Focusing on the Banking sector of the Ghana Stock Exchange (Part I)

The financial sector on the Ghana Stock Exchange includes banking and non-banking stocks. There are seven (7) banks on the exchange, six of which operate in the country and one in Gambia, (Trust Bank ltd, TBL). The banks operating in Ghana include CAL Bank (CAL), Ecobank Ghana (EBG), Ghana Commercial Bank (GCB), HFC Bank (HFC), Standard Chartered Bank (SCB), and UT Bank (UTB).

Let us now look at the various facts & figures behind these banks and how they performed since January 2012 on the Stock market.
I would be concentrating on GCB & HFC in this post.

Ghana Commercial Bank (GCB);

GCB - Bloomberg Chart: Price movement from Dec 2011 to May 2012. 

With market capitalization of about GHS 506.15 million, GCB began the

Fri.18.05.12: Ghana Stock Exchange (GSE) Market Update.

Friday, GSE Market Update;

CAL Brokers: 

Courtesy: CAL Brokers

In the market today, the major indices, the GSE-Composite Index and the GSE-Financial Stock Index, gained some ground following price appreciation in two equities.

The GSE-Composite Index closed at 1,046.94 points from 1,041.30 points and the financial stock benchmark closed 6.99 points higher at 910.75 points. The year-to-date return on the market rose to 8.04%. 

Taking a closer look at Unilever Ghana Limited (UNIL)

Today, I want us to focus on Unilever Ghana Limited (UNIL) and it's performance in 2011 and in the year so far. In my earlier post about the 1st Quarter of the Manufacturing sector, I wrote on the current standing of the company on the exchange. 

UNIL: 1st Quarter Chart on GSE: (courtesy; Bloomberg & GSE) 

We would look at more figures and how investors are reacting. UNIL as we know, manufactures and markets consumer goods throughout Ghana some of which includes toilet soaps, personal products, detergents, and consumable food products.

This year, UNIL began trading at GHS 6.64 (03.01.12) per share on the exchange. UNIL has issued about 62.50 million ordinary shares on the Ghana Stock Exchange (GSE) with market capitalization of GHS 509.38 million. As released by the exchange, UNIL records a dividend yield (%) of 5.89. It was also recorded a price per book value from the most recent quarter as reported by Bloomberg as 8.6373. 

Investors reaction to the stock on the exchange has not changed so much. The shares are trading from time to time and most of the time as odd lots. As at today, the price remains at it's year high of GHS 8.15.

UNIL reported in March 2012 that it has made a revenue of GHS 239,005 for the 2011 financial year. In a press release to the Ghana Stock Exchange, it reports a profit after tax for the year as GHS 30,115, an increased of the one for 2010 which was GHS 17,947. Shareholders equity increase from GHS 41,340 to GHS 48,893.(NB: all figures are expressed in thousands of GH cedis unless otherwise stated)

UNIL would be having its Annual General Meeting on 27th April 2012 at the National Theatre. Shareholders are advised to go and contribute to the discussions and also vote on issues. Moreover, the company has proposed a dividend per share of 0.4800 pesewas which has a qualifying date as 25th April, 2012.

We hope to keep our eyes on UNIL and it's affairs in the household & consumer products sector.

Benso Oil Palm Plantation (BOPP) in the 1st Quarter of 2012 on Ghana Stock Exchange

6 months performance on GSE - BOPP [Oct - Mar]

Benso Oil Palm Plantation with GSE stock ticker symbol; [BOPP] is an oil palm producing and processing company and was listed on the GSE on August 30, 2004 when it was converted into the public limited liability. The nature of businesses the company is authorized to carry on include: Growing of oil palm and other agricultural products, Processing of oil palm fruits to produce palm oil and palm kernels and Dealing & trading in palm oil, palm kernels and other agricultural products.

BOPP on the Ghana Stock Exchange has recently been the choice for investors as the company continues to show greatness in different forms.

The Key Statistics for BOPP as researched by Bloomberg reveals that, the current P/E ratio [trailing twelve months (ttm)] is 6.0546 and Earning per share (EPS) (ttm) is 0.2808.  BOPP’s current market capitalization is GHS 59.16 million with about 34.80 million shares outstanding. Price per Book (most recent quarter) is valued at 1.9908.

BOPP started the year, 2012 on the Ghana Stock Exchange with a share price of GHS 1.10 (03.01.12) and has since been rising to attain a year high of GHS 1.78 (20.02.12); the highest since 18^th October, 2011. An investment made in BOPP exactly a year ago would make an outstanding 121.23% profit to date.

Year to Date change on GSE - BOPP [Jan -Mar. ]

Analysts predict further rise in price of this stock in the year but the greatest fear for most investors is the Election Year fever on the market which has shown its power over stocks in the past years.

We hope to closely follow this stock and see how investors react to it despite the election year’s controlling force in the market. 

Is CAL Bank undervalued on the Ghana Stock Exchange?

The debate continues everywhere among investors as they keep wondering whether CAL Bank shares on the Ghana Stock Exchange are undervalued. My earlier post on the 2011 year review of CAL bank on GSE has shown clear analysis of CAL as at last year. It showed the potential of CAL's share price rising this year as the bank plans to recapitalize to meet the required capital as proposed by the Bank of Ghana. Meanwhile, some investors and market analysts argue that, the share price is undervalued to the extent of stating that there could be a rally on the exchange for these stocks very soon.
Let us look at some figures of the Bank; (courtesy: Bloomberg)

Valuation and Earnings as at 20.02.12.

The Banking stock shows a relative P/E to the GSE Composite Index of 0.2628 and a P/E ratio (ttm) of 3.6220 as reported by market analysts.

With a current market capitalization of about GHC 64.48 million, the Bank would recapitalize this year to meet the requirement.


Dividends figures & Other Market figures

Chart: Share Price Movement from December 2011 to Date on GSE.

Ghana Stock Exchange Composite Index: So far in 2012

The Ghana Stock Exchange Composite Index (GSE-CI) includes all ordinary shares listed on the GSE with the exception of those companies whose shares are listed on other exchanges. (e.g.  ETI, TLW).  The base index is 1000 and the index is a market capitalization weighted index.

Last year, the index closed at 969.03 (30-12-11) below the base index. There were some highs and lows this New Year and investors are hoping to see the index above the base index.

Below is how the index fared so far in 2012. [22-12-11 to 19-01-12]

This Week in focus on the Ghana Stock Exchange (16-01-12 to 20-01-12)

2011 Year Review of CAL Bank on the Ghana Stock Exchange.

Overview of Company

 CAL Bank Limited formerly Continental Acceptances Limited and then CAL Merchant Bank was incorporated on March 20, 1989 but the bank was licensed in June 1990 and commenced business in July 1990. With issued shares of 238,802,978, CAL Bank is listed on the Ghana Stock Exchange (GSE) and the share price is 0.23p as at December 6, 2011. We would be looking at how this bank performed on the GSE for the 2011 financial year.
As at 31st December, 2010, the Social Security and National Insurance Trust (SSNIT) held 82,363,074 shares in the bank making 34.13% whiles Mr. Afare Donkor, the largest individual shareholder and second largest shareholder held a stake of 7.51% representing 18,120,000 shares.



Analysis

CAL Bank began the year, 2011 with a share price of 0.33p (04/JAN/2011) and because of investor activities & active trades, share price of the bank rose to 0.39p (04/FEB/2011). Meanwhile, the stock price dropped steadily after that time to close at 0.26p on 22/March/ 2011. Further fluctuation of price was recorded from July to October 2011. Ten months down the year, CAL recorded a Year high of 0.39 pesewas and Year-Low of  0.25 pesewas (p). The volume of trade heightened at the end of October and hence was reflected by an increased in share price by some pesewas.
CAL stock and other financial stocks performed badly in November making the Financial Stock Index remain lower than the Base index of 1000.

The Year 2011 obviously was not the best year for most stocks on the GSE and CAL Bank is no exception.

I would be writing on Ecobank Ghana Limited (EBG) in my next post. I would be reviewing EBG stock on the Ghana Stock Exchange for the Year 2011.

[Courtesy: Ghana Stock Exchange, Bloomberg]

One year GSE Equities Trend Analysis for FML, EBG & GCB

One Year EQUITIES TREND ANALYSIS. [Charts from Databank Financial Services]

Fan Milk Limited (FML)

  Ecobank Ghana Limited (EBG)

  Ghana Commercial Bank (GCB)

 

History of Initial Public Offers (IPO) in the Ghanaian Capital Market.

Initial Public Offering which is popularly known as IPO comes about when companies issue new shares to the public to purchase as a source of raising capital. Ghana has a wonderful history of IPOs and since the inception of the Ghana Stock Exchange (GSE), there have been so many IPOs with an impressive performance in the market. Meanwhile others were just so bad and despite their impressive subscriptions, they traded badly on exchange.

On 12^th November, 1990, Accra Brewery Limited (ABL) made a provisional listing on the Ghana Stock Exchange, making it one of the earliest companies to be listed on the Ghana Stock Exchange. This company and others existed before the inceptions of the GSE Public Limited Liability Companies hence were initially given provisional listing status before the formal listing. ABL made its formal listing on 20^th December, 1991 (Source; GSE Research Dept.).

One IPO listing was by SPPC and this was from December to February 1992. Eight (8) million shares were offered but only 4.2 million shares were sold to raise an amount of 630 million old cedis (GHC 63,000). Mechanical LLoyd Company Ltd (MLC) also offered 11 million shares as IPO at 50 old cedis (0.05 pesewas) per share from December 1993 to February 1994 and only 9.36 million shares were sold which raised an amount of 468.16 million old cedis (GHC46,816). Looking at these historical trends, it is obvious that early IPOs were cheap but subscriptions were not impressive. In January 1995, HFC Bank stocks were oversubscribed when they made a placement.  Shares offered were 11.35 million at 100 old cedis (0.10 pesewas) and 13.10 million shares were sold to raise about 1,315.45 million old cedis (GHC 131,545). Most of the time, shares of this nature were patronized by foreigners because the investment community of Ghana was small by then. Aside the HFC placement, SSB (now known as SG-SSB) IPO in 1995 was also oversubscribed. Many companies like ALW, UTC, PZ, EIC, FML made primary issues which were not necessarily IPOs. In 2006, Ghana Commercial Bank (GCB) issued and IPO of 49.50 million shares but 68.44 million shares were subscribed. This oversubscription set the pace for most IPOs and the investment community of Ghana especially the youth, took advantage of them. Initial Public Offers of Camelot (CMLT), Produce Buying Company (PBC), Sam Wood Ltd (SWL), Cocoa Producing Company (CPC) followed and in 2004 alone, four (4) Companies (CLYD, BOPP, CAL & SPL) listed IPOs on the GSE. But how well do the trade on the Exchange?

About two year ago, Ecobank Transnational Incorporated (ETI) offered an IPO that was largely subscribed meanwhile these shares are facing liquidity problems as at now in the market. Share price of ETI has fallen below its IPO price and shareholders are not happy at all.  UT Bank entered the market with an IPO which was also oversubscribed but the question still remains, do IPOs perform well in the market. Shares of UT bank had so many problems when it started trading in the market but is currently bouncing back.

The most recent IPO issued in the market is the shares of Tullow Oil, just weeks ago and these were undersubscribed. Does it mean that the investment community is no longer having confidence in IPOs or it was due to the costly price of this particular offer? As an investor, you must find out because this can inform your investment decision.

Is Ghana Stock Exchange a company? Who owns it? What is it then?

Hello reader,
I decided to write this because of some questions posed to me by some followers of this blog and it is all about the Ghana Stock Exchange. "Is the Ghana Stock Exchange a company?" she asked, If it is a company then who owns it and what do they do? If not a company then what is it?
Just like a market for trading fish, tomatoes, yam and other products, the Ghana Stock Exchange is a platform for trading securities (shares, bonds, futures, etc). Sellers bring their products and buyers come to buy. But because there are a lot of sellers and buyers, they are represented on the Exchange by Licensed Dealing Members (LDMs), (what people called Brokerage Firms or brokers). This means as a buyer or a seller, you cannot go to the exchange to buy or sell yourself (although some do).
The Ghana Stock Exchange plays a major role in securities industry regulation and is thus classified as a Self- Regulatory Organization. With respect to its numerous responsibilities, it simply monitors trading. It has Directors just like a company but the Securities and Exchange Commission oversees its regulation by making sure they do what they are supposed to do in the market and what is appropriate under the Security Industry Law (SIL)- the principal regulator.
When Public Limited Liability Companies want to raise capital for their business, the list shares on the exchange (that is, allowing people to own part of their company), so when investors study the company and find that the company is good and strong among other factors, they contact their brokers for them to make the trade - money, for part of the company. That is what the Ghana Stock Exchange oversees; that the right amount is paid and the ownership rights of part of the company is transferred to the name of the buyer or investor (in form of shares).
Finally, the Ghana Stock Exchange is privately financed and managed with the budget mainly financed by its members (LDMs and Associates) and issuer companies.

Value Investing and its rewards on the Ghana Stock Exchange.

There are different kinds of stocks or shares of companies on the Ghana Stock Exchange and every investor has a purpose for investing with reference to individual risk preference and time horizon. An investor’s purpose for investing could be for growth or for income or value. Value investing is investing in stocks believed to be worth far more than their current prices rather than those that pay high dividends or seem likely to appreciate irrespective of underlying value. 

On the stock market, there are some stocks that are mispriced. Mispricing is calculated as the difference between the estimated intrinsic value and the market price of a stock. Intrinsic value of an asset, in this case stock, is the value of the asset given a hypothetically complete understanding of the asset’s investment characteristics.  Therefore when a stock is undervalued on the exchange, there is an investment opportunity and smart investors take advantage of that.

The Question then is, how do you know whether a stock is undervalued or not? This is where you need an expert to advice you. Knowing this involves a lot of factors and calculations. One must first valuate the stock using some figures on the financial statement of the company. Some industry experts say that, UT bank is currently undervalued on the stock market. They make their argument with respect to the potentials of the company and how low it is currently priced on the Stock market (0.33p, courtesy: GSE). One thing you should know is that, so many investors do these calculations and that informs their investments strategy. An advice to you is that, for an active strategy to be consistent and successful, the investor’s expectations must differ from consensus expectations and be, on average, correct as well.