Wednesday, March 23, 2011

What is Profit Margin?

Net profit divided by net revenues, often expressed as a percentage. This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions.

NSE Market Review [14-18 mar, 2011]

"The NSE-ASI closed at 24,378.72-4.7% (+0.9% in the previous week). Volume for the week was a cumulative 1.102 billion shares (1.91 billion shares in the previous week)"

Despite the NSE-ASI being down -4.7% this week there are a few key milestones to note. The week saw the highest number of transactions in a single day for the year at 12,424 on March 15, 2011. It was also interesting that the only positive day in the week was also the same day the presidential debates were held.

Company Focus: Glaxo Smithkline Consumer PLC

Glaxo Smithkline Consumer PLC was incorporated in 1971. The shares of the company are held 46.4% by GlaxoSmithKline plc UK through its wholly owned subsidiaries, Setfirst limited and Smithkline Beecham Limited (both incorporated in the UK); and 53.6% by Nigerian shareholders.

Thursday, March 17, 2011

What are Unit Trusts?

A unit trust is a form of collective investment constituted under a trust deed. Unit trusts represent the pooled resources of thousands of investors who have entrusted their money to a management company.
The management company buys shares on the Stock Exchange on behalf of the investors. The trust does not give the shares to the investor, but combines them in a portfolio.

Company Focus: ABC Transport

ABC Transport was incorporated as a private Limited Liability company on April 5, 1993 and was converted to a Public Limited Liability Company on November, 21 2005. The shares were quoted on the Nigerian Stock Exchange on December 20, 2006.

The NSE-ASI closed at 25,357.84 +0.9% (-3.1% in the previous week), Volume for the week was a cumulative 1.91 billion shares (1.37 billion shares in the previous week) [7-11 mar, 2011].

While some might celebrate last week’s belated/tepid recovery they might be missing the messages in the numbers. Before the retraction, the market sustained a 10 day losing streak of 1,572 pts. The equivalent of over 150 pts per day. Even with the reversal, the NSE-ASI is still down over 1,000 pts from its peak.

Thursday, March 10, 2011

What is Passive Investing?

Passive Investing (also called passive management) is a financial strategy in which an investor (or a fund manager) invests in accordance with a pre-determined strategy that doesn't entail any forecasting (e.g., any use of market timing or stock picking would not qualify as passive management). The idea is to minimize investing fees and to avoid the adverse consequences of failing to correctly anticipate the future. The most popular method is to mimic the performance of an externally specified index.

The NSE-ASI closed at 25,357.84 -3.1% (-2.2% in the previous week), Volume for the week was a cumulative 1.37 billion shares.[28 Feb-4 March, 2011]

The market was red all of this week seeing the NSE-ASI dip below 26,000 for the second time this year on the first day of a new month. This defeats the thesis that 26,000 is a floor for this cycle. However, consistent with the tone of the market in the last 6 months, there is ample reason to believe that a retraction will be swift.

Wednesday, March 2, 2011

What Does Debt/Equity Ratio Mean?

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.

Note: Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the calculation.

Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as corporate ones. 

Company Focus: Nigerian-German Chemicals PLC (NGC)

Nigerian-German Chemicals PLC was incorporated as a private limited liability company on January 10, 1964 and became a public limited liability company, quoted on the Nigerian Stock Exchange in August 1979. The company is engaged in the manufacture, marketing and distribution of pharmaceutical healthcare products, household consumer products, as well as oil-field chemicals.

The NSE-ASI closed at 26,181.18 -1.72% (-0.17% in the previous week)

It seemed odd that on the same day Businessday held its annual capital markets conference, the market saw its second biggest point loss for the year at -496.45, It could be that with DG SEC, DG NSE and major players in the market occupied by the conference, the bears felt confident to make a  reappearance. Next week’s market direction will give us an idea of whether this hypothesis has credence or not.