2016 by all accounts was not a memorable year for stock market in Nigeria. In a year where Nigerians were seeking for an investment outlet that could provide decent returns, rather than see the NSE as an investment destination many preferred to invest in ponzi schemes.
The stigmatization of the NSE is yet to abate since the stock market crash of 2008/2009. The memory is still in the minds of many people. Once beaten twice shy! The stock market did not disappoint as it closed 2016 with a 6.1% year to date loss. This was the second year straight it had posted losses and made it one of the worst stock markets of 2016. Despite this poor return, some stocks on the exchange did post impressive returns.
According to data available to Nairametrics a total of 31 stocks out of about 170 closed 2016 on a positive note. The rest either returned flat or closed the year negatively. Of the 31 stocks that closed the year with a gain, 3 posted a return that was about 100%. Here is how they made this happen;
Dangote Flour Mill Closing price N4.15 (gained 284%)
Dangote Flor Mills Plc, formerly Tiger Branded Plc, closed 2016 as the best gainer. This was a stock that in 2015 closed at N1.13 after plummeting from a 2015 opening price of about N9.
The story of Dangote Flour Mills is somewhat of a lesson on how not to buy a Nigerian business. Tiger Brands, one of Africa’s largest consumer goods company, acquired Dangote Flour Mills in 2012. After the acquisition, the new owners put in place strategies to turn around a company that seems to have lost its glory days.
Unfortunately, things only when from bad to worse and the company continued to lose more money. Eventually, this deal will cost Tiger Brand a whopping N24 billion in write downs. Soon after, they gave up and sold the company back to Dangote Industries Ltd. They soon renamed the company to Dangote Flour Mills and within a year it recorded its first profits. This triggered a share price rally, that saw the stock gain over 280%. The fundamentals are still not good for this company but investors see an opportunity in here and have rewarded the stock with capital gains. Promise of new investment and the backing of government for a company owned by Africa’s richest man is one that is hard to underestimate.
Read more about Dangote Flour Mills here
United Capital Plc
This was perhaps one of the most consistent stock of 2016. United Capital started 2016 at a share price of about N1.35 and ended the year with a share price of N2.86 gaining a whopping 118% year to date.
The story of United Capital is one of a company that has increased shareholder value through sound fundamentals. The company grew its profits in 2015 by a whopping 39% and declared dividends that provided a yield of about 15% at the time the announcement was made. The company only went from strength to strength. By the second quarter of 2016, the company announced that it had sold its 50% stake in UBA Metropolitan for about N2.2 billion. This announcement sky rocketed the share price from about N1.4 and it kept going up since then and never looked back.
The company in its 2016 9 months results reported an earnings per share growth of 144% to 78 kobo. The share price is likely to continue in this trajectory in 2017 and could cross N3 by the end of the first quarter of 2017.
Total Nigeria Plc
By closing the year with a share price of N299, Total Nigeria Plc closed the year with a 103% pop posting the third best returns in the Nigeria Stock Exchange. Total, a consistent performer opened the year with a share price of N148.5 and remained largely within a 10% gain until the rally began.
The company reported an earnings per share of N8.32 in the first quarter of 2016 representing a 530% increase over the same period last year. Investors saw the results and began scrambling for the stock. The second and third quarter results were no different posting double-digit earning growth year on year. Rumors that the company is planning to sell its downstream business has also helped fuel a share price rally that had the share price cross N300 at some point in November before receding by year-end. We project an average share price of about N320 by the end of the first quarter of 2017.
Others to note
There have also been other performers in 2016 that are worthy of note. Seplat for example ended the year with a gain of 86% as investors reacted to the spate of OPEC deals that took place in the second half of the year. The cool in the Niger Delta crisis and the resumption of oil production also helped buoyed investor interest. Mobil Plc is another stock that ended the year with a gain of 81%. The company announced a deal that it was divesting to NIPCO Plc triggering a rally that helped it close the year at N290.
All charts sourced from Bloomberg