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Breakfast Report - 27th March, 2017

The Minister of Finance – Kemi Adeosun disclosed that a total of ₦992 billion has so far been released to Federal Ministries, Departments and Agencies as capital expenditure for the 2016 budget. This translates to a capital budget disbursement of c.60% compared to 73% in 2015 fiscal year. In our view, we foresee a better capex performance in 2017 fiscal year given cautious optimism on revenue generation. One, average oil price is projected to remain in the neighborhood of $50/barrel over the course of the year, which provides some breathing space when compared to the $44.5/bbl benchmark in the 2017 budget; although increasing shale oil production remains a risk to prices. Also, peace talks between FG and the Niger-Delta militants are expected to continue, consequently keeping disruptions to infrastructure relatively muted compared to 2016.

Further losses across most key sectors at the close of last week dragged the NSE ASI to a w/w loss of 77bps and extending ytd return to -5.18%. The Industrials sector emerged as the top gainer for the week, driven majorly by positive market reaction to WAPCO’s FY’16 release. Meanwhile, other key sectors posted negative w/w. Leading the laggards was the Oil & Gas sector following sell pressure on SEPLAT, FO and OANDO. The Banking and the Consumer Goods sectors also logged respective w/w declines of 208bps and 31bps.

With more earnings expected this week, we foresee mixed trading sessions amidst investor reactions to the numbers. Meanwhile, last Friday’s negative market breadth (-10) and lower closes across most key sectors indicate weak investor sentiment. As such, we believe the NSE ASI would open lower today.

Stock Watch: After eight straight sessions of losses (shedding 11% in the process), ACCESS logged 287bps positive return at week close. The stock currently trades at ₦6.01.

UBA released its FY’16 results with PAT coming in 11% and 4% ahead of Vetiva and consensus estimates respectively. The board of directors also proposed a final dividend of ₦0.55/share, bringing the total dividend to ₦0.75/share (Bloomberg estimate: ₦0.52, FY’15: ₦0.60). The stock currently trades at ₦5.39 and has returned 20% ytd.