Mid-Week: Market consolidates with 12.28% YTD gains as value investors increase stake
Category: Investors NewsBeat
Risk aversion trend continued on the bourse as sustained decline in speculative trading was observed amid low market price volatility while unrelenting and steady bargain tendency towards value stocks reigned so far in the week.
Mid-week analysis revealed sharp increase and growing bargain appetite towards equities on the bourse despite overbought posture of the market as revealed by the market RSI- this indicates strong optimistic posture of the investors with corresponding increase in commitment level as significantly reflected in naira votes.
The outlook further reveals appreciable decline in speculative trading pattern of the investors while value investors seemed to be dictating pace as more of blue chip stocks consolidate positions while recording new highs accordingly.
Notwithstanding, the market turnover sustained positive and impressive position while naira votes posture further indicates sustained commitment towards investments in equity as noted above.
Meanwhile, market regained its uptrend momentum to stay healthy as revealed by market RSI, indicating increased bargain activities in the market terrain. Though, price correction may set in soon as market trades within overbought range.
In our opinion, some of the impressive earnings report witnessed recently could have been one of the, if not major, factor(s) stoking increased bargain activities while we maintained our position that investors’ crave for interim benefits from blue chip companies remained the driving force of sustained value investing observed
At the end of the today’s session, technical analysis revealed increased market optimism as market witnessed improved bargain activities across attractive sectors while market turnover remained positive.
More so, slight profit taking continued to hit penny stocks while value stocks, mainly in medium capitalisation category, experienced increased patronage.
Market closed with WTD performance of 2.36% gain- weak but sustained market optimism was observed when compared with previous mid-week performance of 0.65% gain while YTD performance stands at 12.28% as against 7.35% recorded in the previous week.
The improved patronage witnessed towards blue chip stocks in Consumer Goods, finance, Agriculture, Healthcare and Industrial Goodssectorscontributed to the market outlook so far in the week.
The Stocks on the Hunters’ Radar
Investors’ Trading pattern and psychology:
The trading pattern suggests low speculative tendency while the profile of top 10 stocks on the investors’ radar reveals moderate risk appetite as majority of the stocks are penny stocks while CONOIL, FLOURMILL and GUARANTY are the only medium and high priced stocks that made top ten stocks on the investors’ radar.
Notwithstanding, we remained concerned as regards to the driver of these top penny stocks that dominated investors’ radar so far in the week.
Further analysis into their last financials revealed mixed outlook as subsequent outlines will shed more lights.
Snapshot comment on their recent results.
Transcorp(Q1'2012 result) records weak bottom-line amid negative turnover growth of -22.44%. Meanwhile, the sustained negative working capital does not suggest sound and healthy financial posture in the face of significant growth in short term borrowings-
The 385% surge in short term loan of the company gives us concern, considering the high interest rate. This further points to inability of the company to secure long term loan which boils down to low credit rating status while we implore the management to put this under control as this may send wrong signal to discern investors.
Conoil(Q3'2011 result) records strong profitability posture which has put the earnings per share at N4.46kobo with sustained impressive turnover trend, indicating active market penetration and market share.
The shareholders' fund remained healthy and robust with 20% growth (YoY) while the 34% growth in working capital shows healthy financial posture of the company, though the significant plunge in bank balances and significant growth in expenses signifies poor cost management while we advise the company to put this under control.
Airservice(Q1'2012 result) records mixed outlook with slight weakness in top-line while the company sustained impressive and robust bottom-line. the financial status of the company healthy with growing working capital and bank balances amid low short term borrowings.
Ikeja Hotel (Q3'2011 result) records unimpressive performance as both top-line and bottom-line record negative growth, indicating weak performance in the quarter.
The financial status of the company appeared worrisome with growing debt profile while the working capital sustained negative posture. Similarly, the bank balance of the company plunged by 99%, buttressing the poor financial posture as observed.
Analysis of investors’ radar (gainers’ list) revealed improved bargain drive towards high and medium priced stocks while penny stocks sustained weak patroange.