The year 2020 no doubt is a dismal year for most Nigerian companies and their shareholders, but there are stocks whose shareholders are seemingly prospering in this coronavirus (COVID-19) pandemic era.
Despite the early optimism in the first month of 2020, a sharp decline in crude oil prices driven by the coronavirus pandemic led to a now nearly–bearish stock market.
BusinessDay has identified 14 stocks on the Nigerian Stock Exchange (NSE) that yielded positive returns in excess of +10 percent as at half-year (H1) to June 30, which outperformed the NSE All-Share Index (ASI) with record negative return of circa -9 percent.
Two of these stocks that put smiles on investors face are in the healthcare sector; two are in telecoms sector; three are in industrial goods sector; one is in consumer goods sector; two are in oil and gas sector; two are in the agricultural sector, and two are in the insurance sector.
In the healthcare sector, Neimeth shares rose by +166.1 percent in the H1 to June 30, while May & Baker advanced by +48.7 percent.
For the Telcos, MTNN shares increased by +11.9 percent in H1 while that of Airtel Africa rose by +10 percent. The insurance sector saw stocks like Law Union increase by +106.0 percent in H1, while AIICO advanced by +27.8 percent same period.
Looking at the performance of equities in the agric sector, Livestock Feeds went up by +24 percent in H1 while Okomu Oil advanced by +39.2 percent.
The two companies in the oil and gas sector that their shareholders made money in this pandemic are Mobil (+30.2 percent) and Conoil (+13.5 percent).
Beta Glass (+27 percent) led the industrial goods sector rally, followed by Cutix (+20.3 percent) and BUA Cement (+10.6 percent). Vitafoam shareholders saw their shares rise by 27 percent in the first half of 2020.
Meristem Securities in its June 29 note recommended most of these stocks for investors to “Buy”, “Hold” or “Sell”. MTNN and Airtel, Conoil, and Okomu Oil are on their “buy” list, while Vitafoam is on their “hold” list.
For those on Meristem Securities analysts’ “buy” list, it is because their Target Price (TP) is above the current market price by at least 10 percent, while for those in the analysts’ “hold” list, it is because their TP ranges between -10 percent and 10 percent from the current market price.
Stocks in the health and pharmaceuticals sector and those in telecoms have been on the rally radar. For the health and pharmaceutical sector, the reason is the significant stimulus plan put together by the Central Bank of Nigeria (CBN) to support operations in the health and pharmaceutical industry.
Also, the N100 billion credit support fund is targeted at the healthcare sector to aid working capital and support research. The health and pharmaceutical sector remains at the forefront of the Federal Government efforts in the fight against COVID-19 pandemic. Since the stimulus announcement, it has spurred interest in healthcare and pharmaceutical stocks listed on the Nigerian bourse.
“Lockdown measures put in place to curb the spread of the coronavirus put the telecoms sector as the biggest beneficiary of the pandemic. Most formal businesses have now moved to work from home, which requires increased data consumption on the part of employees,” said FSDH research analysts.
“Also, we note that with individuals sitting at home all day, social media activities have received a significant boost while visits to streaming platforms have become a norm in a bid to provide some sort of entertainment,” the analysts said.
Though many listed companies’ first-quarter (Q1) results were not utterly negative, they were obviously affected by the pandemic and the lockdown across states. Analysts expect the second-quarter (Q2) results to more precisely echo the impact of COVID-19–driven decline in economic activity.
“A significant number of sectors will be severely negatively affected by COVID-19 and its associated impact. For the crude oil sector, lower oil prices and demand will slow investments into different segments of the sector as well as raise nonperforming loans,” FSDH analysts noted.
“The movement restrictions and lockdown of economic activities will have tremendous negative impacts on sectors such as transport, education, trade, entertainment, and the construction sector will suffer from lower government revenues. Higher demand for ICT and health care services will lead to the expansion of both sectors. Agriculture has remained resilient during and after 2016 recession. The constant demand for agriculture output for both consumption and as intermediate input will sustain the sector,” they said.
Also, equity analysts at Lagos-based Vetiva said early optimism about economic growth and strong earnings at the start of the year has all but gone.
“In the banking sector, we expect a decrease in Interest Income, caused by lower repayment rates and an increase in loan deferrals and extensions. Furthermore, we expect the consumer and industrial goods companies to report lower revenues, due to the weak economic activity and diminished,” Vetiva analysts noted in their half-year outlook.
“While we expected a more attractive market for investors in 2020, the poor macro environment, currency devaluation, and general uncertainty over crude prices have dampened investors’ view of the Nigerian market. In the second half of the year, we expect the recovery in equity prices seen in second-quarter (Q2) to continue -albeit at a slower pace with local investors continuing to drive a majority of the activity on the bourse,” the analysts noted.
The Q1 GDP data show a very high concentration of economic activities in a few sectors – five sectors (agriculture, crude oil, manufacturing, trade, and telecommunications).