Vanguard Markets - October 5, 2014 edition

8/11/2019 Vanguard Markets - October 5, 2014 edition

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Purveyors of basic

necessities feel thepinchAST WEEK IMARA

Africa Securitiespublished Sub-Sa-

haran Africa Fast MovingConsumer Goods Sector Re-port: Limited Window of Op-portunity on Nigerian Con-sumer Specials.

The Johannesburg-basedrm regularly provides inci-sive coverage of several com-

panies on the Nigerian Stock

Exchange. IAS is also knownfor its sector-wide reports thatgive investors a 360 view ofcompany-specic issues andbroader trends. This latest re-port does not disappoint.

In a nutshell, KudakwasheKadungure, the IAS analyst,explains that Nigerianconsumer companies havereeled from the compoundingeects of a triple whammyspurred by a slowdown in

fundamentals following macroshocks, the Boko Haraminsurgency in the countrysnorth-eastern region and nowEbola virus disease.

As an aggregate, compa-nies in the consumer goodsbasket like Cadbury Nige-ria, Dangote Flour, FlourMills of Nigeria, NestlNigeria, PZ, UAC, and Uni-lever Nigeria have erasedgains chalked up in the thirdquarter of 2013. IAS pro-jects that the fall to investordisfavour may linger for theshort- to medium-term dura-tion in spite of the countrys

solid fundamentals. Hereinlies what it describes as arare opportunity to pick upbargains in the Nigerian con-sumer goods sector.

Concrete evidence of thesectors slipping fortune canbe found in the drop in aggre-gated market capitalization ofa sample of consumer com-panies on the Nigerian StockExchange. This has fallen 5.75per cent from N1.68 trillion ayear ago to N1.59 trillion to-day. Analysts place the blamefor the loss in value squarelyat the feet of deterioratingearnings since the Q3 2014.

To shed more light on this,aggregated revenue growth

since July last year has beena disappointing 4.3 per centyear-on-year. Over the rsthalf of this year, things havetaken a turn for the worsewith the sector posting a de-cline of 1.13 per cent over-all. Worst hit were Cadbury12.00%, Flour Mills of Ni-geria 5.12%, and UnileverNigeria 1.31%.

VanguardMarkets | Monday, October 6, 2014 | Issue 013

FIXED INCOME & FOREX

Consumer goods sector

optimism reignites

Source: FMDQ

L

Currency Central Rate

SWISS FRANC 162.0225

YEN 1.4244

CFA 0.2889

WAUA 229.8479

RIYAL 41.3790

DANISH

KRONA26.3113

SDR 230.2668

FrTh

25.00

25.10

25.30

25.20

25.40

Mo Tu Th Fr

CNY/N

FrTh

194.0

195.2

197.6

196.4

198.8

195.8945

Mo Tu Th Fr

Euro/N

FrTh249.0

250.2

252.6

251.4

253.8

249.7041

Mo Tu Th Fr

/N

FrTh

155.0

155.1

155.3

155.2

155.4

155.25

Mo Tu Th Fr

$/N

FOREX RATES

InsideIs art collecting agood investment?The answer dependson many factors.

!Page VM6

CONSUMER GOODS

25.2866

!Page VM2

Ngozi Osamor of Unilever congratulates Friday Igwe on winning a new Hyundai car in the companys Close UpBuy, Win and Display

promo last year. Marketing bonanzas like these are eating deep into consumer companies profits.

Consumer goods brands from lead-

ing companies are usually first in lineto benefit when the economy rises,

and first to take a hit when it falters.

Using listed companies on the Nige-

rian Stock Exchange as a proxy, Imara

Africa Securities forecasts that these

companies present a good bargain at

current prices.

SPOTLIGHT

Sandie Okoro, Global General Counsel, HSBC Asset Management

Balham Girl toCity Superstar

!page VM6


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Irony of deflatedwallets in a boomingeconomy

The dismal corporate perfor-mance notwithstanding ana-lysts at Imara Africa rate Nige-ria one of the top performers insub-Saharan Africa.

Then why do the numbersnot add up on the consumergoods side?

According to Imara Securi-ties a number of factors haveslowed the transmission ofwealth to consumers in themiddle and lower incomegroups. These were the 50 percent hike in petrol prices, theimposition of duties on im-ported processed rice, and in-creased energy costs.

But that is not allCompetition also played a

role in the erosion of protabil-ity. As raw material costs haverisen, manufacturers have beenreticent about passing on fullcosts to consumers so as not tosoil their attractiveness to pricesensitive customers. In addi-tion, companies like companieslike PZ Cussons and Unileverincreased spending on mar-keting and promotions. Thesereduced margins further, andincreased sales expenses.

The worst is overThe Nigerian consumer is a

longer term story and an im-portant ingredient in my port-folio wrote Mathias Althof,a money manager at TundraFonder, a few months ago.The Stockholm, Sweden basedfund management rm over-sees the equivalent of $180 mil-lion, and has over 50 per cent ofits Nigeria and Sub-Sahara

African Fund invested in Ni-geria. Analysts at Imara AfricaSecurities completely agree.

The FCMG report is optimis-tic that the eects of the macroshocks have been fully absorbedand needed adjustments madeby consumers. Pointing to eco-nomic forecasts of GDP growthat 7 per cent for 2014 and 2015,IAS expects a recovery in con-sumer spending to occur fromthe last quarter of this year.

The Imara Africa Securitiespublication comes on the heelsof a Renaissance Capital re-port,Nigerian consumer com-panies: Down but not out, re-leased a month ago. Accordingto Robyn Collinsand Oyin-damola Olanrewaju of Ren-Cap, who prepared the report,stronger economic growth,moderately looser spending asthe February 2015 elections ap-proach, and moderately higheroil output will be positive forconsumer sentiment.

Both the IAS and RenCapreports reach the same conclu-sion that consumer condence

is poised to turn positive forthe rst time since the rst halfof 2011. This predictive con-currence should telegraph toinvestors that this is the besttime to load up on soap mak-ers, biscuit bakers, and drinksmixers.;

IMARA AFRICA SECURITIES RECOMMENDATIONS

Company Recommendation Friday closing price Target Price

Cadbury Nigeria BUY 53.69 61.97

Dangote Flour BUY 6.55 9.13

Flour Mills of Nigeria BUY 62.00 83.69

Nestl HOLD 1,050.00 1,060.20

PZ Cussons HOLD 32.15 33.47

UAC BUY 58.00 76.58

Unilever HOLD 47.99 44.77

BUSINESSVM2

CONSUMER GOODS

VM| Monday, October 6, 2014 | Issue 013

Consumer goods sector optimism reignites

The Nigerian consumer is a longer

term story and an important

ingredient in my portfolio.

- Mathias Althoff,

money manager, Tundra Fonder

WContinued from Page VM1

Data visualisation by Publican Media


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MARKET DATA VM5VM| Monday, October 6, 2014 | Issue 013

MARKET SNAPSHOT

# TICKER WTD YTD

1 DANGCEM -0.46 1.30

2 NB 0.54 7.24

3 GUARANTY 1.87 8.144 NESTLE -2.59 -11.17

5 ZENITHBANK 1.25 -2.80

6 FBNH -3.02 -17.30

7 WAPCO -2.27 10.43

8 STANBIC 2.37 48.84

9 ETI 1.85 14.09

10 GUINNESS 0.52 -19.93

11 FO 0.45 141.20

12 OANDO 5.48 -1.35

13 TRANSCORP 0.00 33.41

14 UBA 0.15 -27.21

15 ACCESS 0.22 -6.15

16 UNILEVER -0.32 -11.32

17 FLOURMILL 1.44 -24.25

18 UBN -0.54 -4.79

19 PZ 0.94 -13.10

20 UACN 1.26 3.59

21 7UP 10.24 128.00

22 INTBREW 3.53 9.64

23 CADBURY 1.98 -44.75

24 DANGSUGAR -2.63 -27.79

25 DIAMONDBNK 0.97 -16.67

26 FCMB 0.45 17.45

27 JBERGER -0.22 1.22

28 ASHAKACEM -1.08 46.25

29 MOBIL -0.97 49.40

30 TOTAL 4.38 6.16

31 FIDELITYBK 3.54 -24.07

32 GLAXOSMITH -3.16 -12.84

33 STERLNBANK 5.12 -9.60

34 PRESCO 5.83 -1.28

35 SKYEBANK 9.09 -36.14

36 CONOIL 2.83 -19.50

37 OKOMUOIL -2.80 -26.37

38 CAP -2.56 -20.80

39 NEIMETH 2.80 0.00

40 MAYBAKER -9.95 -32.55

WEEK-TO-DATE RETURN

-10%

-50%

-20%

-30%

-40%

-10%

0%

+10%

+20%

+30%

+40%

+50%

+60%

+70%

+80%

+100%

+90%

+120%

+140%

+130%

+110%

+150%

0%-5% 5% 10% 15%

YEAR-TO-DATERETURN

LAGGING

SLIPPING LEADING

IMPROVING

12 3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

3233

34

35

36

37

38

39

40

Bubble size = Market Cap

TRADING BREAKDOWNBY SECTOR

Sector %

Financial Services 73

Natural Resources 8

Services 5Others 14

19/09 03/1023/0912.5

12.8

13.1

13.4

13.7

3000

3010

3020

3030

3040

FGNBond Index

Market ValueYTD Return

INDEX PERFORMANCE

IndexWeek

OpeningWeekClose

Change WtD MtD QtD YtD

1 All Shares Index 40,819.72 41,103.94 284.22 0.7 -0.26 -0.26 -0.55

2 NSE 30 Index 1,861.61 1,875.63 14.02 0.75 -0.35 -0.35 -1.65

3 NSE Banking Index 420.30 428.29 7.99 1.9 0.74 0.74 -4.37

4 NSE Insurance Index 149.16 148.40 -0.76 -0.51 -0.53 -0.53 -2.92

5 NSE Consumer Goods Index 1,010.92 1,015.47 4.55 0.45 -1.64 -1.64 -7.71

6 NSE Oil/Gas Index 451.76 461.33 9.57 2.12 0.11 0.11 35.73

7 NSE Lotus Islamic Index 2,705.81 2,696.03 -9.78 -0.36 -1.09 -1.09 -5.84

8 NSE Industrial Index 2,748.03 2,739.15 -8.88 -0.32 0.08 0.08 7.56

MARKET SNAPSHOT

Date DealsTurnoverVolume

Turnover Value Traded StocksAdvanced

StocksDeclinedStocks

UnchangedStocks

All SharesIndex Value

1 29.09.2014 4,567 274,021,093 4,739,691,885.99 105\123 24\29 27\23 54\71 41,105.38

2 30.09.2014 4,894 1,079,687,542 8,084,705,772.57 106\123 30\17 23\40 53\66 41,210.10

3 02.10.2014 4,967 673,973,619 6,319,258,315.77 104\111 29\21 25\31 50\59 41,135.75

4 03.10.2014 4,322 560,322,603 5,758,044,369.95 112\117 22\29 23\22 67\66 41,103.94

The\arrow signifies week-on-week change in value. This weeks value is shown on the left of the\sign, and last weeks value on the right.

GLOBAL INTEREST RATES & INFLATION TARGETS

CentralBank

RateLast DateChange

%Change

InflationTarget

China 6.00% 05.07.2012 -0.31 4.00%

Japan 0-0.10% 05.10.2010 -0.20 2.00%

UK 0.50% 05.03.2009 -0.50 2.00%

USA 0-0.25% 16.12.2008 -0.1 2.00%Eurozone 0.05% 04.09.2014 -0.10


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ART AS AN ALTERNATIVE INVESTMENT

EDITOR: MIDENO BAYAGBON

GROUP BUSINESS EDITOR:OMOH GABRIEL

CONTENT DIRECTION:OBIORA TABANSI ONYEASO

DESIGN & ILLUSTRATION:PUBLICAN MEDIA

Vanguard Markets features unbiased, in-depth coverage of corporateand market developments across a wide range of business sectors.

Every week, Vanguard Markets delivers essential business analysis andcommentary on Nigerian companies, regional economies, and globalmarkets.

Vanguard Markets is published by Vanguard Media Limited in associa-tion with Customs Street Advisors Limited, a specialist communicationsconsultancy.

Vanguard Media Limited,Vanguard Avenue, Kirikiri Canal,P.M.B.1007, Apapa.

Website: www.vanguardngr.com

ISSN 0794-652X

Published by

In Association With

BUSINESSVM6 VM| Monday, October 6, 2014 | Issue 013

N THE KEENLYwatched Powerl-ist 2013 of Britains

most inuential black people,Sandie Okoro sits comfort-ably in the 6th position behindDavid Adjaye, the Tanzanian-born star architect of Ghana-ian parentage, and Ken Olisa,the British boardroom gran-dee of mixed Nigerian descent.On the list shes ahead of Chu-ka Umunna, the shadow busi-ness secretary, and Idris Elba,the actor. Not bad for a womanwhose childhood ambition tobecome a lawyer inspired by

an addiction to Crown Court,a TV drama series from theseventies, was dismissed by awhite teacher with the scald-ing words little black girlsfrom Balham, dont becomejudges. Today, she is the mostsenior lawyer of minority de-scent in the City, Londons -nancial district.

Born to a Nigerian father,and a Trinidadian mother in1964, Sandie, as she knownin the industry, is a self-con-fessed motivator. On her Twit-ter page, she trumpets that her

role is to inspire her follow-ers higher. She believes thatinspiration and motivationcan change mindsets and thatmindsets change lives. Shecertainly puts her resourceswhere her mouth is. Yearsago, she co-founded See thePossibilities, a mentoringprogramme aimed at encour-aging young students in theLondon area to think about ca-reers in the City. She does notstop there. Sandie frequentlyadmonishes those who haverisen to let the ladder down soothers can climb up too. Get-

ting to the top is not a zerosum game in her books.

After her secondary educa-tion at Putney High School, anall-girls private school, whereshe excelled in history, Sandieproceeded to the University ofBirmingham to study law andpolitics. As things turned out,

she did not practice at the Bar,in spite of becoming a memberof Lincolns Inn. Her tower-ing student debts meant thatshe needed a good paying jobsince pupillages were non-paying. This led her to accept atraining contract at Coopers &Lybrand, the predecessor rmof PricewaterhouseCoopers.

The career move put paidto her dreams of becominga judge. It did not hinder herambition to excel. Though shelasted only a year at the profes-sional services rm, she had

had her rst taste of nanceand she would return to it be-fore long.

In 1989, at the relativelyyoung age of 25, Sandie joinedSchroders, an investmentbank, as the head of its trusteecompany. She says that whenshe resumed she had the vagu-

est idea about what merchantbanks did. She wasted no timelearning the intricacies of hernew craft. She would remain atSchroders for seventeen years.

In 2002, not long after shereturned from her maternityleave, Sandie was made a di-rector at Schroder InvestmentManagement, an unusualmove that left her humbledand determined to deliver bet-ter results. In 2007, she left tojoin Barings Asset Manage-ment, the storied British mon-ey manager as its rst general

counsel responsible for man-aging its legal risk across theglobe.

At the start of this year, shewas named as the global gen-eral counsel at HSBC AssetManagement. The companyhas $428 billion under man-agement, over 2,000 employ-ees, and is present in 30 coun-tries.

2014 is already shaping upto be a historic one for the gaptoothed lawyer. In July shewas awarded an honorary doc-torate degree by City Universi-

ty, London for her outstandingachievements in the legal pro-fession and nancial services.In her acceptance speech shetold graduands at the ceremo-ny that the most importantadvice I can give you is do notgive up -there will be manybarriers that you will face butnever give up. Do not stand inyour own way; you must be-lieve in yourself.

From the look of things shehas followed her own advice.In doing so, she has cracked theglass ceiling for women of col-our and immigrants in the UK.

This is where her life shineswith a glitter so bright thatmany people can relate to herjourney. Her list of out-of-of-ce engagements reads as longas an arm.

Sandie serves as an ambas-sador of the British Law Soci-etys Diversity Access Scheme.Since July 2011 she has beenon the Management Boardand the Panel of Expertsof the Hague-based Panelof Recognised InternationalMarket Experts in Finance(P.R.I.M.E Finance). Between

January and June 2014, Sand-ie held the position of presi-dent of International Lawyersof Africa (ILFA). She also sitson the Judging Panel of theErnst & Young Black BritishBusiness Awards.

Her life is a dedication topurpose and celebration of ex-cellence.

An avid tness bu, Sandiecompleted the London Mara-thon in 1997 and 1999. Shehas two children, a 16-yearold daughter, and a 9-year oldson. ;

SPOTLIGHT

Sandie Okoro, Global General Counsel, HSBC Asset Mgt

I

HREE WEEKS AGO,

we brought you therst in a two-part se-

ries of a review on the book,Art as an Alternative Asset? ASurvey of Comparative Assets,written by market expert Mela-nie Gerlis. In this weeks con-cluding episode, we will starto with a brief summary ofGerlis views about the risks ofart in comparison with severalother assets like gold, property,wine and luxury goods.

She asserts, Art has nointrinsic worth but unlikegold, is a market comprisedof unique objects rather thansupporting a product that canbe commoditized. She alsoposits that like property, it isa heterogeneous good, thoughproperty has an actual andeconomic utility. In the samevein, Gerlis writes that the lux-urygoods industry requirescondence to boost demandfor its products, but unlike theart market, now has a mass-market audience to supportharder times.

Crucially, she points out thatdepending on several factorsoutside the control of the in-vestor, art can be a great hedgeagainst ination and a store ofwealth, and oers great returnswhen compared to other pe-destrian assets. Other benetsof art include the aesthetic ex-perience, as well as VIP accessto exclusive social eventsallof which are very real non-eco-nomic returns.

However, most invest-ment decisions are based onan assets worth in relation to

its price, and neither can bepinned down in the elusive artmarket. In spite of this, art asan investment portfolio seemsto defy expert opinion, largelydue to issues of transparencyand regulation.

In her book, Gerlis also ex-amines issues relating to thescant data available on thesales of art and the inconsist-

ency of art indices, the limita-tions of art and wine funds,the exuberant costs of buying,selling and owning art, andthe varying inuences of theauction room including lowestimates, and the nancialcapability of bidders.

Crucially, the author ob-serves that it is the dealerswho have the most informa-

tion in the art market.They determine theprices; not the inves-tors, who remain spec-tators. Signicantly,she highlights the factthat advances in tech-nology and globaliza-tion only serve to forcean increase in infor-mation ow, whichironically is inimical tothe art market, whichthrives on an asym-metry of information.Here, worth and priceare known only to afew.

Auction houses donot oer a level play-ing eld as it is quitecommon for dealers to

bid up work by artists they arealiated with, as well as third-party guarantors who bid upworks in which they hold a -nancial interest. She describesit as a market that thrives onasymmetry of informationand that there is a large bodyof powerful players in whoseinterest it is to preserve theopacity. Melanie Gerlis con-

cludes that the lack of veri-able and meaningful datacontinue to underpin the artmarket and its illiquid status,warning collectors not to viewart purely as an investment.

In the past, time was oncean important leveler. Signi-cantly, Gerlis points out thatthe investment strategy to buyart to hold for a generation isno longer tenable especiallywith regards to contemporaryart. She continues that themarket for investment gradeart by deceased artists is dwin-dling and increasingly out ofthe reach of museums.

Perhaps, a justication forsignicant holdings in art isbased on its relationship withother assets in a portfolio. Thisis a core tenet of Modern Port-folio Theory (MPT) a termcoined by Nobel Prize-winningprofessor, Harry Markow-itz, and which mathematicallyunderpins asset investmenttoday. Markowitz has demon-strated that the best performingportfolio of assets is one that isdiversied, with both risk andreward balanced out. ;

Book review:Art as an Investment?A Survey of Comparative Assets, by Melanie Gerlis Part 2

Oliver Enwonwuis the director of leading Lagos

gallery, Omenka and president of

the Society of Nigerian Artists.

[email protected]

T

Sandie Okoro

Do not stand in your own way;

you must believe in yourself.

- Sandie Okoro

Praise Singer by Demas Nwoko, oil on board, 91.4 x 122 cm.

Sold N7.7 million at Arthouse contemporary auction, Lagos, May 7, 2012

Documents

Vanguard Markets - October 5, 2014 edition