7 December - Lagos Markets - Niyi Ogunbayo - Bank PHB
CNBC Africa
Transcript
the Nigerian B was up again on Friday mainly due to a lot of bargain hunting why are stocks cheap so now in your view yeah you know before now there are a lot of event that have happened this year from from the global economic crisis to the domestic banking crisis that sent fears to all investors and that led to the for sale of several stocks so stocks have really Fallen badly at Le stocks this year are falling by more than 37% so it's not uh surprising that the stock are still very cheap right now the major cause is actually the the downfall in the banking industry which has spread Affairs across all other sectors and as you mentioned uh the banking stocks they rallied on Friday um but as you said they're still pretty cheap what is the market facturing in right now um that these banking stocks are still so low particularly in the sector yeah actually you know at present banking stocks are St cheap they trading at a PO ratio of about 16.5 times and when you adjust back for the provisions that have been made they tra at P of uh about 5 to six times there are still shap no doubt about that but investors have a lot to be worried about uh because a number of things are still in the air like for instance the CBN Governor said they're going to establish asset management company to take over the bad loans of of the banks before the end of this year so there's no new information on that that is a great uncertainty then the bad loans that the banks have uh have recorded we don't know how how they've gone with the recovery effort and we don't know the plan of the CBN on how the troubled banks are going to be uh handled in respect of the fund that has been injected into them how they're going to be uh carried how they going to manage going forward the investors are looking to buy the banks we don't have any information and we don't know maybe those banks will be acquired locally by other Banks or by any other Arrangement so there are a lot of things that very in the banking industry particularly then the economy generally well where banking stocks aren't performing I guess investors are turning to uh stocks like um like Guinness which was the highest gainer in absolute terms on Friday but Nigeria breweries out with results last week quite positive it seems like investors are are turning away from Nigeria breweries and moving towards Guinness why is that uh actually what happened on Friday that Guinness gained Nigeria buy closed flat was basically a result of the forces of demand and Supply because if you compare these two companies based on their fundamentals you will see Nigerian buy appears to be better than the Guinness for instance Nigerian buy uh is operating at a profit margin of about 15% while Nigerian bu is operating at a Prof margin of about 18% and when you look at their relative valuation Nigerian bu is trading at a p ratio of about 13 times and but when you look at Guinness is traing at the p ratio of about 15 times so when you look at that uh Nigerian bu appears to be relatively cheap compared to Guinness so it's just a a temporary swing I believe in the long run uh the prices will adjust accordingly well interesting news coming out last week was that the NSE says that it wants to um to to list oil marketing companies um o oil Majors uh for free um in a bit to kind of restore confidence in the market um our Market Watcher last week says that he doesn't see a lot of um oil companies uh listing what's your view on this yeah you see there are several factors that companies considered uh in deciding whether to list on the stock exchange but I believe uh the quotation fee is one of the least uh factors that is usually considered especially by big companies if a company does not need long-term capital if a company does not link the Nary publicity that comes with the quotation they may not decide to list when you look at telecomunication sector you look at companies like MTN uh it salot uh Zen and um and the rest they have huge cash flow because most of principally their business are based on cash bases so if they don't have any need to raise Capital they will not come to the uh stock market and when you look at the oil sector major oil marketing firms have been listed on the exchange except if we are considering listing the Upstream I mean the Upstream part of the business which I doubt will happen anytime soon so the quotation fee is a minor factor to be considered in listing so I don't expect that to um to induce our firms in the Telecom sector o sector to come and list just in terms of some macro news out uh today the finance ministry is holding a press briefing to um basically explain a little bit more about the 2010 budget is already said that growth this year is going to be 5.7% 6% next year what else could possibly come out of this press briefing yeah maybe they will may we expect the uh finance minister to mention uh issues about budget uh for 2010 right they need to discuss why they've agreed The Benchmark oil price to be $20 less than the current price then they need to shed light on the what the uh government is doing about the banking industry uh what is the way forward I expect that to be covered on are the breathing and generally the Outlook of the economy in 2010 and going forward