16 Jan

Daily Watch – NSE leaves the world in the dust, Swipha Nigeria shuts down over staff woes

  • The main NSE index has surged 12 percent this year in dollar terms, the most among 96 major bourses according to Bloomberg, adding ₦1.76 trillion in the first two weeks of the year, pushing it to ₦15.37 trillion, the highest level since 2008. The largest company on the exchange, Dangote Cement has climbed to a record high. FirstRand Asset Management believes the advance will probably be sustained thanks to rising prices for oil, Nigeria’s main export, and as investors look to increase their holdings of what remain among the cheapest stocks in Africa. New York-based Global X MSCI Nigeria ETF attracted record weekly net inflows last week, helping to increase the exchange-traded fund market capitalisation to almost $90 million, double the level in May last year. Even after the gains, Nigerian valuations are the least expensive among major African equity indexes, stocks trade at a forward price-to-earnings ratio of 10.1, while South Africa’s are at 14 and the MSCI Emerging Market Index is at 13, suggesting further upside for growth.
  • More than two-thirds of quoted Nigerian companies will come under the pricing band of one kobo. The NSE is set for the implementation of new pricing rules that will remove the current stop-gap that has supported stocks at their nominal value and allow shares of quoted companies to trade for as low as one kobo. The NSE will begin the implementation of its amendments to the pricing methodology and par value rules on 29 January. Under the new pricing rules, share prices shall be allowed to trade as low as a floor price of one kobo. The new rules effectively remove the rule which places minimum allowable price to trade for any stock at its nominal value, irrespective of the market forces. A classification guideline for the implementation of the new pricing methodology indicated that about 67 percent of quoted companies – including such companies as Africa Prudential, BOC Gases, Custodian And Allied, Eterna, Fidson Healthcare, Interlinked Technologies, Nigerian Aviation Handling Company and Nigeria-German Chemicals, will come under the immediate pricing band of one kobo, 27 percent will come under a band of five kobo while the remaining 6 percent will come under a band of 10 kobo.
  • Swipha Nigeria says it decided to temporarily shut down its Nigerian operations because of the uncooperative attitude of its staff who have been on a strike since mid-December, protesting the company’s decision to layoff some workers. Managing Director, Gaby El Khoury, said the shutdown was to guarantee the safety of the company’s property and equipment from being damaged by staffers. Swiss Pharma was acquired by Biogaran SAS, a French pharmaceuticals manufacturer, a unit of France’s second-largest drugmaker, Les Laboratoires Servier in March 2017 after an initial $500,000 investment and has embarked on a restructuring of the business to ensure efficiency and align the Nigerian firm with global best practices.
  • Vitafoam’s audited results for the 12 months ended September 2017 showed revenue increase by 30 percent from ₦13.5 billion in 2016 to ₦17.6 billion in 2017, but profit before tax dropped from ₦61 million in 2016 to ₦16 million in 2017. The Vitafoam Group made a loss for the third consecutive year as it made a loss after tax of ₦127 million. The flagship of the group, the Vitafoam Company made a profit of ₦190 million, a 116 percent drop from the ₦412 million it made in 2016. Increases in the cost of finance and raw materials were the key factors behind the poor results. Finance costs increased by 22.9 percent from ₦895 million in 2016 to ₦1.1 billion in 2017. The costs of raw materials and consumables also increased by 34.8 percent from ₦8.9 billion in 2016 to ₦12 billion in 2017. Vitapur Nigeria, Vitabloom and Vitavisco were the only subsidiaries that made a profit in 2017 with the group’s West African subsidiaries in Sierra Leone (₦200 million) and Ghana (₦154 million) as well as Vitagreen and Vono Furniture bled cash.