Growth Board To Roar As NSE's ASeM Slowly Disappears

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Saturday, February 22, 2020   /  05:10PM / Bukunmi Adejobi with Adesola Borokinni, Proshare Research/ Header Image Credit: NSE


With the introduction of the Nigerian Stock Exchange's (NSE's) Growth Board, companies listed on the Nigerian Alternative Securities Market (ASeM) may soon experience a fresh lease of life or disappear.


The recalibration of the NSE into new sub-categories of equity types based on market capitalization and other factors would allow greater investor filtering of the stock market and provide clearer insight into corporate performances and operations in separate market segments.


The NSE launched the ASeM for emerging companies with high potentials to grow. ASeM has been described as a specialized Board of the bourse to accommodate small and mid-sized companies with high growth potentials seeking to access the capital market, unfortunately the index remained helpless as performance has been poor due to a lull in the economy at the time the index was launched.


Capital market operators attributed the poor performance of the ASeM to asymmetric information and poor corporate governance structures.

 

Why ASeM May Go With The Wind

Analysts reviewing the performance of ASeM believe that the tiers weak growth has required a few readjustments to encourage more companies to take advantage of opportunities on the NSE. The ASeM has so far been characterized by the following:     

  • The ASeM Index has consistently shown low trade activity and narrow liquidity; turnover is currently less than 1% of the average yearly stock turnover and far below the market average of 37%.
  • The ASeM Index has shown a continuous trend of negative performance and lack of new listings justifying the need for a revamped board.


As the growth board gains wind under its sails, the ASeM would likely disappear slowly into the sunset as company's show a preference for the growth board and its acquired benefits.


When Growth Becomes Aggressive

The Growth Board is thought to encourage the listing of companies, which are active in their respective sectors and have exhibited high future earnings potential with good corporate governance standards.  The Growth Board offers a few relaxed entry criteria - less stringent listing requirements, that provide greater accessibility for growth-oriented companies, raise long term capital, making it easier to attract capital flows, reduce pre and post-listing requirement obligations and promote liquidity.


The entry division of the board is for companies with a market capitalization from N50 million and the standard division for institutions with a market capitalization from N500 million. The segmentation of the boards also provides alternative options for interested investors to participate in each company's growth journey. (see Table 1 below)

 

Table 1 Looking Ahead: Growth Board's New Vibe

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In line with the NSE's efforts to deliver value to listed companies, the Exchange presented companies aspiring to list on the Growth Board access to its value-added Services program. (see Table 2 below) 

 

Table 2: Comparison of The Old and New: Growth Board Vs. ASeM Advisers


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NSE ASI Vs ASeM

The NSE ASI and ASeM index alternated between bullish and bearish momentums over different months. NSE ASI has had a better outlook compared to the ASeM index.


In January 2019, both the NSE ASI and ASeM Index started bearish with declines of -2.78%, -0.60% respectively and became bullish in February 2019. There were positive changes in the NSE ASI in May, September, November of 2019 by +6.55%, +0.38%, +2.45% respectively while the ASeM Index was negative by -0.49%, -0.60% and -0.01% respectively in the same months.


The ASeM index experienced a downward trend from April 2019 and grounded to a halt in January 2020, the index became flat while the NSE ASI was bullish by +7.46%. (see Chart 1 below)


Chart 1: NSEASI Vs ASeM Index Yields Jan. 2019-Jan. 2020

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Source: Proshare/NSE


NSE 30 Vs ASeM

From March 2019 till August 2019, both indexes were bearish. At periods when both indexes were bearish, the NSE 30 appeared to be more hostile and when both indexes were bullish, the ASeM Index was unresisting compared to the NSE 30.


NSE 30 Index surpassed that of the ASeM Index in September, November, December 2019 with a rise of +5.45%, +6.19%, +3.68% respectively while ASeM recorded decline of -0.60%, -2.99% while being flat in November 2019.


In January 2019, NSE 30 index outperformed the ASeM Index with a rise of +8.25% leaving the ASeM Index to trail behind. (see Chart 2 below)

 

Chart 2: NSE 30 Vs ASeM Index Yields Jan. 2019-Jan. 2020

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Source: Proshare/NSE 

 

NSEASI Vs NSE 30 Vs ASeM Index

The NSE 30 closely tracked the NSE ASI throughout the duration in review (Jan. 2019-Jan. 2020); bringing the ASeM Index into the mix, the chart below reveals the underperforming nature and downward trend of the ASeM Index.


All three indexes started the year 2019 on a bearish note with NSE ASI at -2.78%, NSE 30 at -4.04% and ASeM at -0.60%.


The NSE ASI Index, NSE 30 fluctuated between bearish and bullish orientations at different times between March 2019 and December 2019 while the ASeM Index appeared to be steadily bearish between March 2019 and December 2019.


In January 2020, NSE ASI and NSE 30 were both bullish with a growth of +7.46 and +8.25 respectively, while the ASeM Index was flat. (see Chart 3 below).

 

Chart 3: NSEASI Vs NSE 30 Vs ASeM Index Yields Jan. 2019-Jan. 2020

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Source: Proshare/NSE

 

Companies Likely To Be On The Growth Board

The growth board will host a plethora of companies characterized by high growth potential across different sectors of the economy


Agricultural

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There are two firms involved in agricultural activities that are likely going to be on the board. They include Livestock feeds Plc and FTN Cocoa Processors Plc.


Livestock feeds Plc is involved in the manufacturing of animal feeds in Nigeria. Livestock feeds Plc market cap as of February 4, 2020 was N1.65bn. It's most recent financial reports as at Q4 2019(unaudited) reveals that it recorded an increase of 26.95% in its sales revenue to N9.95bn from N7.86bn in Q4 2018.


In Q4 2019, it made a profit of N34.7m an increase from a loss of N620.311m in Q4 2018. Its earnings per share at the end of the year in 2019 was 1kobo per share rise from last year's negative earnings per share of 21kobo per share.


FTN Cocoa processors Plc. provides cocoa commodities. Its products consist of cocoa butter, cocoa cake, cocoa powder and cocoa liquor. Its market cap as of February 4, 2020 was N440m. It's most recent financial reports as of Q3, 2019 showed that it recorded a decrease of 3.86% in its sales revenue to N523.18m from N502.97m in Q3 2018. Also, it recorded a loss before taxation by 67.77% to N354.46m from N211.28m in Q3, 2018. It also recorded a rise in loss per share of 16.11kobo per share in Q3, 2019 from 9.60kobo per share in Q3 2018.

 

CONGLOMERATES

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Three conglomerates likely to be on the growth board include Chellarams Plc, SCOA Nig Plc and John holt Plc with market caps as of February 4, 2020 of N2.01bn, N1.904bn and N217.92m respectively.


Chellaram Plc. is a conglomerate with a diverse array of industries including manufacturing, retail, distribution, marketing and power generation. Its most recent data as of Q3 2019 reveals that Chellarams Plc. recorded a rise in its revenue to N5.72bn from N8.49bn in Q3 2018. It recorded a loss of N1.31bn in Q3 2019 from a loss of N1.12bn in Q3 2019. It also recorded a rise in loss per share of 16.11kobo per share in Q3 2019 from 9.60Kobo in Q3 2018. There was a loss of 181.15kobo per share from 128.06 kobo per share.


SCOA Nigeria Plc. is a conglomerate active in furniture production and interior design, automobile assembly and distribution, power generation, retailing and trade. It has a market cap of N1.9bn as of February 4, 2020. Its most recent data as of Q3 2019 reveals that it recorded a revenue of N882.79m a decline from N990.66 recorded in Q3 2018. It recorded a loss before tax of N277.86m in Q3, 2019 a decline in loss from 986.07 in Q3, 2018.


John Holt Nigeria Plc. is a conglomerate that has subsidiary businesses involved in assembly and distribution of power generators, leasing, distribution of fire-fighting equipment, logistics, boat building and fabrication of industrial and agricultural equipment. Its revenue as of Q3 2019 declined to N1.79bn from N2.67bn in Q3 2018. It recorded a profit of N218m in Q3 2019 from a loss of N81m in Q3 2018. It recorded positive earnings per share of 55.90 kobo per share from a loss in its earnings of 20.77 kobo per share.


CONSTRUCTION/REAL ESTATE

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There are four firms involved in construction and real estate that meet the criteria for the growth board. They include UACN Property Development Company PLC, SFS Real Estate Investment Trust, ARBICO PLC, ROADS NIG PLC with market caps of N2.47bn, N1.71bn, N469.26m and N165m respectively as at February 4, 2020.  UACN Property Development Company Plc had the highest market cap of N2.468bn while Roads Nig Plc had the lowest market cap of N165m.


UACN Property Development Company Plc recorded a decline in its revenue to N2.17bn in Q4 2019 from N2.3bn in Q4 2018. There was a decline in its loss before taxation to N16.52bn in Q4 2019 from N9.21bn in Q4 2018. It made a loss in its earnings per share of 626kobo per share in Q4 2019 from 579kobo per share in Q4 2018.


Roads Nig Plc revenue as of Q1 2015 was N1.9bn a decline in its revenue from N3.26bn in Q1 2014. It made a loss before tax of N227.76m in Q1 2015 from a profit of N136.97m in Q1 2014. Its loss in its earnings per share was 11.39kobo per share in Q1 2015 from 6.85kobo per share in Q1 2014.

 

CONSUMER GOODS

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There are seven firms involved with consumer goods activities that fit into the growth board. In this sector, Union Dicon Salt Plc had the highest market cap of N2.99bn while Mcnichols Plc had the lowest Market cap of N150.28bn as of February 4, 2020.


Union Dicon Salt Plc reported a loss before tax of N40.58m in Q3 2019 a decline from a loss of N49.46m in Q3 2018.


Mcnichols Plc reported revenue of N679m in their Q4 2019 unaudited report which reflected a decline from N818.56m recorded in Q4 2018. It also reported a drop in its profit of N20.22m in Q4 2019 from N42.6m in Q4 2018. It recorded a reduction in its earnings per share of 5.69kobo earnings per share from 12.5kobo per share.


FINANCIAL SERVICES

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There are 24 Firms involved in financial services that fit into the growth board. The firm with the highest market cap as at February 4th 2020 was Law Union and Rock Plc with a market cap of N3.61bn while Nigeria Energy Sector Fund had the lowest market capitalization of N411.91m.


Law union and rock insurance had a gross premium written of N4.83bn in Q4 2019 (unaudited financial statement) from N4.54bn in Q4 2018. It made a profit before tax in Q4 2019 of N830.71m from N263.59m in Q4 2018. Its earnings per share increased to N19.34 in Q4 2019 from N6.14 in Q4 2018.


Deap Capital management and trust Plc had revenue of N1.07m in its Q4 2019 unaudited financial statement. It recorded a decline in its loss in Q4 2019 to N6.28m from N8.66m in Q4 2018.


HEALTH CARE

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There are eight firms involved in health care that fit into the growth board. May and Baker Nigeria Plc had the highest market cap of N3.74bn while Pharma-Deko Plc had the lowest market cap of N325.23m as of February 4, 2020.


May and Baker Nigeria Plc reported a decline in its revenue to N8.08bn in its Q4 2019 unaudited result from N8.55bn in Q4 2018. It also recorded an increase in its profit to N924.82m in Q4 2019 from N817.91m in Q4 2018. It recorded an increase in its earnings per share to 36.45kobo per share in Q4 2019 from 34.97kobo per share in Q4 2018.


Pharma-Deko Plc reported a decline in its revenue to N484.58m in Q4 2019 unaudited result from N1.02bn in its revenue in Q4 2018. It recorded an increase in its loss before tax of N295.9m in its unaudited Q4 result from a loss of N265.26m in Q4 2018. It also reported an increase in its negative earnings per share to 136.4kobo per share in Q4 2019 from 122.3 kobo per share in Q4 2018.


ICT

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There are five firms that fit into the growth board in the ICT sector. Chams Plc had the highest market cap of N1.34bn while Tripple Gee and Company Plc had the lowest market cap of N287m as of February 4, 2020.


Chams Plc reported a decline in its revenue to N3.52bn in its Q4 2019 unaudited financial statement from N3.01bn in Q4 2018. It reported an increase in its Q4 2019 profit to N240.69m from N301.61m in Q4 2018.


Tripple Gee and Company Plc reported an increase in its revenue to N1.01bn in its Q4 2019 unaudited financial statement from N546.29m in Q4 2018. It reported an increase in its profit to N25m in Q4 2019 from N16m in Q4 2018. There was an increase in its earnings per share to N5.05 per share in Q4 2019 from N3.23 per share in Q4 2018.

 

OIL AND GAS

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Three firms in the oil and gas sector fit into the growth board. They include Eterna Plc, Japaul Oil and Maritime Services Plc and Capital Oil Plc. Eterna Plc had the highest market cap of N3.13bn while Capital oil Plc recorded the lowest market cap N1.17bn as of February 4th 2020.


Eterna Plc recorded a decline in its revenue in Q4 2019 (unaudited) to N229.47m from N251.87 in Q4 2018. It recorded a decline in its profit to N125.78 in Q4 2019(unaudited) from N1.99bn in Q4 2018. It recorded a decline in its earnings per share to 7kobo per share in Q4 2019(unaudited) from 77kobo per share in Q4 2018.


Japaul Oil and Maritime Service Plc recorded a decline in its revenue in Q4 2019(unaudited) to N701.94m in Q4 2019 from N965.54m in Q4 2018. It recorded a rise in its profit of N40.63bn in Q4 2019 from a loss of N6.39bn in Q4 2018


SERVICES

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Seventeen firms in the services sector fit into the growth board. Global Spectrum Energy Services Plc had the highest market cap of N3.72bn while Academy Press Plc recorded the lowest market caps of N223.78m as of February 4, 2020.


Global Spectrum Energy Services Plc recorded an increase in its revenue in Q4 2019(unaudited result) to N2.45bn from N1.87bn in Q4 2018. It reported a decline in its profit in Q4 2019 (unaudited result) to N238m from N595.93m in Q4 2018.


Academy Press Plc recorded a decline in its revenue to N1.29bn for the third quarter ended (unaudited) from N1.488bn in Q3 2018. There was an increase in loss incurred after tax in Q3 2019 to N382.59m from N178.7m in Q3 2018.


INDUSTRIAL GOODS

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Five firms in the Industrial sector fit into the growth board in the industrial goods sector. Cutix Plc had the highest market cap of N2.48bn as of February 4, 2020 while the company that recorded the lowest market cap was Meyer Plc with a market cap of N244.37m as of February 4, 2020.


Cutix Plc reported a decline in its revenue to N2.44bn in its unaudited account for the period ended October 31st 2018 from N2.78bn in October 31st 2019. It recorded a decline in its profit before tax to N217.36m from N344.7m in the previous period. Its earnings per share declined to 8kobo per share from 25kobo per share.


Meyer Plc reported an increase in its revenue to N1.11bn in its unaudited account for Q4 2019 from N970.13m in Q4 2018. It reported a loss of N921,000 in Q4 2019 from a profit of N182.32m in Q4 2018. It recorded negative earnings per share of N1.02 per share from positive earnings of N0.64 per share.

 

NATURAL RESOURCES

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Four firms in the natural resources sector fit into the growth board. B. O. C Gases Plc had the highest market cap of N1.73bn as of February 4, 2020 while Thomas Wyatt Nigeria Plc had the lowest market cap of N77m as of February 4, 2020.


BOC Gases reported a rise in its revenue of N3.07bn in Q4 2019(unaudited) from N2.79bn in Q4 2018. Its profit before tax declined to N340m in Q4 2019(unaudited) from N533.97m in Q4 2018. There was a decline in its earnings per share to 56kobo per share from 100kobo per share in the previous period.


Thomas Wyatt reported a rise in its revenue to N58.99m in Q4 2019(unaudited) from N45.3m in Q4 2018. It reported a loss before tax which increased to N41.98m IN Q4 2019(audited) from N36.33m in Q4 2018. It also reported an increase in its loss per share to 19 kobo per share from 17kobo per share.

 

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