Dangote Cement Plc CP Offer; The Bulls Return as Average Yield Dips 38bps WoW

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Monday, May 18, 2020 / 12:32 PM / By Afrinvest Research / Header Image Credit: Coindesk

 

The Nigerian Treasury Bills ("NT-Bills") secondary market kicked off on a calm note last week with investors trading cautiously in anticipation of the Primary Market Auction ("PMA") that held on Wednesday. However, towards the end of the week, there was an uptick in activity levels as inflow (N209.0bn) from matured Open Market Operations ("OMO") buoyed bullish sentiments leaving system liquidity at N388.5bn long on Friday.


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Consequently, average yield across all NT-Bill tenors declined by 38bps W-o-W to close at 2.3% with most buying interest skewed towards the medium and long term instruments, particularly the 10-Sep-20 (-80bps), 17-Sep-20 (-76bps) and 15-Oct-20 (-75bps) bills.

 

During the week, the Apex bank offered N70.0bn worth of OMO bills to mop up excess liquidity in the financial system. However, there was "no sale" on all tenors despite the huge subscription (N344.2bn).

 

Conversely, in the NT-Bills space, the CBN ,on behalf of the DMO, took advantage of the impressive subscription levels given the plan to focus on domestic borrowings, and absorbed N142.8bn as opposed to the N33.8bn initially offered. As a result, stop rates on the 91- and 182-Day tenors closed higher at 2.5% (+65bps) and 2.85% (+36bps) respectively while the stop rate for the 364-Day tenor remained unchanged.

 

Please see detailed PMA results below:

Auction Date

13-May-2020

13-May-2020

13-May-2020

 

 

 

 

Allotment / Issue Date

14-May-2020

14-May-2020

14-May-2020

 

 

 

 

Tenor

(91-Day)

(182-Day)

(364-Day)

 

 

 

 

Offer Amount (N)

4,384,180,000

12,920,900,000

16,536,720,000

 

 

 

 

Total Subscription (N)

22,334,588,000

41,194,993,000

102,030,671,000

 

 

 

 

Allotment (N)

19,783,588,000

40,093,992,000

82,886,671,000

 

 

 

 

Range of Bid Rates (%):

1.3900 - 6.6398

1.9400 - 7.4800

2.8000- 12.8000

 

 

 

 

Stop Rates (%):

2.5000

2.8500

3.8400

 

 

 

 

  Previous Stop Rates (%):

 

1.8500           

 

2.4900

 

3.8400

 

  Bid-to-Cover Ratio:

 

1.1x

 

1.0x

 

1.2x

 

  Allotment Ratio:

 

0.9x

 

1.0x

 

0.8x

 


 

This week, there are no NT-Bills and OMO maturity, however, we expect sustained buying interest in the secondary market due to the unfilled bids from last week’s auction.

 

In addition to cherry picking attractive instruments across the NT-Bills secondary market, our recommendation is for investors to seek other attractive opportunities such as available private money market offers like Commercial Papers ("CP"). Qualified investors must conduct all necessary due diligence on the Issuer of the private offerings.  


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Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

2-Jul-20

45

2.55

2.56

27-Aug-20

101

3.65

3.69

24-Sep-20

129

3.90

3.95

26-Nov-20

192

4.35

4.45

28-Jan-21

255

4.55

4.70

Rates are valid till 01:45pm today (18-May-2020)

*Please note that the minimum subscription for T-Bills is N100, 000.00


Dangote Cement Plc Series 15 & 16 Commercial Paper

The Series 15 and 16 Commercial Paper issuance ("CP or the "Issuance"), under the Dangote Cement PLC ("Dangote Cement") N150.0bn CP Issuance Programme is now open and scheduled to close on Wednesday, 20-May-2020.

 

Dangote Cement is the largest cement manufacturer in Sub-Saharan Africa with an installed capacity of 45.6Mta across its operations in 10 African countries. Dangote Cement is assigned AA+ long-term rating by GCR and Aa2.ng long-term rating by Moody’s. It is one of the few corporates in Nigeria with a top-notch rating of AA+.

 

Please see below, the indicative terms of the proposed offer:

Issuer

Dangote Cement PLC

Description:

Series 15

Series 16

Tenor:

 

175-days

266-days

Target Size:

 

Up to N50.0billion across both tenors

Discount Rate (%):

 

4.8833%

5.7492%

Implied Yield (%):

5.0000%

6.0000%

Offer Open Date:

Thursday, 14 May 2020

Offer Close Date:

Wednesday, 20 May 2020

Allotment Date:

Wednesday, 20 May 2020

Issuer Rating:

Aa2 (Moody); AA+ (GCR)

Minimum Subscription:

N5.0million

Tax Consideration:

Free and clear of withholding taxes

Offer valid till 9:00am on (20-May-20)

 

*Kindly note that the minimum subscription for commercial papers is  N5,000,000.00

 

FGN Bonds Update: Average Yield Inches 33bps W-o-W Amid Revised Q2:2020 FGN Bonds Issuance Calendar; N60.0bn Offering in PMA This Wednesday

Last week, the FGN bonds secondary market started off on a slightly bullish note with minimal activity observed at the short end of the curve. However, activities turned bearish towards the end of the week as investors reacted to the release of the Q2:2020 revised bonds issuance calendar by the Debt Management Office ("DMO"). Subsequently, average yield across the curve spiked by 33bps W-o-W to close at 10.6% on Friday.

 

According to the DMO’s revised calendar, total borrowings in June is scheduled to increase by N120.0bn. Going into this week, the DMO is scheduled  to offer  N60.0bn across the 5-, 15- and 30-Year re-opening bonds on Wednesday.

 

Please see details of the auction below:

Bond Name

12.75% FGN APR 2023

(Re-opening)

12.50% FGN MAR 2035

(Re-opening)

12.98% FGN MAR 2050

(Re-opening)

Term-To-Maturity

2 Years, 11 Months

14 Years, 10 Months

29 Years, 10 Months

Range of Amount on Offer

N10.0bn- N20.0bn

 

N10.0bn- N20.0bn

 

 

N10.0bn- N20.0bn

 1

We anticipate a quiet trading session at the beginning of this week as investors prepare to position for the PMA. Investors are also advised to seek instruments with attractive yields that advanced last week.

 

Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

2

4.40

14.50

111.29

Jan-22

3

4.75

16.39

118.70

Apr-23

4

8.30

12.75

111.40

Mar-24

5

7.75

14.20

120.96

Mar-25

6

7.80

13.53

122.73

Jan-26

7

9.50

12.50

112.90

Mar-27

8

10.00

16.29

130.55

Feb-28

9

10.20

13.98

119.90

Jul-34

15

10.65

12.15

110.81

Mar-36

17

10.75

12.40

112.39

Apr-37

18

10.75

16.25

142.43

Apr-49

30

11.75

14.80

124.98

Rates are valid till 01:45pm today (18-May-2020)

*Please note that the minimum subscription for FGN bonds is N20,000,000.00

 

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