Author Archives: Mr. Peter Aro

Custodian Investment Plc has delivered a standout performance in the first half of 2024, surpassing its pre-tax profit forecast by a significant margin.

With this backdrop, the key question remains: Is now the right time to buy, hold, or sell Custodian Investment’s stock, given its strong first-half performance and second-half targets?

Beating Forecasts and Setting the Pace 

Nairametrics had earlier reported that Custodian would beat its Q2 forecast, given the company’s overachievement in Q1 2024.

For the first half of 2024, Custodian Investment forecasted a pre-tax profit of N12.105 billion but delivered N25.745 billion, representing 112% of its forecast and a 294% year-on-year growth.

This strong performance was driven by strong investment results, which rose by 84% YoY to N33.491 billion. Custodian Investment’s core insurance business also contributed significantly, generating N60.964 billion in insurance service revenue, representing over 90% of the total revenue recorded for the full year of 2023.

However, insurance service expenses remain a challenge, consuming N59.872 billion of that revenue, resulting in an expense-to-income ratio of 0.98.

While this marks an improvement over the first half of 2023, when the ratio stood at 1.11, it highlights the company’s ongoing battle with rising costs

Targets for second half of 2024

With the first half exceeding expectations, Custodian has set target for the second half of 2024, aiming for a pre-tax profit of N36 billion.

One key factor that could support the Custodian’s continued outperformance is the current high-interest rate environment, which has already been pivotal in boosting its investment income.

In the first half of 2024, interest income from investments measured at amortized cost of N13.07 billion, constituted the highest portion of its total interest income.

This surge in investment returns, driven by elevated rates, contributed to Custodian’s overall 84% YoY growth in investment results. If interest rates remain elevated, the company’s investment portfolio is likely to continue benefiting, further strengthening its ability to hit its aggressive second-half targets.

Dividend Performance and Valuation 

Adding to the appeal for investors, Custodian Investment has demonstrated commitment to rewarding its shareholders.

The company raised its total dividend by 23% in 2023, increasing the payout from 65 kobo per share in 2022 to 80 kobo per share in 2023.

Following its impressive first half performance, Custodian Investment declared an interim dividend of 15 kobo. Given its ambitious full-year forecast, there is a strong possibility that the company will exceed its final 2023 dividend of 65 kobo.

The stock offers a trailing twelve-month dividend yield of 7.11%, one of the highest in the Conglomerate/Diversified sector, boosting total returns to 52%, the second-best in the sector. This makes Custodian an attractive option for income-seeking investors, especially when combined with its strong stock performance.

This potential for an increased payout could further enhance total returns, investor confidence and attract interest in the stock.

From a valuation perspective, Custodian Investment’s stock appears undervalued relative to the industry. The stock is trading at a price-to-earnings (P/E) ratio of 2.10x, lower than the industry average of 4.67x.

Its price-to-sales ratio of 0.69x and price-to-book ratio of 0.85x are also below the industry averages of 0.87x and 0.94x, respectively. This suggests the stock is trading at a discount, providing a potential opportunity for investors looking to capitalize on Custodian’s growth story.

The stock has gained 44% year-to-date, closing at N13 per share as of September 23, 2024.

NGX Broker Ratings Mixed 

According to the NGX Compendium of Broker’s Stock Recommendations for the week of September 24-27, 2024, there are differing opinions on Custodian Investment Plc.

Bancorp Securities has placed a “Hold” rating on the stock, suggesting it is reasonably valued and a stable investment, while Meristem has issued a “Sell” rating, reflecting concerns about potential downside risks.

These varied ratings highlight balanced sentiment, with the company’s strong earnings growth weighed against its rising expenses.

Custodian Investment Plc’s first half of 2024 has been an undeniable success, exceeding expectations and positioning the company for further growth. However, rising costs, along with divergent views from brokerage firms, suggest that investors should carefully weigh their own risk tolerance.

Whether to buy, hold, or sell hinges on an investor’s risk tolerance and outlook for the second half of the year.

-By  Idika Aja

 

On Wednesday, Fidelity Bank briefly surpassed the N17 mark during trading, maintaining its upward trend that has gained momentum in September, before closing at N15.35.

As of the end of trading on September 25, 2024, the bank’s stock has soared by more than 38%, reflecting strong investor confidence.

This recent rally comes in the wake of the bank’s successful hybrid offer, consisting of a rights issue and an Initial Public Offering (IPO) launched on June 20, 2024.

The offer comprised 10 billion ordinary shares priced at N9.75 for the public and an additional 3.2 billion shares offered to existing shareholders at N9.25, collectively raising N127.1 billion.

Following the conclusion of this offer in mid-August, Fidelity’s stock began to consolidate in the early days of September. By the third week, however, the stock regained bullish momentum.

Share Price Trend   

Fidelity Bank’s stock has followed a steady bullish trajectory that dates back to August 2018, when its share price had fallen below N2. Since that time, the stock has gained over 680%.

The bank began 2024 trading at N10.85, with a total of 900 million shares exchanging hands at the time.

However, uncertainties surrounding the recapitalization efforts affecting major Nigerian banks triggered a slight dip, pulling the stock down to N9 per share in April.

Despite this brief setback, Fidelity’s stock quickly resumed its upward climb. As of September 25, 2024, the share price had risen by over 38%, with a monthly trading volume exceeding 400 million shares.

Drivers of Bullish Sentiment 

The bank’s hybrid offer launched in June attracted substantial investor interest, leading to the issuance of an additional 8.2 billion shares in July.

Of these, 5 billion shares were sold via the public offer, and 3.2 billion shares were issued through the rights offer.

This strong demand triggered a surge in trading volumes, with over 2 billion shares traded in June and an additional 3 billion in July. By the time the hybrid offer closed on August 12, Fidelity Bank’s stock began consolidating.

However, trading activity picked up sharply by mid-September, with weekly volumes reaching 27 million shares.

By the fourth week of September, over 400 million shares had changed hands, driving the stock to print a higher high above N17.

Meanwhile, in a recent message to investors, Fidelity Bank’s Managing Director, Nneka Onyeali-Ikpe, expressed her gratitude for the overwhelming response to the capital raise.

She highlighted the rising investor confidence and strong market participation as key factors fueling the bullish sentiment surrounding Fidelity Bank’s stock.

– By Izuchukwu Okoye

 

Flour Mills of Nigeria Plc (FMN) has announced plans to buy out its minority shareholders after receiving the necessary regulatory approvals to move forward with the process.

The company, one of Nigeria’s largest food and agro-allied businesses, disclosed on Tuesday that its majority shareholder will propose a formal buy-out offer to minority shareholders.

The buyout will be conducted through a scheme of arrangement, having already received the green light from the Nigerian Exchange Limited (NGX) and the Securities and Exchange Commission of Nigeria (SEC).

With the development, FMN is set to streamline its ownership structure, aligning the company’s operations with its long-term vision.

According to, Boye Olusanya, FMN’s group managing director, the move is part of the company’s broader strategy to position itself as a leading pan-African food business

“In line with FMN’s ambition to become the leading Pan African food business that feeds and enriches lives of its consumers every day with quality brands, this move aligns with our strategy aimed at positioning the company to achieve its ten-year vision of building a company that is sustainable, resilient, dynamic, and adaptable in its people, systems, and structures,” Olusanya explained.

The proposed buyout is expected to enhance FMN’s management efficiency and decision-making capabilities by allowing the company to operate with more agility. The restructuring will enable the majority shareholder to better align FMN’s entities with its unique characteristics and attract the necessary investments to support the long-term growth.

As part of the process, FMN has notified both the NGX and SEC of the buyout offer. The company will now file an application with the Federal High Court to convene a shareholder meeting, where the resolution to buy out minority shareholders will be proposed. The resolution will pass if at least 75 percent of members present and voting—either in person or by proxy—approve it during the Court-Ordered Meeting (COM).

FMN’s board of directors has already recommended the offer to shareholders for consideration, highlighting the potential benefits of the buyout. If successful, this strategic move is expected to bolster FMN’s capacity to innovate and grow while maintaining a sharp focus on creating long-term value for the business and its stakeholders.

By Hope Moses-Ashike

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has decided to further raise the interest rate by 50 basis points or 0.50 per cent to 27.25 per cent from the 26.75 per cent it pushed it to at the last meeting in July.

This came as the 12-member committee of the apex bank unanimously decided to hike the rate despite back-to-back cooling in the inflation rate in the last two months.

The Governor of the CBN, Mr Yemi Cardoso, who doubles as the Chairman of the MPC, disclosed this at the end of the MPC meeting held in Abuja.

The apex bank further increased the Cash Reserve Ratio (CRR) of commercial banks by 500 basis points from 45 per cent to 50 per cent, and retained the Liquidity Ratio at 30 per cent and the Asymmetric Corridor at +500 basis points/-100 basis points.

Mr Cardoso admitted that the decision to hike the rate was rationalised by increased energy prices, adding that the committee expects that further hikes will help ease inflation further.

Inflation rose to its highest level in 28 years in June 2024 at 34.19 per cent. However, it cooled to 33.40 per cent in July and further eased to 32.15 per cent in August 2024 due to an improvement in food supply influenced by the harvest season.

-By Adedapo Adesanya

The Naira depreciated to a new low against the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Tuesday, September 24, as the Central Bank of Nigeria (CBN) shocked the market with a further boost to interest rates.

At the official market, the domestic currency lost N95.82 or 6.13 per cent on the greenback to exchange at N1,658.48/$1 versus the N1,562.66/$1 it was transacted a day earlier.

The apex bank after the 297th meeting of the Monetary Policy Committee (MPC) announced another increase in its Monetary Policy Rate (MPR) by 0.50 per cent to 27.25 per cent, despite the market expecting a pause as inflation had cooled in the last two months.

Explaining the rationale, the CBN Governor, Mr Yemi Cardoso, said the move would further contribute to cooling the inflation, and said the bank would continue to utilise all tools at its disposal to help the economy.

FX supply to the market improved yesterday by 66.0 per cent or $66.15 million as the forex turnover for the session settled at $166.36 million, in contrast to the preceding day’s $100.21 million.

Equally, the Nigerian currency depreciated against the Pound Sterling in the spot market on Tuesday by N63.99 to wrap the session at N2,131.86/£1 versus the previous day’s N2,067.87/£1.

Similarly, against the Euro, the local currency weakened by N15.64 to sell at N1,778.07/€1 compared with Monday’s closing price of N1,762.43/€1.

Also, in the parallel market, the Naira performed badly against the Dollar on Tuesday as its value declined by N5 to quote at N1,670/$1 versus the preceding day’s N1,665/$1.

Meanwhile, the cryptocurrency market was majorly positive on an anticipated global monetary easing cycle as China joined all other major global economies in easing monetary policy to combat a slowdown in the economy.

Cardano (ADA) rose by 6.4 per cent to $0.385, Solana (SOL) jumped by 2.8 per cent to $150.32, Dogecoin (DOGE) gained 1.9 per cent to sell at $0.1096., Bitcoin (BTC) rose by 1.4 per cent to $64,138.92, Ripple (XRP) appreciated by 0.4 per cent to $0.588, and Litecoin (LTC) went up by 0.1 per cent to $63.58.

On the flip side, Ethereum (ETH) dropped 0.3 per cent to quote at $2,624.71, Binance Coin (BNB) decreased by 0.2 per cent to trade at $601.38, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.

-By Adedapo Adesanya