REGENCY RESEARCH

Monday August 17, 2020

Movement in Oil Prices and What It Means for Nigeria

The recent volatility in oil prices due to the coronavirus pan-demic and the oil price war between Russia and Saudi Arabia, has caused a drastic drop in Nigeria's revenue profile. Nigeria's oil revenue dropped by N425.52billion in Q1'2020 to N940.91billion and may drop further in the coming quarters. This is a twin challenge for Nigeria as it has negatively impact-ed both the demand and supply sides of the economy. Meanwhile, oil prices have started to recover owing to im-proved compliance to OPEC's output cut of almost 10 million barrels per day and the global easing of lockdown restrictions. Brent crude price rose 40% in May which is its highest level since 1999 while WTI crude price was up by about 80%, its highest increase since 1983. Brent crude was up by more than 5%, to $43.20 per barrel as at June 23rd. This is the highest level since March this year. In a bid to further aid recovery in the global oil market, the OPEC+ agreed on June 6th to further extend its oil production cut of 9.7 million barrels per day till the end of July. Further extension in the coming months is dependent on the compli-ance to quotas of some countries including Nigeria and Iraq. This indicates that the future of the global oil market is still bleak in the medium term although global oil consumption and price may have been recovering as lockdowns ease in North America and Europe. Given the global situation as it relates to oil, Nigeria can expect to navigate much lower costs per barrel and revenue projections for the foreseeable future. This will trigger an increased reliance on domestic and external borrowing and will have negative impacts for the financial sec-tor. Impact on the Nigerian Economy Before the recent economic crisis and pandemic, Nigeria was already reeling from the 2016/17 recession: struggling to boost its growth, rising inflation, depleting external reserves and a huge external debt. The IMF has predicted a 3.4% con-traction in the country's GDP in 2020 due to COVID-19. If oil prices remain soft Nigeria's recovery may be stalled due to its vulnerability to price shocks. Capital Market Summary .

Analysis of the market activity in the week ended August

14, 2020 shows a continued appreciation during the week

under review. The prices of equity in some sectors and

stock market indices went up during the week. The Nigeri-

an Stock Market thereby closed on a positive note with

All Share Index and market capitalization of listed equities

appreciated by 0.63% each from the opening figures of

25,041.89 and N13,1063 trillion to close at 25.199.84 and

N13,146 trillion respectively. Its year to date (YTD) return

stands at –6.12%.

Regency Research | Weekly Market Report

Source: Central Bank of Nigeria (CBN)

Source: Nigerian Stock Exchange (NSE) & Regency Research

Source: Nigerian Stock Exchange (NSE) & Regency Research

WEEKLY MARKET REPORT

MACROECONOMIC INDICATORS

MACROECONOMIC ENVIRONMENT

ALL SHARE INDEX & MKT. CAP

PERFORMANCE OF THE NSE INDICES

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GDP Growth Rate 1.87% March 31. , 2020

Un-employment Rate 23.10% May 20, 2020

Broad Money Supply (M2) N31,763,941.95 rn May 20, 2020

Money Supply (M1) N11,587,048.45rn May 20, 2020

Consumer Price Index (YOY) 12.56% June 30, 2020

Monetary Policy Rate (MPR) 12.50% July 24, 2020

Cash Reserve Ratio (CRR) 27.50% July 24, .,2020

Nigeria’s Bonny Light Crude Oil US$40.16/Bar July 29, 2020

Nigeria’s Gross External Re-

serves

US$36.899Bn July 29, 2020

WEEKLY MARKET REPORT

Domestic Market Review

GAINERS FOR THE WEEK

Twenty Nine Stocks appreciated in price dur-

ing the week, as against forty one stocks in

preceding week. The top ten price gainers

during the week were:

LOSERS FOR THE WEEK

Thirty three Stocks depreciated in price dur-

ing the week as against eighteen stocks rec-

orded in the preceding week. The top ten

price losers during the week were:

EXCHANGE TRADED PRODUCTS (ETP)

A total of 25,904 units of Exchange Traded

Products valued at N169,443,449.75 in

17deals were traded during the week com-

pared with 118,062 units of Exchange Traded

Products valued at N1,060,681,531.26 traded

last week in 26 deals.

BOND MARKET

A total of 2,542 units of FGN Bond valued at

N3,411,596.21 in 7 deals were traded during

the week compared with 56,630 units of

FGN Bond valued at N58,663,979,10 traded

last week in 15 deals

Regency Research | Weekly Market Report 2

Source: Nigerian Stock Exchange (NSE) & Regency Research

MARKET SUMMARY

TOP TEN GAINERS

TOP TEN LOSERS

STOCK MARKET REPORT

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Curr. Week Previous

week

% Change

Volume 1,327 M 1,065 M 24.60

Value N= N=13,934 B N=10,798 B 29.04

Total Gain 29 41 -29.26

Total Loss 33 18 -83.33

Deals 19,392 20,482 -5.32

All Share Index 25,199.84 25,041.89 0.63

Market Cap. N=13,146

Trillion

N=13,063

Trillion

0.63

WEEKLY MARKET REPORT

Domestic Market Review

OUTLOOK AND STOCK RECOMMENDATION FOR THE WEEK

17/08/20-21/08/2020)

The Nigerian Stock Market indices continued to appreciate

during the week under review. The stock prices in some sec-

tors of the market and stock market indices went up making

the market to maintain the gaining trend of the previous

weeks during the week. The All Share Index thereby appreci-

ated by 0.63% compared with 1.40% appreciation in the pre-

vious week. The appreciation may not be unconnected with

improved second quarter results of some stocks and the ex-

pectation of interim dividend from some stocks. We there-

fore recommend for purchase the under listed stocks during

the week due to low and attractive prices, good half year

results, and strong fundamentals. Some of the stocks recom-

mended may likely pay interim dividend as half year results

have started coming in to the market. The stocks are: DAN-

GOTE CEMENT, VITAFOAM, FBNH, FLOUR MILLS PLC, GUAR-

ANTY TRUST BANK, LARFAGE, UBA, FIDELITY, and ZENITH

Regency Research | Weekly Market Report 3

Source: Nigerian Stock Exchange (NSE) & Regency Research

STOCK MARKET REPORT

FINANCIAL HIGHLIGHTS OF RECOMMENDED STOCKS

RECOMMENDED STOCKS TO BUY

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Stocks Current

Price

Max. entry

Price

N=

6-mths

Target

price

%

Change

VITAFOAM 5.75 5.80 7.00 21.74

FLOUR MILL 19.70 20.00 25.00 26.90

DANCEM 136.00 135.00 180.00 32.35

FBNH 5.00 6.00 8.00 60.00

GTBANK 24.90 21.00 30.00 20.48

LARFAGE 11.75 11.00 15.00 27.66

FIDELITY 1.80 1.80 2.50 38.89

ZENITH 16.70 17.00 24.00 43.71

UBA 6.50 6.50 8.00 23.08

Company Result Turnover PAT

Current

N=bill

Last yr

N=bil

Current

N=bill Last yr N=bil Curr EPS Last Div. Paid

UBA PLC First Qter

31/03/2020 147.17 131.67 30.10 28.67 N0.83

N1.00 Total divi-

dend for 2019

LARFAGE

WAPCO 2nd qter

30/06/2020 120.7 117.8 23.3 9.0 N1.45

N1 div. was paid in

2019 FY

FIDELITY

BANK First Qter

31/03/2020 51.16 48.42 5.86 5.94 N0.20

N0.20 final div.

paid in 2019 FY

ZENITH

BANK First Qter

31/03/2020 166.81 158.11 50.53 50.23 N1.61

N2.80 Total divi-

dend in 2019 FY

GTBANK PLC

First qter

31/3/20 112.86 110.33 50.07 49.30 N1.77

N2.80 Pd as total

dividend in 2019

FY

FBNH PLC 2nd Qter

30/06/2020 296.55 140.80 49.46 15.85 N1.35

N0.38 pd as final

dividend in 2019 FY

F/MILL PLC Year end

31/03/2000 573.77 527.40 11.38 4.00 N2.55

N1.40 PD as final

dividend in 2020 FY

VITAFOAM

PLC 3RD QTER

30/6/2020 16.47 17.53 2.14 1.11 N1.62

N0.42 final div.

paid in 2019 FY

DANGOTE

CEMENT 2nd Qter

30/6/202 476.85 467.73 126.14 119.24 N7.45

N16.00 PD as final

div. in 2019 FY

WEEKLY MARKET REPORT

Regency Research | Weekly Market Report 4

Source: Nigerian Stock Exchange (NSE) & Regency Research

STOCK MARKET REPORT

INVESTMENT BASICS

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MARKET DEVELOPMENTS (LAST WEEK )

VALUE INVESTING.

Value investing is a process of seeking securities that are undervalued relative to their intrinsic worh or future prospects, A

value investor hopes that others will eventually recognise the true worth of the security causing its price to rise. When the

stock appears to be fully valued or even overpriced, the typical value investor will sell it and look around for another stock,

starting the cycle again. While the principle of value investing is easy to understand, identifying undervalued opportunities

can require considerable research. Low price alone do not denote an undervalued stock; quality is also important. Accurate

accessing quality requires a thorough understanding of the company, its business, balance sheet, and future prospects. A

search for value always starts with a review of basic, widely available financial indicators, such as Earnings per share, Price

Earning Ratio, Price per Book Value , Dividend Yield. Etc.

ADVANTAGES OF VALUE INVESTING .

A principal advantage of this technique is that a careful stock selection will limit the overall risk of a stock portfolio over

time. Valued situation may offer above average dividend yield. The system generates good return to investors in term of

capital appreciation and dividend pay out.

CURRENT TREND IN THE NIGERIAN STOCK MARKET.

As Nigerian stock market finds it more difficult to climb the ‘wall of worries’ in the recent times, investors or portfolios in

the Nigerian Stock Market are already going through portfolio rebalancing and stock reshuffling during this Covid-19 Pan-

demic. This is considered necessary as the uncertainties that will be associated with post COVID-19 pandemic may likely

have negative trends and affect wealth in the capital market. Experience investors or portfolio managers have already tak-

en and still taking position to reflect these incoming realities as the recent consistent sell-down on the Nigerian Stock Mar-

ket could not be distant from this fear of unknown. The recent report on foreign portfolios participation on the Nigerian

bourse indicates consistent sell-down thereby depressing the market further into negative zone

OUR RECOMMENDATION.

Though, your risk appetite remains an important factor as we implore you to trade cautiously on penny stocks at this time

of growing market uncertainties, except penny stocks with good fundamentals. Concentrate on value stocks with strong

fundamentals. These stocks do retain value and often recover very fast after a general market downturn. Do not get scared

of high-priced the stocks are, they tend to retain value and recover very fast. Most of the valued stocks have enjoyed

strong investors’ loyalty on the back of improved fundamentals. We believe this class of stocks would stand and survive

the market volatility with strong potentials to climb the wall of worries ahead. And in case of any eventualities, they have

strong backbone of good dividend payment and to drive quick price recovery.

Shareholders of Japaul Oil & Maritime Services Plc have approved major resolutions authorising the company to change it name, reconstruct its share capital and raise up to $70 million in new capital as part of significant redirection of the company towards growth and profitability. At the annual general meeting (AGM), shareholders approved the change of the company’s name from Japaul Oil & Maritime Services Plc to Japaul Gold and Ventures Plc to reflect its new business focus from oil and gas servicing sector into natural resource management, specifically the exploration, mining, processing and export of minerals such as gold and lithium among others. Shareholders also approved the reconstruction of all ex-isting ordinary shares of 6.0 billion ordinary shares of 50 kobo each while also authorising increase in authorised share capital to 60 billion ordinary shares. After the reconstruction, shareholders mandated the board to undertake public offering through combination of any of book building and public offer to raise $70 million or its naira equivalent through all possible legitimate means. The net proceeds of the proposed new capital raising will be used to finance the comple-tion of expanded explorations; mining activities; mineral processing; export; engineering design; procurement; installa-tion of a gold processing plant and working capital among others. Chairman, Japaul Oil & Maritime Services Plc, Mr. Paul Jegede said the changes underscored the company’s commitment and proactive nature in exploring opportunities to bring value to its shareholders. According to him, the diversification was due to the belief that natural resources are a viable substitute for oil, as necessitated by oil prices which have been nose diving even before the COVID-19 pandemic.

WEEKLY MARKET REPORT

Money Market

At the end of the week ended August 14, 2020 the Nigeri-

an Interbank Offer Rates (NIBOR) closed negative for

most of the tenors during the week under review. The

NIBOR rate depreciated by 52.11%, 6.41%, and 2.59% for

overnight, three and six months tenors to close at 4.81,

3.74, and 4.24 respectively.

Treasury Bills

The Central Bank of Nigeria during the week sold N19,784

million 91-day treasury bills at 1.20% and N27,000 million

182-day Treasury bills at 3.10% compared with 49,840

million 91-day treasury bills at 1.30%, N54,593 million

182-day Treasury bills at 1.80% and N161,523 million 365

-day treasury bills at 3.35% during the previous week.

Foreign Currency (EXCHANGE RATE).

The Interbank rate for US Dollar closed at N380./$ during

the week under review same with N380.00 in the previ-

ous week. The naira during the week appreciated against

some major currencies. It appreciated by 0.01%, 0.95%

and 0.61% for Euro, Japanese Yen and CFA to close at

N448.98, N3.56 and N0.68 respectively.

OIL PRICE

The Nigeria’s oil price (WTI) appreciated slightly during

the week under review. According to the latest data giv-

en by the NNPC, the oil price closed at $42.01 during the

week, compared with $41.22 recorded in the previous

week .

Regency Research | Weekly Market Report 5

Disclaimer

This report was prepared, issued and approved by Regency Assets Management Limited (RAML). The report is based on infor-

mation from various sources that we believe are reliable. While due care has been taken in preparing it, investors are reminded that the

stock prices fluctuate based on stock market forces.

This report is provided solely for the information of clients of RAML who are expected to make their own investment decisions.

Regency Assets Management Limited accepts neither responsibility nor liability whatsoever for any loss arising from the use of this report. All

opinions on this report constitute the authors best estimate judgment as of this date and are subject to change without notice

This report is for private circulation only. The report may not be reproduced distributed or published by any recipient for any

Source: Financial Markets Dealers Quotations (FMDQ)

Source: Central Bank of Nigeria (CBN)

Source: Financial Markets Dealers Quotations (FMDQ)

This Week

(%) Last

Week (%) % Change

Open-Buy-Back

(OBB) 17.60 6.33 178.04%

Overnight (O/N) 19.80 7.17

176.15%

FIXED INCOME MARKET REPORT

NIGERIAN INTER BANK OFFER RATE NIBOR

NAIRA EXCHANGE RATES

MONEY MARKET RATES

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TREASURY BILLS RATES