Beverages, manufacturing dictate stock market pace

Michiel Herkermij, MD, NB Plc

As the Nigerian Stock Exchange (NSE) continues on the bullish territory, Business Hallmark analysis has shown that activities in the market have so far been sustained largely by equities quoted on the food, beverages and other manufacturing sectors of the NSE.

Since this year, there has been a general consensus among financial analysts that the hazy atmosphere which persisted in the stock market last year is gradually fading away.The NSE All-Share Index has grown by 14.4% or 3007.13 basis points to 23,846.03 basis points as at Thursday, February 4, 2010, compared with the 20,838.90 basis points it opened the year on January 4, 2010 while the NSE market capitalisation has also recorded a year-to-date advancement of 15% or N751 billion as it closed at N5.743 trillion last Thursday, up from the N4.992 trillion it opened the year.
Most market operators who spoke with Business Hallmark were upbeat, especially with the relatively cheap prices of equities in the food, beverages, construction, health care and other manufacturing sectors, even as they urged the Federal Government to churn out policies that would boost the health of the country's macro economic indicators.
Despite the fact that no one knows which way the economy is headed as a result of the current impasse in the political circle, stock market operators are bullish as they have continued to argue that stocks with sound fundamentals would always shine under any circumstances. They added that because of the effective demand for their products and the little risk attached to it, equities from the real sector would always be outstanding in the stock market.  The Nigerian manufacturing sector continues to suffer as a result of dwindling amount of value added to the nation's Gross Domestic, poor level of infrastructure, inconsistent government policies, inadequate funding among others. The reform in the banking sector last year, further weakened the sector as banks, which are still battling to recover huge debts, placed embargo on lending thereby denying industries the opportunity to advance.
Nevertheless, Business Hallmark highlights some equities whose performance on the NSE has continued to dictate the performance of the stock market since this year.
Ashaka Cement
This cement manufacturing company has advanced this year by 32% to N15.01 per share as at last Thursday, up from the N11.39 per share it resumed the year. Ashaka Cement earnings performance this year stands to benefit more from a lot of construction work going on across the country. It suffered some decline in its earnings as disclosed by its unaudited result for the third quarter ended 30th September 2009. Its turnover fell to N12.706 billion, as against N15.272 billion in the comparable period of 2008. Its profit after tax also dropped to N1.189 billion compared with N2.121 billion in 2008.Ashaka Cement which traded below N10 per share until 8th of May last year when it hit N10.08 per share, had peaked at N84.89 per share on 22nd of May, 2007.
Nigerian Breweries
Still riding on the back of a N1.50 per share dividend declared to its shareholders recently, this industry bell-weather has recorded a year-to-date appreciation of 13% as it closed at N60 per share last Thursday, as against the N53 per share it opened the year. The last time it climbed to N60 per share was on 25th of September last year. Considering its huge capitalisation of N453.754 billion as at last Thursday, further rise in Nigerian Breweries share price may positively influence the total market capitalisation as it is currently placed second, behind First Bank of Nigeria on the capitalisation ranking.
Nigerian Bottling Company
This market leader in the non-achoholic beverages market has grown by 27% in the past 25 trading sessions this year as it closed at N28.50 per share, compared with the N22.49 per share it opened the year. Although NBC may be facing some challenges in the local economy due to the harsh business climate, the image of its products has continued to soar in the international market. Its involvement in the forthcoming soccer world cup in South Africa in the middle of the year would further boost its image. The Company recently projected a turnover of N1.442 billion and a profit after tax of N981 million for the first quarter ending March 31, 2010. NBC got to its zenith at N70 per share on 7th March, 2008.
Nestle
The food and beverages giant has maintained a healthy dividend and an expansive international business. Recession or not, Nestle Nigeria's products are always in demand. It has recorded a 13% upswing to N270 per share as at Thursday, as against the N239.50 per share it stood on January 4th, 2010. Currently placed eight on the total market capitalisation of the NSE, Nestle has a way of wielding its self on the direction of the stock market.
Fidson Healthcare
Despite the fact the some healthcare stocks have plenty of question marks surrounding them as they have not been too fantastic in the past; Fidson Healthcare Plc which has not enjoyed so much preference from investors has continued to walk on the bullish region this year. This healthcare stock has so far grown by 23% to N2.29 per share as at last Thursday, over the N1.86 per share it stood on the first trading session this year.  Its audited result for the year ended 30th June 2009 made public recently reflected a rise in turnover by 12% to N5.020 billion as against the N4.504billion realised in 2008. Its profit after tax stood at N429.1 million compared with N189.3 million in 2008. Business Hallmark anticipates further upswing in Fidson's share price as we look further to more product development and research from the Company following the increasing health concern and awareness in the country.
Operators' opinion
To the Group Managing Director, Profund Securities Limited, Mr. Kayode Akin-Ajayi, the Food , Beverages and other manufacturing sectors on the NSE  portends very little risk in terms of demand by virtue of the fact that their products are always in demand.
According to him, “The food and beverages sub-sector is one that in terms of downturn or upturn remains an investor's delight, relative to other sectors of the economy, particularly to the Insurance sub-sector and other sub-sector that are doing relatively poor. You would also see stocks like Seven-Up, Nestle Nigeria Plc, Flour Mill Nigeria Plc, Dangote Sugar Refinery Plc and even Cadbury Nigeria Plc, all of them are doing very well, compared with other sub-sectors.
“In terms of diminution, the value of stocks in this sector did not go down as much as the value of stocks in other sector. And they are posting very good results and some of them have paid out good dividends.”
But the Managing Director, Compass Securities Limited, Mr. Emeka Madubuike believes that one of the things pushing the market is the fact that it is the beginning of the year, adding that this is the time of the year when investors take position, especially because a lot of people didn't invest in most of last year.
Madubuike explained, “ So the expectations are that all things been equal, the market is going to do better this year giving the fact that the banking reform has been done. The effect of that has been fully taken by the market and so we see a turnaround.I also think because most of last year, investment shifted from the capital market to the money market, as it normally does when the capital market is down. So I think that people are beginning to see that the returns in the capital market are better and the investments are gradually flowing back.”
On his part, the Managing Director, First Registrar, Mr Bayo Olugbemi stressed the fact that the manufacturing stocks would always remain bullish due to the inelastic demand for their products.
“People would also demand for household products from Companies like Unilever, Nestle, Cadbury and you would discover that a lot of investors are now looking towards those sectors because their products are always in demand. Of course, building and construction projects are still going on, even though there may be some slow down on it. But then, investors believe that no matter what, their stocks won't perform as bad as the banks stocks,” Olugbemi added.