Wednesday, July 10, 2013/ The Analyst
The performance of the consumer goods sector, relying less on consumer behaviour patterns but on technical analysis of equities in the sector; indicate that securities listed in the sector enjoy steady and significant patronage from fund managers and experienced investors.
Majority of the sector players provide goods required daily by a growing population of consumers across different demography which naturally translates to a steady financial top and bottom line for most firms; leaving the quantum of profitability and returns to shareholders to decisions around efficiency, growth strategy, market share assessments and capital investment funding.
The affinity between the consuming public and these firms remains an intricate nexus between the stock performance and the anticipatory rally that always ensues in the sector.
In this regard, a cursory look at the sector reveals that consumer goods sector returned a moderate average quarter growth of +12.78% while the bargain trend in the sector remains upbeat as YTD average gain stands at +30.28% against 14.22% gain recorded in Q1'13, which shows steady and consistent investors' commitment towards the sector.
MCNICHOLS leads the price performance in the sector with impressive YTD appreciation of 106.17%, followed by Dangote Sugar and Cadbury with 95.33% and 88.03% price appreciation respectively.
Further Analysis reveals the immense contribution from the consumer goods sector to the general market performance - particularly in Q2'13 when market witnessed a huge price volatility with a significant plunge in the key benchmark indices from +19.44% gain to +7.84% recorded at the end of Q2'2013. A similar pattern was observed in the NSE consumer goods index which recorded a YTD appreciation of +23.74% while All Share Index closed at 31.82% as at July 9th 2013 - this confirms the contribution of sector the market performance as noted above as the sectoral index remained active among leading NSE sectoral index.
Looking into H2 ‘2013, the average performance analysis of the sector suggests possible continued investors patronage towards the consumer goods stocks - the sustained north trend in sector average gains buttresses this assertion. Also, we expect the inflation outlook to moderate further with positive effect on the consumption rate which may ease the pressure on consumers’ purchasing power – and consequently boost the turnover and margins in the sector.