The bears held sway in the market despite juicy corporate results and benefits that deluged the market last week.

This is evident in all market indices as an aggregate turnover of 3.236 billion shares worth N58.58bn was recorded in 61,441 deals quite below the previous week’s trading statistics of 3.278bn shares valued at N86.20 billion traded in 59,752 deals. However, the total market returns for the week appreciated by 0.12 per cent as the NSE All-Share Index closed higher at 53,818.72 points while total market capitalisation of 208 listed equities rose marginally by 0.72 per cent to stand at N8.377tn.

Activity in the banking sector also plummeted except for a few stocks like Afribank, First Bank, GTBank, UBA, Wema Bank and Zenith. Afribank continued to ride on its impressive results and benefits to attract significant patronage throughout the week while First Bank and Zenith remained relatively inert until Friday August 10, 2007 when the duo became active as First Bank closed on over 10 million bid and Zenith picked up extra N2 to close at N65. Diamond Bank also released its full year results amidst high expectations from investors. Sequel to this, price nose-dived to close at N17.20 from N19.94 it opened the week, representing a capital loss of 13.7 per cent, despite its impressive results. This is hinged on the bank’s 55k dividend declared without any scrip issue as highly speculated.

The conglomerate sector was also buoyed mainly by activity in shares of PZ Cussons as a result of its striking benefits of one for four and 71k dividend. A total volume of 11.99 billion units was traded while activity in the Insurance sector was dominated by International Energy Insurance, Lasaco, Mutual Benefit, Nem Insurance, Crusader, Custodian Insurance and Continental Re.

Market participants also played hosts to the management of IBTC-Chartered Bank at an interactive session called ‘Fact Behind the Figures’ on the Exchange to further convince investors on reasons why the on-going Tender Offer should be supported for its merger with Stanbic Bank to succeed. A cross section of the market argues that the 45 per cent premium on the current price of N11 is far below the industry returns in the last 18 months. On the contrary, the bank’s management maintains that the Offer price represents a premium of 278 per cent to the stock’s price of N5.76 on September 22, 2006 when the memorandum of understanding between the two banks was signed. This, they claim, is well in excess of the industry average returns for most banks.

We present below brief highlights of market events and sentiments for the week and some of the stocks that investors should watch closely for investment decisions in the week ahead.

AFRIBANK OF NIGERIA PLC:
Afribank Bank shares suddenly became a toast of investors immediately the seven-month old (January 2006-July 20, 2007) technical suspension was lifted. The stock made a bullish run with a daily steady five per cent capital appreciation to close at N33.41 on Friday August 10, 2007, translating to a return of 190 per cent in one month. The trend was further reinforced by the release of the Bank’s audited results for the full year ended March 31, 2007. Gross Earnings grew by 76.3 per cent from N15.60bn in the prior year to N27.50bn while after-tax profit soared to N5.10bn from N2.60bn, representing a 96.2 per cent leap. The bank proposes a dividend of 30k and bonus issue of 1 for 4 for the year ended March 31, 2007. The Bank’s EPS currently stands at 98k with a P/E ratio of 29.65 xs
Market watchers posit that the current revamping strategy of the bank is in the right direction to return to its old sterling performance records among peers. Market sources reveal that the management is poised to purse organic growth strategies with a view to expanding its business scope, discover potential markets and meet stakeholders’ expectations. Afribank’s preparedness to provide specialised services and products is also strongly backed up with robust banking information technology applications such as Globus, Bloomberg (for bond trading), Reuters, RTGS (Real Time Gross Settlement), T-24 voice recorders, and dedicated lines. The facilities are meant to enhance the bank’s swift settlement of transactions and seamless operations.
Afribank had planned to come to the market last year but had to review its capital issue strategy. Meanwhile, it is speculated that preparations are in top gear by the bank to re-present its application to the Exchange for the hitherto aborted Offer. This is said to be in line with its strategic intent to reposition itself among the top players in the industry.

INTERCONTINENTAL BANK PLC:
Market observers argue that patronage of the Intercontinental Bank’s shares by both local and foreign investors is a strong reflection of investors’ confidence in the quality of its earnings and growth potential. The bank’s performance in recent times has earned it recognition in the international finance market, having been rated as the second fastest growing bank in the world by The Banker magazine.
Intercontinental Bank emerged the first Nigerian bank to cross the $1bn mark in shareholders’ funds following the recent injection of about $161m (N20.25bn) by a consortium of five leading global investors through convertible preferred equity and proceeds from its Public Offer in December 2006. The five foreign financial institutions are to provide operational support and introduce new consumer products and superior mortgage services to customers in the local market.
The bank’s Q1-2007 results further re-affirm its steadiness in growth trends. Gross earnings rose to N28.75bn from N16.62bn in Q1-2006, while after-tax profit soared to N4.7bn against N2.2bn reported in the comparable period of prior year. This implies a 73 per cent and 113.6 per cent growth in gross earnings and after-tax profit respectively. Our recent projections put the bank’s gross earnings and after-tax profit for the year ending February 29, 2008 at N120.75bn and N25.961bn respectively. This translates to an EPS of N2.42 above the current N1.68.
These indicators make the stock qualify as a GOOD BUY at the current price. This is also buttressed by the relative pricing of the Bank’s peers in the market currently.
However, a section of market participants maintains that investors who bought the bank’s Public Offer in December 2006 are yet to realise any returns since they are yet to receive their certificates seven months after the completion of the offer. They also express fears that the stock’s price will be depressed by the expected huge volume of offer/supply when the certificates are finally released.

INTERNATIONAL ENERGY INSURANCE PLC:
International Energy Insurance has recorded precisely 100 per cent returns in almost 1 month after its listing on the Exchange on July 13, 2007 at N1.41. Following the release of its impressive Q2-2007 results, the company recorded a significant quantum of activity during the week. It subsequently went on bid to close at the all-time High of N2.82 on Friday August 10, 2007.
The company’s Q2-2007 results show a 266 per cent leap in gross earnings from N270m in similar quarter of prior year to N1bn rose while PAT soared to N414.9m from N30.60m, representing an astronomical increase of 1256 per cent. International Energy Insurance evolved from the management buy-out of old Global Assurance Company Limited in 2003. IEI has a technical partnership with Health Lambert Group, UK in the area of training and capacity building especially in the specialised area of oil and gas insurance within energy insurance business. The company has experienced, within the short period of time, phenomenal growth in its operations and steadily gaining market confidence via its robust business strategy and innovativeness.
Analysts opine that if the current growth tempo is sustained, it is probable that the company will surpass its projections of N2.03bn and N835m for gross earnings and PAT respectively and subsequently posted an EPS of close to 10k above seven kobo forecast for the year ending December 31,2008.

AFRICAN PETROLEUM PLC:
AP’s is currently undergoing a strategic re-birth with the recent turnaround, which is already upturning its performance indices as evidenced by its audited results for the year ended December 31, 2006. The company’s turnover rose by a whopping 91 per cent to N81.9bn from the N42.8bn recorded in the previous year. Similarly, earnings performance changed dramatically from a loss position of N3.4bn to a PAT level of N2.4bn. This catapulted the company’s EPS from negative N4.52 to N2.74. Net asset per share also rose from 37k in 2005 to N3.11 as at the year ended December 31, 2006. To affirm its strategic repositioning as well as restore investors’ confidence, AP proposes a dividend of N1 per share. The last paid dividend was N3.00 in 2000, though it declared a 1 for 5 bonus in 2005. AP’s Q2-2007 further reinforced its return to excellence as it grew its turnover by 41 per cent, from N31.40bn in the similar quarter of prior year to N48.80bn while PAT rose marginally by 8.7 per cent to N2.15 from N1.98 over same period.

A group of analysts, however, believe that the stock is a good pick for medium and long term investing, given its long term value potential especially with the market perception that the company’s new board headed by Zenon Petroleum & Oil Limited’s boss, Femi Otedola, will bring in some resilience, innovations and dynamism into the management of the company. However, the on-going legal battle trailing the acquisition of substantial equity stake in AP by Zenon Petroleum & Oil Ltd. may throw a spanner in the works of this new core investor. Meanwhile, AP has recorded a 32.7 per cent return from the January 1, 2007 with the year High/Low of N79.00/N47.40 respectively.

PZ CUSSONS NIGERIA PLC:
Investors’ interest in the stock was renewed with the company’s recent result and benefit declarations. PZ recorded a 28.4 per cent jump in turnover from N42.2bn to N54.2bn and a quarter-on-quarter growth of 8.6 per cent in PAT, with PAT figures getting only a meager boost from N3.2 bn (Q2-06) to N 3.5 bn (Q2 07). A cross-section of the market believes the performance is not too striking but for the twin benefits of 71k dividend declaration and 1 for 4 bonus issue. In tandem, the desire of an average Nigerian investor, the aftermath of this magnificent benefit was a firm rally in the share price. The stock, which has hitherto traded at an average price of less than N26 for over six months recorded an all-time High price of N33.50 at the close of trading on August 10, 2007.
However, some analysts are quite skeptical about the long term sustainability of profit growth of the company and the concomitant benefits declaration. Meanwhile, speculators are already taking positions to benefit from the expected price appreciation before the stock marked down for dividend and bonus.

UACN PLC:
The company’s half year results for the period ended Q2-07 reveal that turnover rose marginally by six per cent from N13.40bn in the corresponding period of prior year to N14.2 bn, while PAT increased to N1.50bn from N0.94bn in Q2-06, translating to a growth of 59.6 per cent. PAT after extraordinary income, however, grew by 25.4 per cent from N0.877 bn to N1.1bn.

Though the quarter-on-quarter growth rate in PAT is quite commendable, some analysts however, express deep concerns about the turnover growth rate, which was practically flat. This reinforces the company’s dwindling trend in annual turnover growth rate, which has dropped from double to single digit in recent years. It, therefore, means that UACN has to improve on its cost-savings strategies to remain more competitive and return bumper returns to investors.

Industry analysts however opine that the recent participation of Actis (with 20 per cent holding) might inject fresh ideas that will change the company’s business models and invariably impact on its performance indicators. We maintain a Hold/LONG TERM BUY recommendation on the stock.