Unquoted stocks gain traction

…as CSCS, WAMCO lead activity at OTC equity market

Adesola Afolabi

Following two consecutive years of bearish performance, the Nigerian equity market is recovering fast, with the Nigerian All Share Index rallying 4.7 percent year-to-date.

Pundits attribute the stellar performance of the market in January 2020 to a number of factors, including low valuation of stocks, high dividend yield expectations and increased allocation to equities by fund managers, who seek higher return on investment, following notable moderation in yields on fixed income instruments. Notably, a number of banking stocks on the Nigerian Stock Exchange, such as Zenith Bank, UBA, GTBank have dividend yields in excess of 10%, reinforcing the attraction for equities.

Interestingly, whilst most investors, local and foreign, focus solely on quoted equities on the Nigerian Stock Exchange, the Nigerian Association of Securities Dealers Over-the-Counter (NASD-OTC) also offer equity investment exposure to leading companies across different sectors. Notably, shares of WAMCO, the leading dairy company in the country is traded over the counter on the NASD.

One of the most actively traded stocks on the NASD has been the shares of Central Securities Clearing System (CSCS) Plc, the financial market infrastructure for the capital market. CSCS, the Central Securities Depository (CSD) and settlement institution for the capital market provides stable and diversified exposure to the capital market.

Amid the bearish equity market over the past two years, the shares of CSCS (currently priced at N12) rallied strongly, gaining over 70 percent over the past two years, delivering stellar return to its shareholders. The performance of the stock partly reflects the steady dividend payment culture of the company.

Notwithstanding the share price rally, the 70 kobo per share dividend for the financial year, translates to 5.8 percent yield on the share price of N12.00 as at the close of market on Friday, 07 February, 2020. Beyond the steady cashflow that the CSCS dividend provides to investors, the strong fundamentals of the company has been a compelling attraction to investors.

Posting N6.1 billion profit before tax in 2018 and poised for growth in 2019FY based on the quarterly performance, CSCS’ diversification strategy has proven effective. Renowned for its strong governance, stable profitability and increasing earnings diversification, CSCS remains a prime toast of investors. Despite being unlisted, the stock attracts notable liquidity on the NASD Over-the-Counter. The NASD lists the company as a top traded securities by volume and value, alongside the Niger Delta Exploration and Production company, WAMCO, Trustbond Mortgage Bank, among others in the just concluded week