The Market Today - 17 January 2019

FO seeks approval to divest power business to Chairman                                    

Forte Oil has announced an Extra-ordinary General Meeting for February 7 to approve or reject the divestment of its stake in power generating outfit, Amperion Power Distribution Company limited, to current majority shareholder, Mr. Femi Otedola CON. We recall that the Group had earlier obtained approval to divest this unit as well as its Upstream Servicing business and Ghanaian subsidiary in 2018. The cash generated was to be invested in the group’s downstream arm, an area where management sees long-term opportunity. However, management has expressed disappointment in the valuations and financing capabilities of the bidders that have come forward and wish to enter into talks with Mr. Otedola. Mr Otedola, who currently owns 75% (directly and indirectly) of Forte Oil’s assets had in December 2018 stated plans to exit the downstream business and has reached an agreement with Prudent Energy to buy his stake in the business.                                   

Late surge in DANGCEM revives the NSE                                       

Lifted by a late surge in DANGCEM, the Nigerian equity market rose 107bps yesterday. Meanwhile, turnover declined to ₦2.1 billion, below Tuesday’s and the 30-day average figures. Market breadth was positive with 23 advances and 16 declines. Following the persistent bargain hunting observed in the last few sessions and improved investor sentiment, we anticipate a mixed trading session with a positive tilt.                              

Stock Watch: After losing 11% in four sessions in 2019, FIDELITYBK has been on an uptrend, advancing another 11% in the last 3 trading sessions. The stock gained 3% yesterday to settle at ₦2.00 and has lost 1% YTD (Banking: -4%).                                                                          

Higher stop rates at PMA auction                                       

Yesterday, the CBN conducted its bi-weekly PMA auction, offering ₦225 billion and selling c.₦152 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 11.00%, 13.10% and 15.00% respectively (effective yields: 11.21%, 14.02% and 17.64%) – higher than previous auction levels. Notably, whilst the CBN allotted all that was on offer on the 91DTM and 182DTM bills, the apex bank cut off allotment of the 364DTM bill at ₦120 billion, even as subscription levels exceeded ₦200 billion. Amidst this, the Interbank Call rate declined 350bps to settle at 18.17%. With ₦560 billion in OMO maturities and a Net PMA maturity of ₦193 billion hitting the system today, we expect the CBN to conduct an OMO auction – in line with its recent stance. Thus, we foresee a mixed trading session.