index points at one point.
U.S stocks ended the first trading session of 2021 on a bearish note amid concerns about global COVID-19 cases and the Georgia senate runoff elections in play at the world’s largest economy.
What you must know: It was the biggest one-day sell-off since October 28 for the Dow (which comprises the most capitalized stocks in U.S Stock Exchange) and S&P 500, while the Nasdaq had its worst daily performance since December. 9.
- The Dow Jones Industrial Average plunged by 1.3%, closing with 30,223.89. At one point, the Dow dropped about 700 index points. Monday marked the first negative start to a year for the Dow since 2016.
- The S&P 500 lost about 1.5% to 3,700.65.
- The Nasdaq Composite also dropped 1.5%, ending the day at 12,698.45. Both the Dow and S&P 500 hit record highs at the open before turning lower.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to our source, spoke on macros weighing hard on investors minds:
“Despite investors galloping out of the gates to face a brave new year, it was the same old lockdown fear that saw investors recoil as buyer beware set in.
“While the big macro recovery and rotation view may be the “ultimate trade for 2021,” the “January trade” could be very different as the near-term landscape got a whole lot more dangerous looking very quickly.
“Markets have treated recent lockdowns more as speed bumps than hitting a brick wall at full speed.”
What to expect: However, the Georgia Senate runoff complicates matters as the street does not know how to trade or invest it. While it seems reasonable to assume that the status quo will see most post-election trades pull through, the balance of uncertainty lies in a Democratic sweep, especially if bond yields go higher.
Vitafoam shares gain 9.6%, as company reports N4.11 billion as profit in 2020
Vitafoam Nigeria Plc profit revealed 72.10% increase when compared with the N2.39 billion reported in the corresponding period of 2019.
Vitafoam Nigeria Plc has reported in its audited financial statement for 2020 that it made a profit of N4.11billion for the year ended 30 September 2020.
This represents a 72.10% increase in profit when compared with the N2.39billion profit reported in the corresponding period of 2019.
- Revenue increased to N23.44 billion in 2020, 5.21% Y-O-Y.
- Cost of Sales decreased to N12.43 billion in 2020, 8.06% Y-O-Y.
- Gross Profit increased to N11.01 billion in 2020, 25.68% Y-O-Y.
- Other income increased to N638.97 million in 2020, 63.91% Y-O-Y.
- Distribution costs increased to N1.05 billion in 2020, 8.13% Y-O-Y.
- Administrative expenses increased to N4.13 billion in 2020, 10.57% Y-O-Y.
- Operating profit increased to N6.47 billion in 2020, 45.58% Y-O-Y.
- Finance income increased to N106.51 million in 2020, 5.39% Y-O-Y.
- Finance Costs decreased to N930.17 million in 2020, 11.39% Y-O-Y.
- Profit from continuing operations increased to N3.92 billion in 2020, 58.88% Y-O-Y.
- Profit from discontinued operations increased to N191.63 million in 2020, 345.68% Y-O-Y.
- Profit for the year increased to N4.11 billion in 2020, 72.10% Y-O-Y.
What you should know
- Shares of the company have gained 9.6% within the first one hour of trading, largely at the backdrop of news of the company’s impressive performance as the current valuation of the company in the light of its results suggests that the shares of the Company are undervalued at the current price.
- Checks by Themoneymetrics as of 11:10 am today confirmed that the company is on a full bid, as 4,930,245 bids from 23 investors have been placed at the highest price for the day, without a single offer at a price lower than N8.55.
The profitability of the company was beefed up in 2020 on the back of the decrease in the cost of raw materials coupled with the increase in sales from the core segment of the company which led to the 5.21% increase in revenue in 2020.
However, it is important to note that the impressive performance of the Vitafoam Group was also strengthened by the increase in other profit owing to improvement in sales, this helped the company to also grow its revenue from services provided to customers’ after-sales.