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Breakfast Report - 07 August, 2017

The Week Ahead                                                                            

In a bid to boost electricity generation in the country, the Federal Government has completed a 1000km major gas pipelines, with an additional 470km still under construction and a further 1400km set for construction before year end. These pipelines were laid to ensure adequate provision of gas needed for electricity generation to the power sector, following the Nigerian National Petroleum Commission’s strategic plan to deliver 5 billion standard cubic feet of gas per day (scfd) to the domestic market by 2020. Group Managing Director of the commission Maikanti Baru, said that in addition to this, other measures to up domestic gas supply such as the reduction of flared gas volumes have also gained traction. These should help improve power generation in the near term.                                                                              

As earnings flow moderates, the NSE ASI gained 78bps on Friday, stretching gains to the fourth consecutive day. Overall, the market closed last week 152bps higher, lifting ytd gains to 39%.                       

With trading pattern particularly positive at the tail-end of last week amidst healthy demand on several blue chips, we expect bullish sentiment to filter into the start of this week. However, we do not rule out the possibility of profit taking on stocks that have rallied significantly in recent sessions.                                           

Stock Watch: Despite posting better than expected H1’17 results on the previous Friday (PAT up 56% y/y), CCNN lost 10% at the start of last week. Since then, the stock has rallied 18% to trade at ₦9.84 (Consensus TP: ₦6.99), returning 97% ytd.                                                                              

In the fixed income market, we expect demand on T-bills to remain capped by the liquidity squeeze even as the CBN continues regular mop ups. In line with trend in recent weeks, we expect activity in the bond space to remain muted as interest remains low in the space.