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The Market Today - 20 September 2018

Coca-Cola planning to increase stake in Chi Ltd                                                

According to Peter Njonjo, President of Coca-Cola’s West African business, the soda giant plans to increase its stake in Chi Limited, makers of Chivita and Hollandia, by Q1’19. We recall that the company acquired a 40% stake in Chi Ltd a couple of years ago, with the intent to increase its holding further down the line. The move is in line with the Group’s strategic plan to expand its portfolio beyond traditional carbonated soda. The group is also looking beyond the ready-to-drink space, recently announcing plans to acquire British coffee giant, Costa coffee and reportedly bidding for GSK’s Horlicks, with the intent of exploring the instant beverage market in emerging markets, including Nigeria. Given the level of competition in the Nigerian beverage industry, Coca-Cola intends to compete on pricing and scale.                                                           

Bourse closes flat after see-saw session                                                              

Following a mixed trading session on the stock exchange, the NSE ASI closed nearly flat (-2bps) amidst varied closes across key sectors. Market breadth remained positive with 25 advances and 13 declines. With the market continuing to fluctuate amidst low market turnover and weak sentiment, we anticipate further mixed trading in today’s session, even as cherry picking by investors offsets tamer selling pressure.                                                         

Stock Watch: Having returned 161% ytd, CCNN is the best performing stock on the NSE. The stock gained 973bps in yesterday’s session to settle at ₦24.80. Though CCNN trades at a premium to our target price, it is currently rated a HOLD in anticipation of a proposed merger.                                                        

Sustained buying activities in the T-bills space                                                 

The CBN conducted a Primary Market Auction yesterday, offering and selling ₦182 billion across the 91DTM, 182DTm and 364DTM bills at stop rates of 11.00%, 12.20% and 13.48% (effective yields: 11.31%, 12.99% and 15.57%). Meanwhile, the Interbank call rate declined 475bps to 4.75%, whilst system liquidity rose to c.₦721 billion following a Paris club payment. Trading remained positive in the T-bills secondary market, with yields moderating 33bps on average. Notably, buy interest was prevalent at the short end of the space, with yields on the 15DTM (declined 241bps to 10.80%) and 8DTM (declined 226bps to 10.60%) bills moderating yesterday. Meanwhile, trading stayed mixed in the bond market, with yields on benchmark bonds moderating a mere 1bp on average. Notably, yields on the 14.50% FGN JUL 2021 declined 14bps to close at 15.50%, whilst the 12.15% FGN JUL 2034 advanced by 6bps to close at 15.45%. Driven by the healthy system liquidity, we expect the CBN to conduct an OMO auction today. That said, we believe demand will remain strong in the T-bills market today but expect mixed trading to persist in the bond market.