Ghana Stock market recovers as 6 stocks gained.

The performance indicator of the local bourse, the GSE-Composite Index, recovered from its two days loss, following price increments on six stocks. The index closed at 1,990.57, a 0.20% increase from Tuesdays closing of 1,986.51.The GSE-Financial Stock Index was lifted by gains on three financial stocks to close at 1,700.96 from 1,697.03.

A total of 0.89 million shares valued at GHS 2.97 million traded. Today's trade volume and value exceeded the previous session's by  more than three (3) and four (4) times respectively. EBG led the market in terms of volume and value with 55.99% of the total volume and 71.82% of the value traded.

PZC reached a new year-high after gaining 3 pesewas to close at GHS0.80. Other gainers were CAL, EGL, FML, SCB and EBG. TLW was the sole loser.

Find out how 4 stocks moved GSE CI up again.

The stock market gained more ground, recording a second straight win, following positive returns on four  stocks. The GSE-Composite Index rose 9.41 points to close at 1,897.66.
Upward price movement on GCB and SCB drove the financial stock index 12.49 points higher, to close at 1,633.48. 

Total volume of shares traded was 0.79 million, 20.74% less than the previous session. The value traded however, increased by 88.08% from GHS1.06 million on Wednesday, to GHS1.99 million. SIC trades represented 64.91% of the total volume traded, while GCB led in terms of value for the second straight session with 46.09%.

BOPP and GCB gained 2 pesewas each to close at GHS3.21 and GHS4.80 respectively. Other gainers were SCB and TLW.

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

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.

Listing & Trading Rules are set for ETFs on GSE.

Exchange Traded Funds (ETFs) are considered by some financial gurus as an investment product of choice for the inexperienced trader all the way to the professional money managers. In emerging financial markets like that of Ghana, ETFs are yet to see the light of the day. The Ghana Stock Exchange (GSE) announced the introduction of  ETFs in to the market sometime ago and finally, the Securities and Exchange Commission (SEC) has approved the Rules for the Exchange Traded Funds. 
The general listing rules prescribing the requirements for obtaining and maintaining the listing of securities on the Ghana Stock Exchange does not apply to ETFs hence different rules were set for listing and trading. With reference to the Rules for ETFs released this month, trades in ETFs shall be settled through the Clearing and Settlement System of the GSE and Securities Depository System of GSE Securities Depository Ltd just like stocks on the GSE.
This same document revealed that an application for the issue of ETFs must include, Net Asset Value (NAV) of the ETF as at the date of application and the Percentage change of the NAV of the underlying basket of securities / index / underlying asset for the previous 6 months on a weekly basis, among others. The criteria for listing revealed that, the ETFs must be open-ended and fully secured at all times: either by the underlying securities/commodities or financial instruments it represents, a proxy security
acceptable to GSE which should be listed, freely tradable and have adequate liquidity or cash. Looking at the current affairs of the capital market, liquidity issues are very important to the GSE & SEC.
Further scrutiny of the rules showed that, ETF issuers must undertake to compute the Net Asset Value of the ETF on a daily basis and make the NAV public to all market participants at the same time through the GSE. Obviously, no insider trading would be encouraged. The condition for listing stipulated among a list of requirements that, GSE may, in its overriding discretion, grant a listing to an Issuer who does not fulfill the requirements set out or refuse a listing to an Issuer who does not comply with the listing requirements on the basis that, in the GSE’s opinion, the grant or refusal of the listing is in the interest of the investing public.

In terms of pricing the ETFs, the rules stated that, the issue price shall be on a basis approved by the Exchange and shall not include management charges and other fees. Moreover all management charges and other fees are required to be separately specified in the offer Document.

The rules for ETFs are very clear and easy to understand. For more analysis of the essence of these rules, join me on Twitter: peagama (click to follow) or facebook: Patrick .... and let's discuss.
For more details on the Rules for ETFs in Ghana, Click to download full document. (Courtesy: GSE, & SEC).

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.

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.