Lean NSE Stock Prices of Companies Listed in 2009 Raise Investor Concern; Analysts Keep Watch

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Sunday, November 15, 2020 / 10:20 AM / by Proshare Research / Header Image Credit: EcoGraphics

 

The situation around the Nigerian capital market recently especially the equities market has been that of a performing market with a not too impressive fundamental.

 

As of Thursday November 12th, 2020, the YTD returns in the equities market has hit +31.67% while the market key indicator, NSEASI, recorded an impressive daily gain of +6.23% at the close of trading on this same date. This represents its biggest daily gain since April 1, 2015 when the NSEASI closed the day with +8.30% gain.

 

The low yield environment within the bonds and fixed income markets coupled with the high inflation rate, which is at +13.71% as of September 2020, has driven investors to increase allocation to risk assets such as equities in order to earn inflation adjusted returns. Hence, the strong rally in the equities market over the past three months.

 

Despite the above scenario witnessed in the equities market, market sentiment currently and in comparison to the period of the 2004/2008 market boom cannot be described as the same as the route through which stocks also got listed in the market were quite different. More stocks got listed by subscription (IPOs) during the market boom and at the eve of the Soludo driven banking consolidation exercise.

 

However, after the 2008/09 financial crisis companies seem to have found another route to the market. more companies now got listed by introduction as market sentiment has not favoured a listing by subscription (IPO) process which will give room for retail investors to actively participate in primary market activities.

 

Stocks Listed During Market Boom and Those Delisted Among Them

 

During the banking consolidation of 2004/05 and the market boom witnessed before the financial crises of 2008/09, the Nigerian stock market witnessed the listing of more equities than ever before. Between 2004 and 2016, market witnessed a lot of IPOs.

 

In 2007, twelve (12) stocks were listed and two (2) out of such stocks have been delisted.

 

Available data on stocks listed in 2008 reflected that they were five (5) in numbers and the whole five have currently been delisted.

 

The five (5) delisted stocks in 2008 are;

  1. Dangote Flour Mills Plc (delisted in Nov 2019)
  2. MTI Plc (delisted in May 2017)
  3. Investment & Allied Insurance Plc (delisted in May 2016)
  4. Starcomms Plc (delisted in Nov 2014)
  5. Nigerian Bag Manufacturing Company Plc (delisted in Apr 2013)

 

The highest number of stocks listed within this period was recorded in  2009. During this period, fourteen (14) stocks were listed and five (5) out of such stocks have been delisted.

 

In a nutshell, almost half of the stocks listed between 2004 and 2012 have been delisted as 20 out of the 42 stocks listed have been delisted.

 

Table 1: Stocks Listed Between 2004-2012 and Those Delisted Among Them

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Source: Proshare Research


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Regulatory Filing Defaulters

A review of the list of stocks that are currently defaulting in regulatory filing revealed that we have twenty-one (21) of such firms.

 

Stocks listed in the financial services sector have the highest representation with nine (9) stocks making the list from the sector.  This represent about 43% of the total 21 stocks that have defaulted. Furthermore, 5 out of the 9 stocks from the financial services sector are insurance stocks.

 

Oil and Gas sector followed closely with three (3) representations. It is pertinent to state that Oando Plc is among the three oil and gas stocks. Oando Plc linked this to SEC's suspension of its AGM as the Company has been unable to appoint Auditors to commence the Company's 2019 audit exercise. The mandate given to the Auditors at the 2018 Oando AGM, by the shareholders, was to audit the Company's FYE 2018 financials and not any other year.

 

Construction/Real Estate and Healthcare have two representations each while Agriculture, Natural Resources, Services, Conglomerates and Consumer Goods all have one (1) representation each.

 

The appearance of companies like MULTITREX in this list must be distinguished as there experience can be read here.

 

Related LinkHow Banks, Govt Policies Kill Manufacturing in Nigeria - The Multi-Trex Case

 

Table 2: Regulatory Filing Defaulters

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A Peep into the NSE X-Compliance Report

 

A review of the NSE X-Compliance Report as of October 30th, 2020 revealed that the NSE has so far earned the sum of N96.4 million in 2020 as penalty paid by issuers on default filings on their financials after the regulatory due date.

 

Prominent among the companies that made this list are firms like Conoil Plc, LASACORoyal Exchange Plc and PZ Cussons Nigeria Plc. See table 3 below

 

 

Table 3: 2020 Regulatory Filing and Penalties

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Delisting Watch-List

Two (2) quoted companies are currently placed on the delisting watch-list based on the NSE X-Compliance Report published as of October 30th 2020. See table 4 below

 

Table 4: Delisting Watch-List

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Delisting in Process

Similarly, the NSE has placed the following six (6) companies on its delisting in process list. based on the NSE X-Compliance Report published as of October 30th 2020.

 

It is pertinent to state that Law Union and Rock Plc which was delisted recently by the NSE on November 5th, 2020 is on this list before it was delisted. The delisting of the insurance firm will lead to the reduction of the number of companies on this list to five (5) from six (6). See table 5 below

 

 

Table 5: Delisting in Process

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Restructuring

The National Council of the NSE has approved that the nine (9) companies listed below be placed on restructuring status subject to the filing of their quarterly compliance report.  Prominent are among these companies are MULTITREXFTNCOCOA and International Energy Insurance Plc. See table 6 below

 

Table 6: Restructuring

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Listings by Introduction and IPO

Listings on the Nigerian bourse has been, usually, done through two means and these are listings by IPO and introduction.

 

 

IPO: The Route to Listing During The Market Boom

Listing by IPO was embraced by most companies that decided to access the Nigerian Capital Market during the banking consolidation of 2004/05 and the market boom experienced prior to the year 2008.

 

A review of the list of companies that came into the market from 2004 till date revealed that thirty-one (31) quoted companies were listed, within this period under review, by IPO.

 

Analysis on the performance of these companies in relation to their listing prices and their current prices reflected that ZENITHBANK currently trades above its listing prices by +158% and closely followed by AIRTELAFRI which was listed in 2019 by +24%.

 

HoweverJAPAULOIL traded below its listing price by -92%.

 

The listing prices of some of the companies listed by IPO during the years 2007 and 2008 were not available as at the time this report was being completed.

 

Table 7: Companies Listed by IPO

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Introduction: The New Route After the Boom

A similar review of the listing of companies listed by introduction from 2004 till date revealed that twenty-six (26) quoted companies were listed within the period under review by IPO.

 

Analysis on the performance of these companies in relation to their listing prices and their current prices reflected that MTNN currently trades above its listing prices by +80% and closely followed by DANGCEM by +48.15%.

 

HoweverOMATEK traded below its listing price by -95% and closely followed by followed by AFRINSURE by -94% .

 

Table 8: Companies Listed by Introduction

 

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Source: Proshare Research

 

 

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