FREE

The Market Today - 21 March 2018

Consumer Goods sector worst performing sector YTD                                                   

The Consumer Goods sector is currently the only major sector on the NSE in negative territory year to date (ytd), down 31bps. In line with the trend observed in the broader market, strong earnings releases so far from the sector has been met with downbeat sentiment from investors, as market participants take profit on earlier gains while others are strategically selling to the strength of the market. Particularly, we highlight sell pressure on brewing giant Nigerian Breweries (NB) - the weightiest stock in the sector – which has declined 6% ytd, underperforming the sector. Sentiment on the stock has been particularly weighed by a more bearish outlook for the brewery sector amidst struggling consumer demand and expected adverse effects of recent increase in excise duties on alcohol. On the contrary, UNILEVER has been a glimmer of hope for the sector, up 36% ytd and is one of the best performing stocks in the sector. Coming off the slump in the sector in 2016, investor confidence remains shaky and is making a gradual recovery. As stated in our 2018 Outlook Report; Acta Non Verba, we believe stable macros and healthy corporate performances will support sustained recuperation of investor sentiment in the Consumer Goods sector in 2018 and believe the sector will deliver a positive return in the year.                                                      

Bears maintain grip on Stock Exchange                                                 

Red closes across all key sectors but Consumer Goods pulled the NSE ASI 35bps lower. Sentiment remained notably bearish with sell pressure strengthening across most sectors in yesterday’s session. Thus, we expect market to trade with a bearish pattern, however, we foresee investors coming in to cautiously buy banking stocks at the currently attractive levels.                                                              

Stock Watch: DANGCEM released its FY’17 results, reporting top and bottom line of ₦806 billion (+31% y/y) and ₦204 billion (+43% y/y), in line with and 19% behind our estimates respectively. The company announced a total dividend of ₦10.50/share (Vetiva: ₦11.08, FY’16: ₦8.23). The stock currently trades at ₦265.00 and has returned 15% ytd.                                                    

Sticky bond yields ahead of March auction                                                         

In the absence of any CBN liquidity mop up, Interbank Call rate advanced 750bps to 30.00% yesterday. With system liquidity still constrained, sentiment was mixed across T-bills as yields moved in opposite directions. Trading was flat in the bond market as yields on benchmark bonds were largely unchanged.  Tight liquidity would continue to cap buying activities in the T-bills space while we foresee cautious trading on bonds amid today’s bond auction. The DMO would be offering ₦70 billion across the 5-yr, 7-yr (new issue) and 10-yr bonds.