55 Stocks Trading at N0.50 Kobo Today: What Next?

Proshare

 

June 03, 2012 / The Analyst / Proshare Research
 
 
Introduction
The extended bearish market sentiments and unrelenting down trend makes it imperative for a cursory review of penny stocks, most especially those stocks currently trading at their nominal value of 50kobo.
 
Recall that the NSE All-Share Index as at 3rd March 2008 was at 65,901.97 basis points, yet  within the space of four (4) years; it shed 43,678.61 basis points representing -66.27% to close at 22,232.36 basis points as at 25th May, 2012.
 
 
 
Consequently, the NSE Market Cap within the same period depreciated by N5.46 trillion to stand at N7.09 trillion as at 25thMay 2012 representing a -43.52 loss.
 
 
 
Observations/Highlights
As at May 25, 2012, we have a total of fifty-five (55) stocks trading at 50kobo (floor) – and of these, twenty seven (27) are insurance stocks, three (3) Oil & Gas stocks while Wema Bank Plc is the only banking stock in the category.
 
One major point that stood out was the fact that half of the companies listed on the bourse between 2008 and 2010 are currently trading at 50k while four (4) stocks have recorded no price movement in the last three years.
 
A review on the affected companies’ financial results (where available) sheds some insight into how the bourse is performing/managed – Eighteen (18) out of the fifty-five (55) stocks declared negative results in their most recent results, three (3) companies have no results at all while twenty-seven (27) have not declared their 2011 Audited results.
 
There are some peculiarities that helps put the financial figures in context. Here are a few:
 
DN Tyre & Rubber Plc (formerly Dunlop) was a tyre manufacturing giants in the Nigerian market became a victim of government’s policy(ies) which made it uncompetitive in its primary market. The company had to convert some assets to cash for use in other areas. As the company could not produce any longer it had to resort to importation of goods. The Group Managing Director of DN Tyre and Rubber Plc, Mohammed Yinusa, explained in an interview with The Guardian that the decision to import was a last resort, adding that the company was still optimistic that a bail-out may come from the Federal Government. 
 
Union Diagnostics & Clinical Services Plc had in 2009 proposed N0.08kobo dividend and later informed the Exchange of its inability to meet up with the payment date of the dividend prior to the AGM at which the dividend was declared. Not much has been heard from/about this company since. 
 
Investment & Allied Insurance Plc had its management suspended by the National Insurance Commission in 2010, two years after its successful public offering. The suspension was sequel to reports of findings from routine inspection of the company by the commission and the failure of the management of the company to satisfactorily correct material lapses observed and brought to its attention by the commission.  
 
Daar Communication Plc recently lost in its bid to address the payment of a N7.5bn judgment sum handed against it in favour of Fidelity Bank Plc and the implication of such for shareholders is onerous. 
 
Starcomms Plc which was listed on the Exchange in 2008 after a public offering has remained a sore experience and the industry poster for the excesses that occurred during the boom years.
 
Wema Bank Plc has been trying to recover after its many corporate governance challenges. 
 
 
 
 
2. Individual Stock Analysis
As at the report date, fifty-five (55) equities are trading at their nominal value of N0.50kobo. To properly understand why this is so and the expectations going forward, we undertook a critical examination/analysis of the equities covering the period from 2008 to 2012. 

ABCTRANS     
The share price of ABC Transport Plc, listed in the services sector, recorded a 4.51% appreciation in 2008 to close at 2.78k from the Opening price of 2.66k. The stock closed flat in 2009 while price depreciation of -3.95% was recorded in 2010. The stock resumed positive movement in 2012 with 3.77% price appreciation recorded while it opened the year 2012 at 50k and later traded above its nominal value before it eventually hit 50k on the 16th Feb, 2012.
 

 
Financial Review – In its latest result for Q4 2011, ABC Plc posted a -N68.18m loss as against N57.51 million in the previous quarter representing a -218.55% negative growth. The company recorded losses also in Q2 and Q1 2011 while it declared profit in Q3 2011 and Q4 2010 respectively, also a negative growth.
 
 
 
 
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