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The Market Today - 27 July 2018

Teleology in final stages of 9mobile takeover                                                   

According to media sources, the takeover process of 9mobile by investment company Teleology Holdings is in its final stages and should be completed soon following an extension of earlier timelines. The Nigerian Communications Commission is reportedly performing due diligence on the deal and is in the final stages of signing off on the transfer of license. Meanwhile, after making an initial non-refundable deposit of $50 million, Teleology has reportedly placed another $301 million for the deal financing in an escrow account with the Afrexim Bank. We note that the company partnered with Safaricom, East Africa’s largest telecoms operator, for this takeover of Nigeria’s fourth largest telco. Given that 9mobile has been adversely hit since the news about its loan default, with market share dropping from 15% as at January 2017 to 10% in June 2018, we believe a Teleology acquisition could be promising in restoring its reach, strengthening infrastructure investment, and regaining subscribers.                                                        

ASI recovers mildly as Consumer Goods provide late boost                                                       

The ASI closed modestly in the green thanks to light rebounds across all key sectors. Despite tepid trading throughout most of the session a late surge in NESTLE boosted the index to a +22bps close. With the release of positive results in the Oil and Gas sector,we foresee improved market sentiment and another marginally positive session today. We will also likely see investors take up deflated blue chips at week close.                                                            

Stock Watch: MOBIL released H1’18 results yesterday reporting a notable jump in revenue (53% y/y) and an even stronger increase in profit (120% y/y). The stock currently trades at N180.00, 8% down from its year high of N216.00 and below our target price of N258.58.                                                 

CBN mops up liquidity; bears dominate                                                               

The Central Bank of Nigeria conducted an OMO auction offering N400 billion and selling N349 across the 91DTM and 210DTM bills at respective stop rates of 11.05% and 12.15% (effective yields: 11.31% and 13.01%) lower than rates at the last auction. Amidst this, the interbank call rate advanced 26bps to 7.33%. Following this, the T-bills space exhibited a negative trading pattern, with yields advancing 15bps on average. Particularly, yields on the 35DTM (+68bps to 11.04%) and 161DTM (+53bps to 12.95%) bills advanced. Trading in the bond market was largely muted yet again, with a negative tilt. Like the previous session, yields rose 4bps on average across benchmark bonds, most notably, the 14.50% FGN JUL 2021 (+32bps to 13.86%), 14.20% FGN MAR 2024 (+10bps to 14.00%) and 13.98% FGN FEB 2028 (+13bps to 14.32%). Barring another liquidity mop-up today, we foresee a more mixed trading sentiment in the T-bills space with buying supported by expected coupon inflows. On the other hand, in the absence of any significant market catalysts we expect another slow session in the bonds space.