Shares in South Africa’s MTN rose 5 percent on Thursday, after Nigeria’s central bank said on Wednesday that it was reviewing information provided by the telecoms firm and four banks over a dispute on the repatriation of dividends.
“The statement suggests there are some talks going on and the market welcomed the less harsh tone by the Nigerian central bank,” said Ruhan Du Plessis, telecoms analyst at Avior Capital Markets.
“It is looking more likely that MTN will not have to pay back the amount after all as the market feared. The market has welcomed the progress.”
The central bank on August 29 said it had ordered MTN and the four banks to bring $8.1 billion back into Nigeria that it alleged the telecoms firm sent abroad in breach of foreign exchange regulations, reports Reuters.
Coy: Zenith Bank Plc
Current Market Price:
Year High: N34.20
Year Low: N 19.60
Fair Value: N40.89
Key Financial Ratios
- Interim Dividend for the period is 30 kobo, up from the previous 25 kobo paid in the corresponding period of 2017.
- Payout Ratio is therefore same as 11.52% (H1-2017: 10.42%)
- Sustainable Growth rate is currently estimated at 10.05%
- Non-Performing Loan ratio in the review period was 5.51%, compared to the 3.28% posted in the 2017 full year financial performance, indicating the need to watch its asset quality.
- The five-year average Dividend Yield of Zenith Bank Plc has been estimated at 10%, above the industry average of 2.21%
- Similarly, the five-year dividend growth rate is currently estimated at 11.03%, lower than the estimated industry average of 25.77%
- Five-year average effective tax rate is currently estimated at 15.11%
|ZENITH INT’L PLC|
|Bourse||Nigerian Stock Exchange|
|Market Classification||Premium Board|
|Nature of Business||Commercial Banking|
|Date of Incorporation||May 30th 1990|
|Date Listed||October 21st 2004|
|End of Accounting Year||31st December|
|Share Price@Relsd (N)||23.95|
|Earnings per Share||2.60|
- Gross Earnings for the half-year 2018 came 15.31% below that of the corresponding period of 2017. Please note that N322.201 billion was reported as Gross Earnings from the previous N380.440 billion.
- 19% same as N74.709 billion of the Gross Earnings was reported as Interest Expense for the period as against N123.29 billion same as 32.41% that was reported last H1 financials
- Nevertheless, Profit before Tax (PBT) reported for the period was N107.35 billion, which is 16.46% above the N92.18 billion achieved in the corresponding period of 2018.
- Profit after Tax (PAT) equally came higher than that of last year by 8.52%, moving from N75.317 billion to N81.737 billion
- Total Assets reported for the period stood at N5,256.46 billion compared to the N4,927.36 billion in 2017.
- Total Liabilities stood 7.82% above same quarter in 2017.
- Total deposits from customers for the six months was estimated at N3,165.95 billion, a marginal growth of 6.42% above the N2,972.93 billion reported in 2017.
- Perhaps due to the bank’s conservative approach, the amount offered in Loans and Advances reduced by 14.36%, when compared with the reported value in 2017.
- Due to marginal difference between the Total Assets and Total Liabilities for the two periods compared in this report, Net Assets estimated for the reported period only inched above that of the similar quarter of 2017 by 2%.
- See table below for details:
|ZENITH INT’L PLC|
|Financial Positions||2018(Mill)||2017(Mill)||% CHG|
|Cash and Cash Equiv. with CBN||843,674||679,915||24.09|
|Total comp Income||82,937||70,440||17.74|
|Loans & Advances||1,873,173||2,187,352||-14.36|
- Although the estimated beta value for Zenith Bank shares stood fairly below the industry average, but well above the Market Beta. This signifies its liquidity and patronage by the investing public
- Although almost irrelevant, since we analyze a financial institution whose major business is to collect deposit (mostly reported under liability), we estimate Debt/Equity ratio as 106.74% well above the industry average of 25.30%
|Volatility||ZENITH INT’L PLC||INDUSTRY|
|Debt to Equity||106.74||25.30|
- Interest Expense to Gross Earnings is presently estimated at 23.19%, which is 28.45% lower than the 32.41% estimated in the 2017 half year.
- PBT margin stood at 33.32% as against 24.23% last year, this is a 37.51% improvement.
- Similarly, Profit margin looked up against last year’s figure. We have estimated a 25.37% margin from Gross Earnings as against the previous estimate of 19.89%
- Return on Average Equity is now 11.36%, compared to the 10.47% returns achieved in the first six months of 2017
- Return on Average Assets only differs marginally by 1.73%, moving from 1.53% to 1.55%
|Interest Expense to Gross Earnings||23.19%||32.41%||-28.45%|
- Gross Earnings to Total Assets ratio is estimated at 6.13%, which is 20.61% lower than the 2017 estimate.
- Similarly, Gross Earnings to Equity is now 44.78% as against the 52.89% estimated in the 2017 half-year statistics.
- Financial Leverage is 7.31x as against 6.85x, this is an estimate of the number of times the Total Assets replicates the Equity. In other words, the ratio got better.
- It was also established that 59.17% of the Total Deposit went to customers in the form of Loan and Advances during the period under estimate, 19.53% lower than the 75.53% given out during the first six months of 2017
- Meanwhile, Loan and Advances is same as 35.64% of the Total Assets this is 19.72% lower than the 44.39% of last half year. This shows a controlled/reduced risk compared to 2017.
|Gross Earnings to Total Assets||6.13%||7.72%||-20.61%|
|Gross Earnings to Equity||44.78%||52.89%||-15.33%|
|Loan to Deposit||59.17%||73.53%||-19.53%|
|Loan&Adv to Total Assets||35.64%||44.39%||-19.72%|
- Just as in the company report above, since share outstanding remained constant during the two periods under consideration, the estimated amount earned per unit of Zenith Bank shares is N2.60, 8.52% better than the N2.40 of prior half-year.
- Due to Foreign currency translation differences for foreign operations, the Total Comprehensive Income per share for the period is N2.64 as against N2.24 last half year, this is 17.74% difference.
- P/E Ratio for the period is 2.30x as against 2.50x estimated last year.
- The Book Value of Zenith Bank is N22.92 fairly same as N22.91 last year. Please note that this almost same as the current market price of Zenith Bank shares (N20.05). Kindly understand the difference between the price when this result was released and when the analysis is being done
- OpEx Margin was controlled against the similar quarter of 2017 as the ratio adjust from the 32.41% to 23.19%
|Sustainable Growth Rate||10.05%||9.38%||7.16%|
Our attempt to place a fair value on Zenith Bank took us through several valuation methods after which we settled for the constant perpetual dividend growth rate. We do not expect galloping growth in dividend, since this has experienced appreciable growth in few years prior, so we make use of 2.758% as our growth rate. To arrive at this value, we estimated five years dividend growth rate at 11.03%, and we make use of the average. It was also assumed that the final dividend will be around N2.50, and discounted at 10%. On this strength, we have placed a fair value of N40.89 per share.
Market Update for September 19, 2018
The nation’s equity market had a mixed session at the midweek to close marginally lower, on a positive sentiment, despite the seeming profit booking in insurance stocks that had recently rallied as a result of the expected merger and acquisition ahead of the recapitalization in the sector.
The Nigerian Stock Exchange (NSE) Index at the opening of the session slipped downward slowly until mid-morning and into the midday, before consolidating by afternoon after touching intraday lows of 32,269.75 basis points from the highs of 32,392.93bps. It thereafter closed the session at 32,375.12bps on a low traded volume.
The mixed corporate earnings and low equity prices are factors attracting bargain hunters to the market despite the economic slowdown, and ahead of the Q3 earnings season. Traders always take advantage of price disconnection from fundamentals, especially when it’s driven by fear or confidence. The prevailing situation in our market today is traceable to the twin effects of political fear and the ensuing dwindling economic activities. These fears: political and other worries have been priced into the stocks making them highly undervalued, especially the blue-chips. There are hopes that the strong and growing fundamentals of these companies will support their prices before and after the 2019 general elections, all things being equal.
Gradually, we are seeing a convergence in MACD that may support short rally in this downturn. The performance gap between the composite index and technical indicators are now close to rebound points since it looks like the index is resisting further decline.
On Wednesday, we mentioned emerging market economics benefiting from forced trade reform in China and others.
In short, all of the countries that have been short-changed on their global trade competitiveness because of China’s weak currency policies, should benefit in a world where China is held to a standard of fair trade. Emerging stock markets are expected to witness big move with the idea that these countries may get a better crack at global demand, I suspect these stock markets could be in for a big rebound.
Back home, despite the prevailing market situation, many company fundamentals remain intact and attractive, but identifying when to buy is however what matters now which technical analysis will do for you. The market is preparing to produce another set of billionaires in 2019 and beyond, that is why you should go for Investdata Consulting’s July 28, 2018 Stock Trading Workshop HOME STUDY PACK. These are audio-visual materials you can play to view the live class on your phone and laptop to help you know when to jump into the market and specific stocks, or stay out. For your Study Pack, call or send ‘YES’ to the phone numbers below.
Market technicals for the day were positive and mixed with low volume and positive market breadth as revealed by Investdata’s Daily Sentiment Report, showing a ‘buy’ position of 86% and ‘sell’ volume at 14%. Volume index was 0.85 of the day’s total transactions.
The momentum behind the day’s market performance was further strengthened despite the prevailing weak situation, as shown in the money flow index at 32.83bps, up sharply from previous day’s 25.37bps, indicating that funds are entering some stocks and the market gradually in the midst of low liquidity.
Index and Market Cap
At the end of the midweek trading session, the NSEAll share index shed marginal 5.88bps, closing at 32, 375.12bps, after opening at 32,381bps, representing a 0.02% slide, just as market capitalisation dropped by N2.14bn to close flat at N11.82tr, which represented 0.02% value loss.
Notwithstanding, this is the time to join Investdata Buy & Sell Signal setup, where you can look over our shoulder and follow to know when to hold cash and take advantage of the watchlist of stocks for different investment purposes that you can position in for maximum gains in the coming weeks and months given that the lingering market decline has and continues to create new entry opportunities. To become a member, send: YES or STOCKS to the phone numbers below. The number of stocks on our watch list has increased due to the prolonged correction. Take advantage of this service to BUY and SELL right.
Midweek downturn was impacted by losses suffered by low, medium and high cap stocks like, International Brewery, PZ, UBA, FBNH, AXA Mansard and Hallmark Insurance, among others. This impacted slightly on the NSE’s Year-to-Date return, following which the loss inched to 15.34%, while market capitalization for same period is down N1.79 trillion, or 13.15% from the year’s opening value.
Mixed Sectoral Performance
The sectors indexes were largely bullish for the day except for NSE Consumers and Insurance that closed lower, as the weak purchasing power tells on consumer goods sector and uncertainties as insurance operators begin the jostle for funds to meet the new three-tiered minimum capital bases prescribed by the industry’s primary regulator- the National Insurance Commission (NAICOM).
Market breadth remain positive for the session with advancers outweighing decliners in the ratio of 24:13, even as market activities in volume and value terms were down 39.95% and 62.32% respectively, to 190.35m shares worth N1.77bn, from previous day’s 267.81m units valued at N2.65bn. This was largely driven by financial services, oil and conglomerates stocks like: Redstar Express, Zenith Bank, Oando, Transcorp and Fidelity Bank
Forte Oil and CCNN were the best performing stocks, topping the advancers’ table after gaining 10% and 9.7% respectively to close at N22 and N24.80 each respectively, purely on their low-price sentiment and expected better Q3 numbers.
On the flip side, AXA Mansard Insurance and PZ were the worst performing, shedding 9.6% and 7.4% of their opening value respectively to close at N2.06and N12.5 on market forces and bearish trend.
We expect the market to continue in this direction over the next few days, ahead end of the quarterly rally that will usher in Q3 earning season in October, in the midst of rising oil prices, as well as the expected new policy statement and reform to stimulate the economy again. The ongoing volatility is likely to persist as bargain hunters take advantage of the low-price regime, in the midst of continued selloffs and political risk, especially as shadow elections by political parties kick off any moment from now.
Meanwhile, investors are looking forward to Q3 earnings reports so as to rebalance their portfolios and watch the political space. Meanwhile, analysing the actual numbers released has given basic insights into company earnings that are likely to drive prices and determine market valuation.
Investors should review their positions in line with investment goals, vis-à-vis strength of company numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst mixed company, economic and market fundamental.
The Central Bank of Nigeria on Wednesday said it has commenced a review of the information provided by telecoms giant, MTN, and four banks sanctioned recently over alleged illegal repatriation of funds.
The apex bank said the review of details submitted by the four banks, accused of helping the South African telecoms company to illegally repatriate $8.1 billion, is being done with a view to reaching an “equitable resolution.”
The central bank had on August 29 ordered MTN and the four banks to bring $8.1 billion back into Nigeria that it alleged the telecoms firm sent abroad in breach of foreign exchange regulations. The development affected shares in MTN which fell nearly a third in Johannesburg stock market after the announcement.
The apex bank thereafter fined and debited the four banks including Standard Chartered PLC, fined 2.4 billion naira ($7.86 million); Stanbic IBTC Bank PLC, fined 1.8 billion naira; Citibank, fined 1.2 billion naira; and Diamond Bank PLC, fined 250 million naira.
The banks in separate statements denied wrongdoings. MTN also denied any wrongdoing. Shortly after the development, Nigeria’s attorney general, Abubakar Malami, imposed a $2 billion tax bill on the telecoms firm. In response to the tax demand, MTN filed a lawsuit accusing Mr Malami of exceeding his powers. The development has created ripples among experts, with concerns raised around the state of Nigeria’s business environment.
But on Wednesday, the apex bank said it is engaging and reviewing the information provided by the banks due to concerns raised after the sanctions were imposed.
“The Central Bank of Nigeria (CBN) acknowledges the public interest over sanctions recently imposed on four deposit money banks (DMBs),” the statement, signed by Isaac Okorafor, CBN’s Director of Corporate Communications, said.
“We wish to restate that the CBN will continue to welcome foreign investments and investors. Indeed, some of our recent innovations and reforms of the Foreign Exchange regime such as the introduction of the NAFEX window, are designed to simplify foreign exchange regulations.”
The bank noted that the delegation of the issuance of Certificates of Capital Importation (CCIs) to commercial and merchant banks some years ago was done to instill confidence in the investor community and encourage the flow of foreign direct and portfolio investments into the Nigerian economy.
The recent sanctions on the banks arose due to irregularities with respect to repatriations made on behalf of MTN Nigeria Limited and were not in any way designed to restrict access to investor returns, it said.
“In response to the recent regulatory actions, the Banks and MTN are engaging the CBN and have provided additional information which is currently being reviewed with a view to arriving at an equitable resolution,” it added.
MTN’s latest troubles come about two years after it agreed to pay more than $1 billion to settle a dispute over SIM cards in Nigeria, the telecoms giant’s biggest and by far most problematic market.
The stock market declined by marginal 0.02 per cent wednesday despite higher number of price gainers. Although a total of 24 stocks appreciated, the Nigerian Stock Exchange (NSE) All-Share Index declined by 0.02 per cent to close at 32,375.12. Market capitalisation shed N2.1 billion to close lower at N11.8 trillion. Profit taking in International Breweries Plc, FBN Holding Plc and United Bank for Africa Plc led to the decline in the index.
However, Forte Oil Plc led the price gainers with 10 per cent, trailed by Cement Company of Northern Nigeria Plc by 9.7 per cent. Regency Alliance Insurance Plc and
Sovereign Trust Insurance Plc appreciated by 9.09 each.
Prestige Assurance plc went up by 8.7 per cent, just Union Diagnostic & Clinical Services Plc garnered 8.5 per cent.
Other top price gainers included Linkage Assurance Plc (8.4 per cent); Union Bank of Nigeria Plc (6.4 per cent); AIICO Insurance Plc (6.2 per cent) and Skye Bank Plc (6.06 per cent).
The shares of Forte Oil Plc has attracted high demand lately. The petroleum product marketing firm had ended half year to June 30, 2018 with an impressive performance.
Profit after tax from continuing and discontinued operations increased by 93 per cent to N 7.9 billion compared to N4.11 billion recorded in 2017. Earnings per share grew by 47 per cent to N1.54 compared to N1.05 recorded for the same period in 2017, while total assets improved by four per cent to N153 billion, up from N147 billion recorded for the same period in H1 2017.
According to the company, the first half of 2018 witnessed a more stable operating environment with higher oil prices, foreign exchange availability and improved petroleum product supply across the country.
“As a company, we commenced our strategic plans and initiatives to re-examine our business model and optimizing our balance sheet through asset disposal and expansion of our downstream operations in Nigeria. In May 2018, we obtained the approval of the board and shareholders at the 39th annual general meeting to pursue our divestment initiatives and the company commenced the process to divest its interest in Power, Upstream Services and Marketing in Ghana (APOG). As at 30 June 2018, these subsidiaries were classified as disposal groups held for sale and as discontinued operations,” it said.
The company explained that despite the operational challenges and discontinued operations, the company recorded 32 per cent growth in revenues, translating to N61.8 billion, compared to N46.7 billion in H1, 2017 as a result of improved product supplies. While administrative expenses reduced by nine from N3.82 billion recorded in 2017 to N3.48 billion in 2018.
Sirika, who spoke to newsmen in his office on Wednesday, said the decision was taken at the Federal Executive Council meeting for strategic reasons
The Federal Government has suspended the national carrier (Nigeria Air) project, according to the Minister of State for Aviation, Senator Hadi Sirika.
Sirika, who spoke to newsmen in his office on Wednesday, said the decision was taken at the Federal Executive Council meeting for strategic reasons.
He, however did not give details of the “strategic reasons” for the cancellation of the project.
He said: “Today the government at the FEC took decision to suspend the national carrier project till further notice.
“It has nothing to do with pressure from stakeholders and it also not for political reasons.
“The decision to come up with national carrier in the first place was as a result of the lack of capacity of the existing carrier to meet demands,” he said.
On the possible thinking of the international interested parties, Sirika said the government had shown serious commitment towards the project, adding that the suspension would not affect government’s credibility before international interested parties.
The News Agency of Nigeria reports that the minister had on July 18 unveiled the name and logo of the airline named “Nigeria Air” at the Farnborough Air Show in London.
He had announced that the airline would begin operation in December with an initial capital of $300 million.
Sirika had also stated that the airline would be private sector driven with government controlling only 10 per cent of the equity.