The market closed the second trading week of the year on a positive note with the All-Share Index gaining 2.63% bringing the YTD returns to 2.25%. Except for the “growth index”, all the major indexes also posted positive gains last week.
Interesting to note that the Insurance Index, Oil, and Gas Index are already up double digits YTD barely just two weeks into the year. Investors seem to have picked up from where they stopped last year and just like we had mentioned in last week’s newsletter, the stock market will be driven by several factors.
Nairametrics identified three external factors such as Naira Devaluation, Oil prices, and CBN Monetary Policies as major factors that will affect the stock market in 2021. In addition, internal factors such as company results and the need to raise capital, and other driving forces. The performance of stocks last week is perhaps an inkling of what is to come in the coming weeks and months.
A week of Deals
During the week, investors got a taste of what is to come following the announcement of several deals that drove the index northwards. The first was Champion Breweries which gained 10% after it was revealed that Raysun Nigeria Limited purchased 1,903,609,538 ordinary shares on 7 January 2021 on the floor of the Nigerian Stock Exchange, at a price of N2.60 per share.
Another major announcement received was Ardova Plc (formerly Forte Oil) announcing that it had reached a deal to acquire downstream player Enyo. The third major deal announced during the week was an agreement reached between Heirs Holdings and Shell to acquire OML 17 from the latter. These were all positive news for the market as evidenced in the 2.25% gain recorded at the end of the week.
We received messages during the week explaining that we comment on some of these deals and any potential for any of the stocks being included as a stock pick in SSN. It is early days, and we are typically skeptical of jumping into stocks soon after a deal has been announced.
Let’s have a look at some of the deals
This is one stock we have covered in detail on Nairametrics, firstly because we own the stock and secondly because it ranks as one of our greatest loss of value in any stock in over a decade.
The losses incurred in that stock is a reminder to never to buy any stock based on inertia or fear of missing out.
That is also why we still own it and refused to average down when it fell below N1 from when I bought it as N7 per share. Yes, this stock was bought at N7.48 per share sometime in 2014 and it has only slid on since then.
The reason why the stock was purchased back then is still the reason why it is now appreciating. Champion Breweries has a majority shareholder named Raysun a Special Purpose Vehicle owned by Heineken (the majority shareholders of Nigeria Breweries) and used to own a stake in Champions Breweries.
In late 2014, after Nigeria Breweries acquired its then subsidiary, Consolidated Breweries, the next plausible move was Champion Breweries. This pumped up the stock to as high as N14 per share before it came tumbling down to as low as 69 kobo per share just last year.
So, is it different this year?
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