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Word on the street: Lafarge, United Capital and MTN

If you have a stake, invest, or plan to invest on the Nigerian Stock Exchange, NASD, and like scoops, then this newsletter is for you.

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Welcome to our Word On The Street Newsletter. This newsletter takes you behind the curtains and into some of the major talking points, snippets, back stories and behind-the-scenes intelligence that affect the value of your position in the stock market. Do well to sign-up for our mailing list to get more exciting Newsletters.

If you have a stake, invest, or plan to invest on the Nigerian Stock Exchange, NASD, and like scoops, then this newsletter is for you. We send this out to our subscribers every Sunday, on or before 2 pm.

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We love feedback, so do not hesitate to share any useful tips or comments that we can use to improve this newsletter. And lest we forget, if you have any useful scoop that can help this newsletter get even richer, do not hesitate to tell us. Just send an email to outreach@nairametrics.com. Rest assured of your confidentiality.


On Custom Street

The Nigerian All-Share Index closed the week on a negative note, shedding 0.29%. Stocks are now 4.3% down in June, 2.6% up in the last 6 months, and 15.8% up from a year ago.

Somehow, you get the feeling that we are gradually hitting the bottom in the foreign investor induced sell-off that has gripped the market in the last 10 weeks. Stocks are beginning to appear cheap again, and as we approach the end of another quarter, next week is looking like the best period to double down on bargain hunting for cheap stocks.

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No love for Lafarge

We read two interesting reports last week that seem to condemn Lafarge to the laundry bin of stocks you probably need to dispose of. According to an ARM Research published on Nairametrics, the stock was downgraded to a sell and Lafarge was valued at N34 despite commentary about an “improvement in fundamentals, mainly from higher volumes, energy savings and lower finance cost.” According to ARM, the reason for the downgrade was due to its excessive valuation.

Stanbic, just like ARM, believes that Lafarge’s fundamentals are not bad and forecast an increase in volume during the year. However, they are worried about their huge debts and attendant interest costs, giving them enough reason to assign a sell rating to the stock. Stanbic believes that Lafarge should be sold at N43. The stock closed the week at N39; it last traded within the N43 range back in April.

Positive vibes

A report on Bloomberg during the week quoted analysts from Templeton (a major emerging market investment company) revealing that they were positive about keeping their investments in emerging markets like Nigeria. According to Templeton, the investors believe that higher oil prices will help keep the exchange rate stable, despite other emerging market currencies taking a beating as investors desert. For most foreign investors, exchange rate remains their major concern and so long as there is risk that it could depreciate, they will continue to toy with our market.

So, for this market to continue to attract hot money (Foreign Portfolio Investments), oil prices need to climb, or at least remain stable, while the CBN demonstrates the capability to defend the naira. You shouldn’t, therefore, be surprised when the CBN Governor occasionally grants interviews thumping up his determination to keep liquidity flowing in the Investor Exporter window, while warning banks and BDCs to ensure that they don’t drive up the price by engaging in hoarding and round-tripping.

No Prestige

Penny stocks have plenty of issues and it is petrifying to think that maybe the managers of these companies don’t think that someone is watching them. Take the case of Prestige Assurance Plc. Just a few weeks back, they announced that they were planning a share reconstruction.

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They eventually got their wish and had the stock formerly placed on full suspension from Wednesday, 23 May 2018 to Wednesday, 6 June 2018, to enable the Registrars to update the register of members. To our profound surprise, the company issued a press release on the website of the Nigerian Stock Exchange informing it that it was planning an AGM among which they will discuss a possible bonus issue!!

Patricia

Just in case you are new to stocks, a share reconstruction involves a reduction in the number of shares which a company has. They often do this, either because they believe the shares outstanding is too much and expensive to manage, or wish to theoretically boost their share price by reducing the number of shares outstanding. It is therefore shocking that the company will be considering to issue bonus shares which inadvertently means they will be bloating their share register yet again.

An Exit and some trades in the “family”

Last week, the erudite CEO of United Capital, Toyin Sanni announced that she was resigning from the company. Madam Toyin is well respected in the industry and is one of the CEOs we admire quite much at Nairametrics. Word on the street suggests that she is going into her own private business and could be launching something big quite soon.

Just as she was announcing her exit, we noticed large trades in United Capital and Afri Prudential Stocks. We reached out to a few of our contacts to decipher what was going on and if there was a reason to panic. From what we gathered, a majority shareholder (I am guessing you know who by now) in both companies was “moving things around” their portfolio being part of a strategic business decision. It’s basically Mr/Mrs. A moving shares in their SPV1 to SPV 2.

MTN Rumours

As we await the big MTN IPO, word on the street suggests that they are looking to raise about $500 million. Probably not true considering that they are currently raising about $741 million. No date has been fixed yet for this IPO but it appears that it could take place sometime in late July/Early August.

We also gather that they could be looking to place about 30% of their shares as free float, which is a welcome liquidity for our very shallow stock market. MTN has also been equipping its Investor Relations Unit ahead of this Nigerian IPO and we hear that they are determined to make this a massive success.  

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Smart CWG

Computer Warehouse Group, one of the few tech companies listed on the Nigerian Stock Exchange, announced last week that it had been selected as one of the Meter Asset Providers by the Nigerian Electricity Regulatory Commission (NERC). Being a MAP means that CWG can now finance, procure, install, repair and even replace electricity meters.

According to CWG, it “initiated and designed a ‘Smart Metering Solution’ which works in the form of a connected mobile app for electricity consumers – both the Maximum Demand Customers (MDCs) and the Non-maximum Demand Customers (NDCs).”

CWG claims that its solution can help “power Distribution Companies to detect power theft, monitor and measure usage for improved power efficiencies.” Energy theft costs power companies over N12 billion monthly, by our estimates.  

While all of this sounds good and points to a potential revenue stream for the company, word on the street suggests that CWG does not have the capital to execute this task (well, at least currently). With less than N300 million in the bank (as at 2018 Q1) and a net asset of just N1.5 billion, one wonders how they will seize this opportunity.

Perhaps they might turn to bank lending, seeing as they do not have external loans on their balance sheet. It is also interesting to note that CWG Software Business was worth just N781 million in 2017, down from N1.4 billion in 2016. The company makes nearly half its N10 billion in revenue from its Managed Support Business were it helps companies with service maintenance and outsourcing.

World Cup and Stocks

Ever wondered how Nigerian stocks perform during World Cups? Our research team looked at how stocks performed at the end of the world cup with focus on the month of July of every world cup year. Here is what we found out.

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To think that Nigeria missed out on the 2006 World Cup.

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Coronavirus

COVID-19 Update in Nigeria

On the 5th of June 2020, 328 new confirmed cases and 10 deaths were recorded in Nigeria bringing the total confirmed cases recorded in the country to 11,844.

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COVID-19: FCMB reschedule operations

The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to rise as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 11,844 confirmed cases.

On the 5th of June 2020, 328 new confirmed cases and 10 deaths were recorded in Nigeria.

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To date, 11844 cases have been confirmed, 3696 cases have been discharged and 333 deaths have been recorded in 35 states and the Federal Capital Territory having carried out 73,064 tests.

COVID-19 Case Updates- 5th June 2020

  • Total Number of Cases – 11,844
  • Total Number Discharged – 3,696
  • Total Deaths – 333
  • Total Tests Carried out – 73,064

The 328 new cases were reported from 14 states- Lagos (121), FCT (70), Bauchi (25), Rivers (18), Oyo (16), Kaduna (15), Gombe (14), Edo (13), Ogun (13), Jigawa (8), Enugu (6), Kano (5), Osun (2), Ondo (2).

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

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The latest numbers bring Lagos state total confirmed cases to 5663, followed by Kano (985), Abuja at 862, Katsina (385), Edo (364), Kaduna (335), Oyo (334), Ogun (329), Borno (322), Rivers (308), Jigawa (282),  Bauchi (281),  Gombe (184), Kwara (127).

Delta State has recorded 116  cases, Sokoto (115), Plateau (113), Nasarawa (90), Ebonyi (80), Zamfara (76),  Yobe (52), Osun (49), Imo (47), Akwa Ibom (45), Adamawa (42), Niger (41), Ondo (38),  Kebbi  (33), Bayelsa and Enugu (30), Ekiti (25), Taraba (18), Abia (15), Benue (13), Anambra (12), while Kogi state has recorded only 3 cases.

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, President Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

 

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READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

Patricia
DateConfirmed caseNew casesTotal deathsNew deathsTotal recoveryActive casesCritical cases
June 5, 20201184432833310369678157
June 4, 2020115163503238353576467
June 3, 2020111663483151332975227
June 2, 20201081924131415323972667
June 1, 20201057841629912312271579
May 31, 20201016230728714300768687
May 30, 2020985555327312285667267
May 29, 202093023872612269763447
May 28, 202089151822595259260647
May 27, 202087333892545250159787
May 26, 2020834427624916238557107
May 25, 202080682292337231155247
May 24, 202078393132265226353607
May 23, 202075262652210217451317
May 22, 2020726124522110200750337
May 21, 2020701633921111190748987
May 20, 202066772842008184046377
May 19, 202064012261921173444757
May 18, 202061752161919164443407
May 17, 202059593881826159441837
May 16, 202056211761765147239737
May 15, 202054452881713132039544
May 14, 202051621931683118038154
May 13, 202049711841646107037374
May 12, 20204787146158695936704
May 11, 202046412421521090235894
May 10, 202043992481421777834794
May 9, 202041512391271174532784
May 8, 202039123861181067931154
May 7, 20203526381108460128184
May 6, 20203145195104553425071
May 5, 2020295014899548123704
May 4, 2020280224594641722912
May 3, 2020255817088240020702
May 2, 20202388220861735119522
May 1, 20202170238691035117512
April 30, 2020193220459731715562
April 29, 2020172819652730713692
April 28, 2020153219545425512322
April 27, 20201337644102559942
April 26, 20201273914152399942
April 25, 20201182873632229252
April 24, 202010951143312088552
April 23, 20209811083231977532
April 22, 2020873912931976482
April 21, 20207821172631975602
April 20, 2020665382311884662
April 19, 2020627862221704362
April 18, 2020541482021663562
April 17, 2020493511841593172
April 16, 2020442351311522772
April 15, 2020407341211282672
April 14, 202037330111992632
April 13, 202034320100912422
April 12, 20203235100852282
April 11, 202031813103702382
April 10, 20203051770582402
April 9, 20202881471512302
April 8, 20202742260442262
April 7, 20202541661442042
April 6, 2020238650351982
April 5, 20202321851331942
April 4, 2020214540251850
April 3, 20202092542251800
April 2, 20201841020201620
April 1, 2020174352091630
March 31, 202013982091280
March 30, 2020131202181210
March 29, 2020111221031070
March 28, 20208919103850
March 27, 2020705103660
March 26, 20206514102620
March 25, 2020517102480
March 24, 2020444102410
March 23, 20204010112370
March 22, 2020308002280
March 21, 20202210001210
March 20, 2020124001110
March 19, 20208000170
March 18, 20208500170
March 17, 20203100030
March 16, 20202000020
March 15, 20202000020
March 14, 20202000020
March 13, 20202000020
March 12, 20202000020
March 11, 20202000020
March 10, 20202000020
March 9, 20202100020
March 8, 20201000010
March 7, 20201000010
March 6, 20201000010
March 5, 20201000010
March 4, 20201000010
March 3, 20201000010
March 2, 20201000010
March 1, 20201000010
February 29, 20201000010
February 28, 20201100010

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Companies

CBN debits banks another N459.7 billion for failure to meet CRR target

Sadly, this move, in addition to similar policies by the CBN, has left many banks cash-strapped and unable to pursue various profitable ventures.

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CBN

The Central Bank of Nigeria (CBN) has debited twenty-six banks, including merchant banks, to the tune of N459.7 billion for failure to meet their CRR (Cash Reserve Ratio) obligations. The fresh debit, which Nairametrics reliably gathered occurred yesterday, has left many stakeholders in the banking sector very upset.

The details: Among the banks that were most affected are United Bank for Africa Plc (N82.3 billion), First Bank of Nigeria Ltd (N59.3), Zenith Bank Plc (N50 billion), First City Monument Bank (FCMB) Limited (N45 billion), and Guaranty Trust Bank Plc (N40 billion). The rest of the affected banks can be seen in the table below.

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Note that the latest CRR debits are coming barely one month after a lot of banks were collectively debited to the tune of N1.4 trillion for the same reason in April. Between then and now, a lot of other minor CRR debits have occurred. Nairametrics understands that the apex bank now debits banks on a weekly basis.

Some backstory: During the CBN’s Monetary Policy Committee (MPC) meeting that was held last month, committee members voted to retain CRR rate at 27.5%. The rate was increased in January this year from 5% to its current level after the apex bank cited inflationary pressure concerns. What this means, therefore, is that Nigerian banks are required to keep 27.5% of their deposits as CRR with the Central Bank of Nigeria.

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But banks are silently upset: Sadly, this move, in addition to similar policies by the CBN, has left many banks cash-strapped and unable to pursue various profitable ventures. While reacting to the latest development, a banker who refused to be identified, said:

“What we’ve seen in recent times is that the CBN just indiscriminately debits banks, usually towards the stale-end of every week. They will look at your bank account and if your liquidity is plenty, they will debit you.

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“You know the central bank also does what we call retail FX intervention, that is when they sell FX to corporates. Now, because they don’t want banks coming with huge demands, what they do is that a day before the FX sales, they debit the banks so that the naira you have available is small and you cannot put them under pressure because of your FX demands. That has really been the driver.

READ ALSO: Central banks digital currencies pose a threat against the U.S dollar

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“We understand that the central bank had set up a special CRR team that is supposed to monitor banks’ CRR once a month. But now, the team monitors banks’ CRR on a weekly basis. This is why the central bank is effectively debiting banks on a weekly basis. Some weeks ago, they debited some banks about N1.4 trillion. That was one of many. Between that time and now, there have been more debits that have happened. But the debits that are huge/significant are what is troubling the banks. There was a N300 billion that happened about two weeks ago. and then yesterday that was this N459.7 billion that was also debited.

Patricia

“These are huge amounts that are leaving the banking sector. It’s a squeeze on the banks. A bank like First Bank, for instance, has about N1.4 trillion in CRR with the Central Bank. And there is Zenith Bank with equally as much as N1.5 trillion. These are monies that banks can potentially put in loans at 52% at 30%, or even put in money market instruments at maybe 10%. So, for a shareholder of these banks, this CRR debits are impairing the banks’ ability to increase their earnings because now are not able to use the funds that are legitimately theirs to create money for their shareholders. And the question is that under what framework is the Central Bank choosing to take people’s money?”

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Business News

Precious metals slump, investors focus on Central Bank’s intervention

Gold fell on Friday morning to $1,717.10. as global investors await the release of Friday’s U.S non-farm payrolls data for May

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Nigeria Mining Sector shows growth prospect despite low bank credit provision, Gold hits eight-year high as global recession sentiments strengthened, Gold hits three weeks high, Investors rush to gold, Gold Future Drops to $1727.80 as Tensions Escalate between America and China, Precious metals slump, investors focus on Central Bank’s intervention

Spot gold went slightly lower, trading at $1,711.57 per ounce by 4 am local time on Friday morning and gold futures was down to $1,717.10.

Gold collapsed like a house of cards as investors overlooked civil unrest in the United States and heavily focused on hopes around central bank intervention and economic recovery,” said Lukman Otunuga, senior research analyst at FXTM.

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READ MORE: Why the NNPC wants $5 billion advance payments for Nigeria’s crude

Gold fall on Friday morning also came as global investors await the release of Friday’s U.S (United States.) non-farm payrolls data for May, scheduled to be released at 1.30 pm Nigerian local time.

“There are quite a few market participants still bargain-hunting gold given the fundamental backdrop of the coronavirus crisis and ongoing recession,” Julius Baer analyst Carsten Menke said.

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(READ MORE: Gold prices surge by 17.4% in 2 months due to global economic crisis)

However, investors are still waiting to see whether the easing of restrictions will lead to a second wave of infections, supporting demand for gold, Menke added.

Gold, Gold prices tick up as President Trump decides on China today, Gold Prices Surges, Protests Erupts In America, Precious metals slump, investors focus on Central Bank’s intervention

What you need to know about Precious metals: Precious metals include gold, silver, and platinum. Gold and silver are the most popular metals, and have been used by jewelers, and as wealth status symbols since ancient times. Global investors use precious metals to hedge against inflation.

READ ALSO: Global oil market to re-balance in 2 months’ time

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Meanwhile, palladium gained 0.34% to $1,947 an ounce, while platinum lost 0.31% to $833.91. Silver was down 0.63% to $17.9 4am local time, having hit a more than three-month high of $18.36 on Monday. 

Patricia

“Some people are buying silver just because it’s much cheaper than gold (or) platinum,” a trader from Tokyo-based retailer Tokuriki Honten said.

 

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