The Nigerian equities market is largely still in a bear market. Stocks have been hammered left right and center as oil prices hover near multiyear lows.
And as the economy continues on its gentle slide towards recession, the bearish mood could get more intense.
There isn’t yet light at the end of the tunnel, and although we don’t have too many reasons to be optimistic, we see an opportunity in these stocks, as we will describe below.
The ‘Forbes season’ – when African billionaires are valued by Forbes for its famous rich-list – is upon us, and the stock of the companies of Nigeria’s billionaires who are in contention, could be in play as they seek to drum up their net worth.
At Nairametrics, we have come to notice that the impact of the Forbes billionaire review on stocks can be significant. And we are anticipating some action as the season approaches, because there is the notion that billionaires have every incentive to remain tops on that rich list and as such will begin buying and/or bidding up the stock in order to increase their value, and hence increase their net worth.
Forbes calculates the net worth of its candidates using stock prices and exchange rates between August and November. (In 2012 it measured it on November 9).
In this analysis, we are simply following the money, and looking into the companies where Nigeria’s billionaires’ major investments are domiciled, and which of these companies have very significant impact on their wealth.
Some of the stocks have started gaining traction lately, as you may have already noticed.
Dangote Cement, owned by Africa’s richest man, who owns a large stake in the company. The stock has risen 2.9 percent since the end of last week. We believe that there isn’t any reason why he wouldn’t want to retain his top spot. We see limited downside to this stock.
Tony Elumelu has a controlling interest in Transcorp, Nigeria’s largest publicly-traded conglomerate; and a significant stake in the United Bank for Africa (UBA).
UBA has already gained 10.2 percent since the end of last week’s trading and it has surged 27 percent since Wednesday.
Transcorp on the other hand has gained 2.4 percent since last week, and 14 percent since Wednesday.
We think he will be too pleased to move up a notch higher on the list.
Forte Oil, owned by Femi Otedola who owns a 78 percent stake in the company. He is the 4th richest in Nigeria, and the 29th richest in Africa in 2014, according to Forbes. Forte Oil stock has bucked the trend all through the year. Although it has been flattish since the end of last week, it has returned 25 percent year to date, making it one of the best performers in a sinking stock market.
Zenith bank, with former chairman and founder, Jim Ovia as its largest individual shareholder with a 9.3% stake. He featured on number 30 in the last edition of the rich list. Zenith stock has gained 3.4 percent since the end of last week.
Other contenders are:
Honeywell – Oba Otudeko
Conoil – Mike Adenuga
MRS group – Alhaji Sayyu Dantata
Diamond bank – Pascal Dozie.
Disclaimer: The author of this article does not intend to buy or sell any of the stocks mentioned in this article in the next 48 hours.
“At Nairametrics, we have come to notice that the impact of the Forbes billionaire review on stocks can be significant.”
— Where is the evidence to support this observation?
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