The bearish sentiments on the Nigerian Stock Exchange seems to have gripped Total Nigeria Plc, as the stock fell to a 5–year low in Monday’s trading session on the Nigerian Stock Exchange. The stock opened at N140, and closed at N130, down N10 or 7.14%.
Year to date, the stock is down 38.1% and trading at a 52–week, as well as 5–year low.
Bearish sentiments mean a consistent decline in an overall market or individual stock. The term bear is used because bears attack their opponents, by swiping down.
Drivers of the decline
The decline in the stock’s share price may be down to two factors: the performance of the market as a whole, and poor first quarter results by the company.
The broader market
Year to date, the Nigerian Stock Exchange (NSE) is down 9.83%, and is one of the worst performing equity markets on the continent. The oil and gas index has performed poorly and is down 19.44% year to date.
Investors have largely stayed on the sidelines due to the absence of a macroeconomic direction. President Muhammadu Buhari is yet to appoint a cabinet, following his swearing in. Foreign investors that make up nearly half of the market, have also turned their attention towards money market securities.
Company–specific factors
Total’s results for the first quarter ended March 2019 were also poor. Revenue rose marginally by 2%, from N75.6 billion in 2018 to N77.4 billion in 2019. The company incurred a N418 million loss before tax in 2019, as against a N2.6 billion profit before tax in 2018. Total also made a loss after tax of N474 million in 2019, as against a N1.6 billion profit.
The key driver behind the poor results was a spike in finance costs. Net finance costs jumped from N614 million in 2018 to N1.7 billion in 2019, due to an increase in interest rate on overdraft and loans.
Going forward
If the company’s second quarter 2019 results, are negative, the share price could drop further.
