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The Market Today - 26 April 2018

High crude oil prices elevate PMS landing cost                                                

As the price of Brent crude price rose to $75/bbl, the open market price of petrol being imported into Nigeria would have risen above ₦190, according to Petroleum Product Pricing Regulatory Agency (PPPRA), Nigeria’s petrol pricing regulator. Despite the landing cost of petrol hovering well above the regulated pump price of ₦145 since the start of the year, the Federal Government has resisted calls to amend the pricing template or deregulate the market, choosing instead to sell petrol to marketers at a discounted rate. With the outlook for oil prices still strong, this situation is likely to persist, and may weigh on Federal Government finances (due to the implicit subsidy being paid). This fragmented structure in the downstream sector will also continue to pose a threat to petrol supply stability through the year.                

Industrials weigh on Nigerian bourse                                                   

The Nigerian Stock Exchange closed in the red yesterday after sizeable declines in the Industrial Goods sector wiped out gains in other key sectors. Even with most key sectors closing in the green, market shed points on the back of a huge dip in DANGCEM mid-session, despite a failed effort to bounce back towards session close. Thus, we foresee another mixed session today in line with the current market trend even as investor sentiment remains visibly varied.

Stock Watch: ACCESS released its Q1’18 results yesterday, reporting Revenue of ₦138 billion (+19% y/y), 12% above our forecast and PAT of ₦22 billion (-1% y/y), 30% above our forecast of ₦17 billion. The stock currently trades at a price of ₦11.35 and has returned 9% ytd.                                                             

Yields moderate amidst Bond PMA over sale                                                    

The DMO, at yesterday’s bond auction, sold ₦140 billion (offer: ₦90 billion) across the 5-year, 7-year and 10-year tenors at stop rates of 12.75%, 12.85% and 12.89% (Previous: 13.40%, 13.53% and 13.60) respectively.  Amidst the auction, sentiment in the bond market was mixed with sell pressure heavy on the short end of the curve while some buying was observed on the long end of the curve. The T-bills market remained mixed with a negative tilt as yields advanced 8bps on average with light buys observed across the curve. In line with recent trend, we foresee the CBN conducting an OMO auction today to mop-up the expected liquidity inflow of ₦227 billion. Nonetheless, we believe the fixed income space remains a buy market and expect lower yields recorded at the monthly bond auction to drive further upbeat sentiment across the space.