Unquoted stocks: Providing equity investment exposure

FOLLOWING two consecutive years of bearish performance, the Nigerian equity market is recovering fast, with the Nigerian All Share Index rallying 4.7 per cent 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, while most investors, local and foreign, focus solely on quoted equities on the Nigerian Stock Exchange (NSE), the Nigerian Association of Securities Dealers Over-the-Counter (NASD-OTC) also offer equity investment exposure to leading companies across different sectors.

Many leading private and unlisted public companies are listed on the NASD. These included Dufil Prima Foods Plc, the manufacturer of Indomie Noodles; Friesland Campina Wamco Nigeria Plc, manufacturer of Peak Milk brand; and Fan Milk Plc, popular manufacturer of Fan Yoghurts, NIPCO Plc, the majority core investor in 11 Plc, formerly known as Mobil Oil Nigeria Plc; Air Liquide Nigeria Plc Industrial & General Insurance Plc, Central Securities Clearing System Plc, the clearing and depository arm of the Nigerian Stock Exchange (NSE); Nigeria Mortgage Refinance Company, Acorn Petroleum Plc, ARM Life Plc, Afriland Properties Plc, BGL Plc, Consolidated Breweries Plc and Food Concepts Plc.

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 rallied strongly, gaining over 70 per cent 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 N0.70 per share dividend translates to 5.8 per cent 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.