NGSE Looks To Low Valuation, High Yields, Robust Q2 Earnings For Turnaround

Market Update for July 16, 2018

It was another tough trading session Monday on the Nigerian Stock Exchange (NSE) as the All-Share index again closed negative on a higher volume traded, when compared to previous day’s, reversing the gain recorded, the first after three sessions of back-to-back losses.
The day started out with a little gap down in the morning which extended into mid-morning till midday on a pullback, touching intraday lows of 37,215.81 basis points from the highs of 37,392.77bps, before retracing up marginally by afternoon to close the session at 37,266.86bps in a 4-wave decline.
The Q2 earnings season kicked off effectively during the trading session, with Transcorp releasing an impressive half-year result with three-digit growth, beating market expectation (READ HERE). Surprisingly however, the market reacted immediately as its share price, unlike in the past, touched intraday high of N1.35, before closing down at N1.26 which was above its N1.23 opening price. This performance is a good way to jumpstart the earnings reporting season. Nevertheless, Investdata would add that this number is peculiar to Transcorp’s sector as a utility company.
For now, let us look forward to more results from different sectors of the economy to give the true position of not just the companies, but the larger economic performance so far in the year. The market also expects the June inflation report today ahead of next week’s meeting of the Monetary Policy Committee (MPC). It is the combination of all of these data and despite the unfolding events in the political arena that will give immediate insights into whether the market will continue the down trend or not.
We have noticed divergence between the index performance and MACD which will likely be corrected, depending on market forces as more company scorecards are made available to the market today after the opening bell to change the negative sentiment that have befallen the market.
Monday’s market technicals were negative and mixed with high traded volume in the midst of negative market breadth and sentiments, as revealed by Investdata’s Daily Sentiment Report showing a ‘sell’ pressure of 71%, while ‘buy’ position for the day was 29%. Volume index was 0.93 of the day’s total transactions.
The momentum behind the day’s market performance was weak also as reflected in the money flow index at 31.97points, down from the previous day’s 38.50 points, an indication that funds have continued to exit the market, even when liquidity has remained low long before now, due to the exit of hot money.

Index and Market Cap
The week started down with the All share index shedding 125.91bps, at 37,266.86bps, after opening at 37,392.77bps, representing a 0.34% decline, just as market capitalization, shed N45.61bn, closing at N13.49tr, from an opening value of N13.55tr, also representing 0.34% value loss to almost wipe away the gain recorded in previous session.
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Monday’s downturn was impacted by price depreciation in all class of stocks like Guaranty Trust Bank Zenith Bank, Forte Oil, UBN, Access Bank, PZ, Oando, Guinness, and Japaul Oil, impacting negatively on the NSE’s Year-to-Date return now at a negative 2.55%. Market capitalisation has within the period lost N109.53bn, same as 0.80% below the year’s opening value.

Bearish Sector Performance
It was a bloody session for sectorial indexes as all closed lower except for the NSE AseM that was flat due to unchanged prices of stocks in that index.
Market breadth was negative as decliners outweighed advancers in the ratio of 34:8, halting Friday’s up market.
Market activities were mixed with volume up by 42.56% at 303.48m shares from previous day’s 212.88m units, while value slipped by 36.96% to N2.04bn from N3.24bn. The day’s volume was boosted by trading in financial services, conglomerates and air services provider stocks like Medview Airline, FBNH, Transcorp, Multiverse and Zenith Bank that witnessed increased trading to top the activity chart.
Nahco and Sovereign Trust Insurance were the best performing stocks, topping the advancers’ table after chalking 9.97% and 8.70% respectively to close at N4.08 and N0.25 each, due to new entrance of a major shareholders, earnings expectation and low price.
On the flip side, Multitrex and Learn Africa were the worst performing, losing 10% each to close at N0.36 and N1.26 on market forces and profit taking after price adjustment.

Market Outlook
We expect reverse sentiment that will impact index positively since Q2 earnings season kicked off yesterday considering undervalued state of equities and high yields. Investors should review their position in line with their investment goals and act as events unfolds in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value, especially during this season were Q2 interim dividend payment are expected in the market arena very soon.
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.

The Date: Investdata Stock Market Training Workshop

On Saturday, July 28, 2018, Venue Ostra Hall & Hotel Alausa Ikeja Opposite NNPC Gas Plant

Theme: Comprehensive Stock Trading & Investing Toolkit for Rest of 2018

Sub Topics

Review of 2018H1 Market & Economic Performance: How Fiscal Reforms and Stimulus Will Support the Market/Economy in 2018H2.
In this presentation, the speaker will discuss how historically the Fiscal and Monetary policies have influenced Nigeria’s stock market, the implications for the second half and it would drive equity prices higher as recovery continues, impact of the new NSE market Structure.

2018H2 Trading Checklist: How to Find Winning Stocks in Nigeria’s Volatile Equity Market
After the prolonged correction, volatility is here to stay for the rest of 2018. Is it time to start worrying about losses suffered so far, a flattening yield curve or time to relax due to the outstanding earnings season? Better yet, is there a way to harness increased volatility to your advantage? Our facilitator, a stock market expert will show you how to handle increased volatility in 2018. He’ll offer insights into forces impacting today’s market. He will share, using real-time examples, his ultimate checklist to finding winning stocks propelled by volatility. This simple strategy allows you to quickly evaluate stocks and to better time entry and exit points, while understanding market forces moving your portfolio.

How To Generate Consistent Superior Equity Returns and Income With Dividend Stocks
Here, the expert will discuss his approach to generating equity income by investing in undervalued dividend stocks, what he looks out for when trading dividend stocks at a discount to historical valuations on multiples of price to sales, earnings, cash flow, book value, and enterprise value to EBITDA. In addition, he requires companies to have positive operating cash flow over the past 12 months, with dividends covered comfortably by cash flow.

Powerful Patterns and Effective Strategies for Trading Shifts in Market Volatility
Recent and ongoing changes in market volatility present both risks and opportunities for discerning traders. Learn some of the most effective strategies for taking advantage of the high-probability trading opportunities available in equities, while minimizing risks associated with stock market trading. The six most powerful patterns in the market to trade, how to know which patterns and strategies to specialize in for consistent results and the critical difference between oscillating and momentum patterns.

Kindly call or send yes to 08032055467, 08028164086 or 08111811223.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08032055467