Capital Moves by Oluwatosin Olaseinde

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CBN

Welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.

Green White Green Last Week 

It was a reversal of fortunes, as the ‌All-Share‌ ‌Index‌ ‌declined‌ ‌by‌ ‌1.30%,‌ ‌closing‌ ‌at‌ ‌38,648.91‌ ‌basis‌ ‌points.‌ ‌The index measures the average performance of stocks. Some stocks will do better or outperform the index. Some stocks will do worse or underperform the index.

Berger Paints 

Berger‌ ‌Paints‌ ‌was‌ ‌the‌ ‌best‌ ‌performing‌ ‌stock‌ ‌last ‌week,‌ ‌gaining‌ ‌14.93%.‌ ‌The‌ ‌stock‌ ‌opened‌ ‌at‌ ‌₦6.70‌ ‌and‌ ‌closed‌ ‌at‌ ‌₦7.70,‌ ‌up‌ by ‌₦1.‌ ‌

UACN

UACN‌ ‌was‌ ‌the‌ ‌worst performing‌ ‌stock‌ ‌last week.‌ ‌It‌ ‌declined‌ ‌by‌ ‌11.01%,‌ ‌opening‌ ‌at‌ ‌₦10.90‌ ‌and‌ ‌closing‌ ‌at‌ ‌₦9.70,‌ ‌down‌ by ‌₦1.20.‌ ‌ ‌

Mutual Benefit Assurance

Mutual Benefits Assurance released its audited FY 2020 earnings and Q1 2021 earnings.

For FY 2020, there was a marginal increase in gross premium written and a more robust increase in the bottom line.

Gross premium written increased by 7% year-on-year from ₦18.6 billion in 2019 to ₦19.9 billion in 2020.

Underwriting profit fell by 32% from ₦5.3 billion in 2019 to ₦3.6 billion in 2020. Underwriting profit is the difference between the premiums earned as an insurance firm and the claims it paid out. The drop in underwriting profit was due to a sharp increase in net benefit and claims.

Profit before tax rose by 34% from ₦3.7 billion in 2019 to ₦5 billion in 2020. Profit after tax increased by 41% from ₦3.6 billion in 2019 to ₦5.1 billion in 2020. The jump was due to net fair value gains.

In Q1 2021, the firm made a ₦1.9 billion loss after tax. This was due to a ₦4.7 billion loss on net fair value loss on assets at fair value through profit and loss.

Fair value through profit or loss means that at each balance sheet date, the asset or liability is re-measured to fair value and any movement in that fair value (positive or negative) is taken directly to the income statement.

Capital Moves 

Capital Hotels Plc (owners of Sheraton Abuja) intends to sell a 51% stake in the company to 11 Plc at ₦7 per share. 11 Plc is the company formerly known as Mobil Oil Nigeria. The move, however, is subject to shareholder and regulatory approval.

One of the conditions is that Hans Gremlin (which holds 51% of Capital Hotels shares) be allowed to sell off 50% of its holding at the same price. Hans Gremlin is majorly owned by Ikeja Hotels (owners of Sheraton Ikeja).

Capital Hotels closed flat at ₦2.4 on Friday, and so the deal would close at nearly 300% above its current market price as at the time of its announcement. Shareholders are advised to deal cautiously when a company is in the middle of a transaction like this.

Guaranty Trust Bank 

Trading in the shares of Guaranty Trust Bank Plc (the bank) was suspended on Friday, June 18, 2021.

The suspension is necessary to prevent trading in the shares of the bank in preparation for the eventual delisting of Guaranty Trust Bank Plc from the Daily Official List of the Nigerian Exchange Limited (NGX) and listing of the Holding Company, Guaranty Trust Holding Company Plc.

The holding company structure will enable GTBank to offer other financial services aside from banking.

Green White Green This Week 

Nestle Nigeria, Computer Warehouse Group, NEM Insurance, Skyway Aviation Handling Company, CHAMS, BOC Gases and Notore Chemical Industries will be having their Annual General Meetings (AGMs) during the week.

AGMs take place after a company has released its financial statement for the preceding year. Shareholders quiz management on the performance and plans for the new year. If a dividend is proposed, they will approve the payment. They also have the right to reject the amount, although this rarely happens.

Presco

Presco Plc will be holding an emergency meeting on Thursday, June 24, 2021. It will table a proposal at the company’s next AGM to authorise the firm to acquire all the shares of a private company in the same line of business.

Star-Spangled Banner Last Week

Last week was a negative one for stocks, following comments by Jerome Powell after the US Federal Open Market Committee (FOMC)  meeting. Powell is the Governor of the US Fed (its central bank).

The three major indices dropped. The  Dow fell by 3.45%. The S&P 500 fell by 1.92%. The Nasdaq composite index took the least hit. It fell by 0.28%.

The FOMC sets the interest rate, as well as monetary policy decisions. Monetary policy refers to the actions undertaken by a central bank to influence the availability and cost of money and credit to help promote national economic goals.

Powell had indicated that there would be two interest rate hikes in 2022. Earlier comments by him had indicated that this would happen in 2023. Higher interest rates would lead to a switch in investor interest from stocks to the fixed income space.

Star-Spangled Banner This Week 

Firms from different sectors will be releasing their earnings this week. The most prominent of them being Nike and FedEx. Other companies releasing their earnings include CarMax (used car retailer), Blackberry, and Winnebago industries.

Stocks

This week may also be a rocky one for stocks as Powell is scheduled to appear before the US congress this week. If he shares more information about a hike in the interest rate, stocks are most likely going to dip.

Tech stock may have a rocky session this week as the US House panel will be voting on a set of antitrust bills. Antitrust laws refer to legislation that aims to promote competition in business, break up monopolies, and reduce collusion.

Tech Giants

There is the impression that tech giants such as Apple, Microsoft, Amazon, Google and Facebook have an unfair advantage compared to smaller players, some of whom they offer their services to while competing against them.

 

Culled from My Money Series

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