It was a remarkable year for the Nigerian Stock Exchange.
The All Share Index surged 44.6% in US dollar terms thanks to impressive profit growth and a raft of market reforms.
Let’s take a closer look at the year’s best performers.
10. MRS Oil
+106.7% (Local Currency: +117.7%)
If recent results from this service station operator are any indication, the pace of Nigerian life accelerated dramatically in 2013. Its third quarter earnings statement shows sales of petrol increased 36% over the prior year.
MRS, which owns 416 filling stations, was forced to slash its dividend in 2012 due to thinning margins and a big foreign exchange loss. But now, with sales up and costs in check, investors are banking on a much larger 2013 payout.
9. Wema Bank
+115.2% (Local Currency: +120.4%)
This smallish regional bank gave investors two big things to cheer about in 2013.
First, it returned to profitability by cleaning up its lending book, driving the non-performing loan ratio down to just 3% from a level of 14% one year earlier.
Second, it raised $250 million in additional capital, making it eligible to obtain a national banking license. The company now intends to expand nationwide from its base in the west of the country.
8. Union Dicon Salt
+125.4% (Local Currency: +130.9%)
A resurrection story.
Until last year, this salt-maker’s shares were so dormant that the Nigerian Stock Exchange was on the verge of having them de-listed.
And share illiquidity was far from its biggest problem. In their review of the company’s 2011 financial statement, auditors noted that the company reported a big earnings loss and that its current liabilities exceeded current assets by roughly $6 million. They questioned whether Union Dicon was viable as a going concern. The company has not turned a profit in many years.
Fast forward to November 2013 and enter CBO Capital. The Nigerian investment firm injected capital sufficient to give it a controlling stake in the business, valuing the company at N14.00 per share. It’s now up to shareholders to decide whether to get while getting is good, or to stick around for the turnaround attempt.
+127.0% (Local Currency: +132.5%)
Nigeria’s oldest and largest domestic filling station operator, Conoil also distributes aviation fuel, asphalt, and propane.
After reporting a drop in earnings in 2012, management slashed admin and finance charges to report 329% earnings growth through the first three quarters of 2013.
Where will growth come from next? Billionaire CEO Mike Adenuga says the company will roll out more filling stations and try to capture market share in the unregulated, high-margin engine lubricants industry.
6. Fidson Healthcare
+136.7% (Local Currency: +142.5%)
Fidson makes more than 200 pharmaceuticals and consumer goods, from antacids to chemotherapy drugs. It’s one of five Nigerian drug companies approved by the World Health Organization to distribute drugs for the treatment of HIV, malaria, and tuberculosis.
In spite of intense competition from counterfeits and legitimate imports from China and India, Fidson managed to increase earnings 272% in 2012 and by 61% through the first nine months of 2013.
The completion of a new, state-of-the-art factory in 2013 and the rollout of a new dietary supplement should lead to healthy sales and margin growth over the near term.
5. Livestock Feeds
+185.5% (Local Currency: +192.4%)
Nothing real glamorous about this business. It does what it says it does, manufactures and distributes feed for cows, pigs, turkeys, chickens, ducks, rabbits. You name the critter, chances are Livestock Feeds makes some sort of mash for them.
The company’s earnings were actually down 7% through the first three quarters of the year. But the shares popped when Nigerian conglomerate UACN acquired a controlling stake of the company in April. The move gave UACN a 32% share of the country’s animal feed market.
4. Champion Breweries
+278.0% (Local Currency: +287.2%)
Champion Breweries’ financial statements aren’t pretty. There’s red ink all over the place.
Not only did the company report a loss both in 2012 and through the first three quarters of this year, its balance sheet shows the companies liabilities exceed its assets.
Not exactly the stuff that superstar stocks are made of.
Nevertheless, the company appears on this list of top gainers because Heineken acquired a majority stake in the brewer in June. Thus, the brewer is in for a major restructuring, and shareholders seem to have decided that the glass looks half full.
3. Transnational Corporation of Nigeria
+288.9% (Local Currency: +298.4%)
Transcorp has put together quite the run. Its share price not only quadrupled in 2013, but it nearly doubled in 2012.
So, what’s behind the conglomerate’s stellar share performance?
Solid sales and earnings growth helped, but the announcement that it would acquire a power plant from the federal government is what really propelled the price gain.
The Ughelli Power Plant has a generating capacity of 1000MW, which is enough to power one million American homes. But due to disrepair, it currently produces just a third of that amount. Transcorp plans to rectify this and expand total capacity by 50%. CEO Tony Elumelu believes the investment will help the company triple its profit next year.
2. Evans Medical
+374.0% (Local Currency: +385.5%)
Another one of Nigeria’s largest pharmaceuticals manufacturers, Evans Medical makes everything from calamine lotion to HIV anti retrovirals. It also operates a chain of 30 pharmacies.
The company doubled earnings per share in 2012, but, as far as I can tell, has not updated the market on its financial performance since then.
Shareholders, did however, approve a NGN3.5 billion ($22 million) rights offering in August. The proceeds would finance working capital requirements.
In spite of the stock’s huge run-up, the shares still appear reasonably priced. The company is cash flow positive and the shares trade for less than 10x 2012’s earnings.
1. Forte Oil
+959.3% (Local Currency: +985.1%)
Nigeria’s best performer by a long shot, Forte Oil owns a network of filling stations in Nigeria and Ghana. It’s a fast-growing, high-octane business. In the first three quarters of 2013 earnings spiked 316% on a 29% sales increase. Billionaire CEO Femi Otedola plans to expand the business to Liberia and Sierra Leone within the next three years.
But this isn’t the main reason that shareholders scored a ten-bagger with the stock this year.
Like Transcorp, the company recently acquired a 414MW power plant from the Nigerian government, a move that makes the company one of the few ways to invest directly in the country’s power sector. Management believes revenue from electricity sales will see Forte triple its profits in 2014.
To top things off, the company is also bidding for some of Shell’s offshore oilfields and is considering the construction of a much-needed oil refinery.
Which Nigerian stocks will make investors wealthy in 2014? Share your top picks with us in the comments!