Equities investors have intensified bargain hunting on the Nigerian Stock Exchange (NSE) with impressive earnings prospects in capital appreciation.
Available data suggest that investors are increasing stakes on equities trading far below their intrinsic value but with high probability of capital appreciation in the short term.
After the healthy results posted by Skye Bank in the first quarter (Q1) of 2015, its stocks have increasingly recorded high turnover volume. Others in similar category are FBN Holdings, United Bank for Africa (UBA), Access Bank, Wema Bank, and Sterling Bank.
According to stockbrokers, these stocks are all trading below fair value, particularly FBN, Access, and Skye Bank, and it is hoped that when pension funds managers begin to position in the equities of FBN (trading below N10 per share) and Access Bank (trading below N7 per share) the share prices will trend upwards.
Skye Bank’s impressive financial results last week helped the price of the stock to rise to N2.7 at the close of trading on the NSE, up from N2.60.
With this 10 kobo appreciation, the bank’s stock price has appreciated 46 per cent since early February.
This indicates improving investor confidence in the bank’s equities on the heels of its strategic repositioning, and integration of acquired Mainstreet Bank expected to launch the bank to tier one rank.
Skye Bank was the biggest gainer in the banking sector last week, stashing 229 per cent in gains from between May 18 and 22. Wema Bank followed with gains of 155.7 per cent
On May 20, Skye Bank recorded the largest turnover volume of 56.7 million shares, representing market share of 30 per cent of total trade volume on the day.
It was the highest turnover volume of the stock since last February, indicating that investors are increasing their holdings in the bank’s stocks.
UBA followed in high volume turnover with 21 per cent, and Access Bank with 13 per cent.
FBN has sustained its status as a stock consistently ranked among the highest in terms of liquidity. In other words, it is one of the stocks that delight investors in equities as the shares are easy to trade on the NSE largely on account of its consistency in returns on equities.
With N26.9 billion pre-tax profits in Q1 2015, 23.5per cent growth in gross earnings to N126.8 billion year-on-year, the bank promises more mouth watering returns on equity in 2015.
For the 2014 financial year, FBN had given shareholders a twin reward of one bonus share for every 10 held and cash dividend of 10 kobo per share.
However, Skye Bank continued market dominance with 26 per cent of total market share the day after, Fidelity followed with 19 per cent market share and ETI had 11 per cent of traded volume.
Stockbrokers attributed increasing interest in the banks’ equities to the impressive Q1 2015 results which various banks churned out, saying financial performance of companies drives their share prices.
Skye Bank had announced a 23 per cent rise in gross earnings to N42.3 billion, from N34.3 billion in the corresponding period of 2014, with 82 per cent rise in pretax profits to N6.2 billion, up from N3.4 billion.
Profit after tax also jumped 85 per cent to N5 billion, compared with N2.7 billion in Q1 2014.
Pretax profit rose 14.7 per cent, from less than 10 per cent in Q1 2014. This is over 49 percentage points from the equivalent quarter.
For every N100 put in the business in Q1 2015, the bank made N14.7 against N9.9 in Q1 2014. The result is a strong indication of a more efficient bank that promises to consolidate on the gains.
“In the remainder of 2015, we will complete the integration of Mainstreet Bank, and consolidate on our market penetration strategies in the retail and commercial segments,” said Skye Bank Group Managing Director/Chief Executive Officer, Timothy Oguntayo.
“Our tier 1 capital raising project remains on course, having achieved substantial milestones. We intend to complete the project during the third quarter.
“Consolidating our performance in the first quarter, we will intensify our drive for low-cost deposits, enhance internal efficiencies, while remaining confident that our performance in the remaining nine months of 2015 would meet expectations of our various stakeholders.”