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Breakfast Report - 4 June, 2018

The Federal Government is scheduled to begin implementation of the new excise duties for Alcohol and Tobacco from today, June 4. We recall that earlier in March, President Buhari assented to an increase in excise duties for Tobacco, Beer, Wine, and Spirits and permitted a grace period of ninety days for implementation. The upward review of the rates was done in line with new ECOWAS standards and are expected to boost FG revenue and discourage the abuse of Tobacco and Alcohol. Whilst we expect the increase in duty to lead to a price hike and also moderate demand, the Minister of Finance has stated that implementation will be spread over a three-year period from 2018 to 2020 in order to reduce the impact on the sector.                                                                       

Equity: The Nigerian Stock Exchange was at the mercy of the bears yet again even as the ASI closed both Friday (-338bps) – the steepest d/d loss since December 2016 - and last week (-638bps) in the red. It was also the eleventh straight session of declines and fifth consecutive w/w decline. We highlight that all sectors closed red for last week. With no signs of losses abating, we believe negative sentiment will filter into the market today.                                                                                                                                                              

Stock Watch: Amidst the broad market onslaught, DANGCEM recorded its worst session since March 2017 on Friday, shedding 708bps on the day. The cement giant was one of the top losers for last week, down 861bps w/w and currently trades at a ytd low of ₦223.00 (Vetiva target price: ₦289.45). The stock has lost 3% ytd, a fairer performance compared to a 10% ytd loss for the Industrial Goods sector index.

Fixed Income: Amidst relatively healthy system liquidity, we expect underlying mixed sentiment (with a slightly positive tilt) to persist today.