July 22, 2007 @ 6.20p.m – Written by January
I like the entries in your blog and your approach to investment analysis.
About 7 more Nigerian banks will be raising funds through the capital market this year. What are your thoughts on their outlooks? I would not think First Bank has the best outlook in the short term even though it’s probably the least risk.
What do you think? FCMB? Fidelity? Access? PHB? Skye? Wema? and possibly Union bank. Diversifying in all of them will not bring the best returns, diversifying in the 2 or 3 best prospects however just might be invaluable.
I would like to know what are your thoughts?
I usually advise prospective investors that investing in the capital market is for the long-term or medium term depending on your reasons for investing in the first place. I’m against short-term investment because tax and commissions will erode capital gains from your investments. From my research and findings, I understand that First Bank stock is scarce on the floor of the NSE, investors will benefit from the likely price appreciation, as the technical suspension will be lifted in a months time. The audited result of the bank is expected to hit the market this month or latest next month. It is likely that the audited result be released towards the lifting of the technical suspension if it is an impressive result; otherwise, it may be released after the technical suspension has been lifted. It is also being speculated that the bank is likely to give a bonus issue of 1 for 6, which will invariably increase the share capital of the company. I think First Bank has a positive outlook both in the short and long term.
Market hearsay is high on a probable bonus issue of 1 for 4 from Union Bank’s audited result expected to hit the market any moment from now. If the bonus issue is eventually given and is of a sizeable quantum, the market price of the stock will rise higher than it’s current price. Union Bank raised additional funds in 2005. The possibility of the bank coming to the market to raise additional funds this year is very slim. At the beginning of this year, Fidelity Bank was selling at N2.17, which implies a 458.3% appreciation in the price of the stock since trading opened this year. The bank’s stock will continue to be attractive if the development that’s being rumored in the market place is true.
The bank will be holding an Extraordinary General Meeting later this month and top on the agenda of the meeting is the possibility of share reconstruction in the bank. If this happens and the bank’s stock follows the trend of others like Access Bank and Bank PHB, it means the stock will be attractive in the long run.