BREAKFAST REPORT: THE WEEK AHEAD, STOCK WATCH & RECOMMENDATIONS FOR WEEK 49

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On the 29th of November, the shareholders of Cement Company of Northern Nigeria (CCNN) and BUA Group’s Kalambaina Cement Company (KCC), voted to approve a merger of the two companies, with CCNN emerging as the resultant entity. This combination is the largest public corporate merger transaction of 2018. Upon approval, CCNN is poised to take over the assets and liabilities of KCC, including a 1.5 million MT plant which is configured to run on multiple fuel sources and boasts a 32MW captive power plant.

This effectively takes CCNN’s production capacity up o 2 million MT and mitigates the company’s dependence on the more expensive LPFO as a fuel source. Whilst CCNN remains the third largest listed producer, the scheme cements CCNN’s place as an emerging titan in the sector and positions it to take advantage of long-term demand in Nigeria and surrounding countries. The scheme is a non-cash transaction involving a share exchange, where 19,811,732 CCNN shares will be issued for every 100,000 KCC shares.

Equity:

Trading in the equity market ended on a positive note last week, with the ASI recording an 86bps d/d gain supported by a rebound across all key sectors. While a much-anticipated strengthening in bargain hunting supported a green close on the bourse on Friday, we foresee a more mixed trading pattern to start the week amid an interplay of underlying weak market sentiment and cautious cherry-picking across beaten-down names.

Stock Watch:

DIAMONDBNK received approval from the CBN to operate as a national bank subject to the sale of Diamond Bank UK. With this approval, the bank will cease to operate as an international bank effectively lowering its capital adequacy ratio requirement. The stock currently trades at a year-low of ₦0.65 and has shed 56% of its value YTD.

Fixed Income:

The Debt Management Office plans to fully redeem all maturing treasury bills in December (₦78.05 billion) and partially redeem (by ₦84.5 billion) bills maturing on 3 January 2019. Whilst this development would normally portend an improvement in demand, we are less optimistic about this, and rather believe that market participants would monitor the actions of the CBN in coming sessions, looking for signs of increase OMO activity in the absence of PMAs.

BREAKFAST REPORT: THE WEEK AHEAD, STOCK WATCH & RECOMMENDATIONS FOR WEEK 49 - Brand Spur

BREAKFAST REPORT: THE WEEK AHEAD, STOCK WATCH & RECOMMENDATIONS FOR WEEK 49 - Brand Spur