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The Market Today - 22 March 2018

New IPO listings could boost market liquidity                                                  

According to the Executive Director and Co-founder of Sahara Group Limited Tonye Cole, the Nigerian energy conglomerate has revived its plans to take on an Initial Public Offering (IPO). The purpose of the IPO according to the founder is to provide capital for the company to achieve its target of increasing its oil production by four-fold to 100,000 bpd. We recall that the company had initially planned to list in 2015 but refrained due to unfavorable market conditions as well as lower crude prices. However, the recent equity market recovery, improving macro-economic conditions, and most importantly stable crude oil prices have revived previously shelved listing plans. Although Mr. Tonye Cole did not provide a timeline or give an indication on the offer size, we highlight that in 2015, the company was looking to sell as much as 25% of its business for $600 million. We note that this is one of two potential listings soon to be done on the NSE, the second one being MTN Nigeria which is scheduled for the second half of 2018. We expect the IPO to further deepen the equity market – providing more investment opportunities as well as market liquidity.                                                           

ASI records six consecutive sessions of losses                                                  

The Nigerian Stock Exchange closed in the red for the sixth consecutive session, with the ASI down 46bps. We expect trading sentiment to remain bearish in today’s session, with negative sentiment further exacerbated by weaker than expected earnings from the banking sector.                                                      

Stock Watch: ACCESS released its FY’17 results, with top and bottom line 5% and 14% behind our estimates respectively. The company announced a final dividend of ₦0.40/share (Total: ₦0.65, FY’16: ₦0.65). The stock currently trades at ₦11.75 and has returned 12% ytd.                                                        

Bond space turns bullish amidst primary market auctions                                                           

aThe Central Bank of Nigeria conducted a Primary Market Auction yesterday, offering and selling c.₦54 billion across the 91DTM, 182 DTM and 364DTM bills at 11.95%, 13.00% and 13.15% respectively (effective yields: 12.32%, 13.90% & 15.13%). Meanwhile at the bond auction, the DMO sold ₦64 billion (Offer: ₦70 billion) across the 5-yr, 7-yr (new issue) and 10-yr tenors at stop rates of 13.40%, 13.53% and 13.60% respectively. Amidst the auction, sentiment in the bond market turned positive with buy pressure weighted across the curve. Trading in the T-bills market was however mixed with yields declining 1bp on average. Whilst stop rates at the bond auction came in lower than the previous auction, we note that the rates are relatively in line with current market levels. Thus, we expect only mild buy pressure in the bond space today. Meanwhile, we believe the ₦259 billion OMO inflow scheduled for today will support overall trading sentiment across the secondary market.