Investors swoop on Unity Bank, penny stocks

•Power business boosts Transcorp’s prospects

Investors appeared to be factoring immediate to short-term prospects of emerging low-priced stocks into their valuations as significant increase in open buy orders for low-priced stocks highlighted the renewed recovery at the stock market.

Against the background of foreign investors’ interests in Unity Bank Plc, investors appeared to be scrambling for the shares of the banking sector’s lowest-priced stock. Unity Bank recorded the second highest capital appreciation at the stock market last week with a gain of 32 per cent to close at 66 kobo.

Market analysts said the strong rally by Unity Bank might not be unconnected with the reports of expressions of interests in the bank by some foreign investors. Three major investors, Lagos-based Verod Capital Management, Development Partners International (DPI), a United Kingdom-based firm; and Bank of Africa, an intercontinental banking and investment conglomerate were said to be prospecting investments in Unity Bank.

DPI, which was established in London in 2007, was reported to have indicated willingness to make a commitment of up to $200 million in Unity Bank plc. DPI currently manages a $400 million private investment fund and is in the process of raising a further $500 million in investment funds.

With an investment portfolio cutting across several sectors pan-Africa, there is high level optimism among finance analysts that DPI’s entry into Nigeria’s banking industry through Unity Bank will redefine the retail market segment and hike the stakes in terms of competition.

One of DPI’s most recent equity investments was the 67 per cent equity stake in Mansard Insurance, now Nigeria’s third largest insurance companies.

Verod Capital Management has also indicated interest in investing as much as $160 million in Unity Bank. Verod, which is focused on acquiring majority or minority equity stakes in businesses with strong market position, free cash flow potential and substantial value creation through growth and operational improvement, was said to have considered Unity Bank as a good investment choice.

Market analysts said investors saw strong potential in Unity Bank, which had opened the week at its nominal price of 50 kobo per share.

Analysts said although there were concerns about liquidity for low-priced stocks, otherwise known as penny stocks, investors were enticed by the substantial capital gains that could follow the realisation of some of the emerging deals on low-priced stocks.

The impending take-over of the Ugheli Power Plant by Transnational Corporation of Nigeria (Transcorp) Plc also boosted investors’ valuations of the conglomerate. Transcorp was the most active stock during the week, a bullish rally that saw its share price rising by 11.11 per cent to N1.50.

Thomas Wyatt topped the gainers’ list, in percentage terms, with a gain of 33.33 per cent to close at 96 kobo. Airline Services Logistics rose by 15.22 per cent to N3.86. Transnationwide Express, which has outlined a business development plan, rose by 15.04 per cent to N1.30. International Energy Insurance’s share price appreciated by 14.29 per cent to 72.

UAC of Nigeria rode on the back of sale of 49 per cent equity stake in its fast food restaurant business-UAC Restaurants Limited, to a South African firm-Famous Brands Limited to record the highest gain by a large-cap stock during the week. UACN’s share price improved by 11.54 per cent to N60.80.

Late price rallies moderated streak of losses that dominated the week, leaving the market with a modest week-on-week return of 0.25 per cent. The All Share Index (ASI), the common index that tracks all equities on the NSE, closed at 36,188.72 points as against its week’s opening index of 36,098.07. Aggregate market capitalisation of all equities increased from its value on board of N11.494 trillion to close the week at N11.527 trillion. The NSE 30 Index inched up by 0.31 per cent, underlining the gains by some highly capitalised stocks.

Total turnover stood at 1.51 billion shares worth N12.06 billion in 24,983 deals. The financial services sector contributed 1.11 billion shares valued at N6.65 billion in 13,369 deals; representing about 73 per cent of total turnover volume for the week. The conglomerates sector, which was largely driven by Transcorp, placed second on the activity chart with a turnover of 224.98 million shares worth N810.38 million in 1,300 deals.

The trio of Transcorp, Wapic Insurance Plc and Diamond Bank Plc accounted for 563.97 million shares worth N1.47 billion in 1,303 deals, contributing 37 per cent of market’s volume.

 

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