Federal Reserve Rate Hike: Who Wins, Who Loses, Who Goes Meh

Janet Yellen and the Federal Open Market Committee have finally taken the world’s biggest economy off life support. Now, U.S. government deficits will rise, insurance companies will get relief and savers -- who’ve weathered years of earning next to nothing -- will continue to survive on crumbs.

The rate hike comes as no surprise, but it’s new territory nonetheless. Investment bankers, traders and analysts who were in business school back in December 2008 when then-Fed Chairman Ben S. Bernanke began the journey known as ZIRP, for zero-interest-rate policy, are now in their 30s, their entire careers spent in what current Fed Vice Chairman Stanley Fischer called “far from normal” times.

Here are some winners, some losers and some who won’t be much affected by the Fed’s “liftoff”:

OPEC Sees Zero Impact on Oil Market From U.S. Lifting Export Ban

Oil prices won’t be affected by U.S. crude exports, according to OPEC’s top official.

“The net effect of export of American oil on the market is zero,” Abdalla El-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said Tuesday. “This will have no effect on the price because the U.S. still is an importing country.”

The U.S. Congress is nearing a deal on the biggest shift in the nation’s oil policy in more than a generation by allowing the world’s largest oil and gas producer to sell crude abroad. Pressure has been building to lift the ban as new drilling technologies unlocked reserves in shale formations, pushing output and stockpiles to records while punishing prices.

It's All Gone Wrong for One of World's Biggest Mining Companies

Even for a company that once had the global monopoly on diamond production during almost a century of all but constant expansion, the collapse in commodities prices is proving too much.

Anglo American Plc, a conglomerate spanning everything from brewing, publishing and gold mining during its peak in the early 1990s, will shrink beyond recognition after Chief Executive Officer Mark Cutifani on Tuesday announced a package of asset sales, mine closures and job cuts. Among the potential casualties is Minas Rio, a Brazilian iron-ore mine where spiraling costs and collapsing prices turned a $14 billion project into the epitome of the company’s predicament.

“Minas Rio is the high water mark of their mistakes,” said Jeremy Wrathall, head of global natural resources at Investec Plc. “It was a series of strategic errors, the collective madness of the super cycle where everyone got it wrong.”

Biggest 2016 risk may be the one just behind us: oil

The biggest financial risk in 2016 may be the one that's been on stage all year.

In Britain's popular Christmas pantomime shows, audiences scream out "He's behind you!" as a warning to the hero whenever the villain appears.

That refrain is almost audible as investment strategists scan 2016 for risk events, as the well-known baddie of plummeting oil prices re-emerges from

PLUNGING OIL PRICES DRAG DOWN WALL STREET

Wall Street started the week in the red as energy and raw material stocks took a hit, with oil prices falling to their lowest in nearly seven years.

Brent crude prices LCOc1 dropped to $41.38 and U.S. crude CLc1 fell to $38.15 a barrel, after OPEC's meeting ended last week without a reference to its output ceiling. [O/R]

A stronger dollar also made it more expensive to hold crude positions. The dollar .DXY rose for a second day and was up 0.3 percent at 98.64 against a basket of major currencies.

INVESTORS BRACE FOR OIL PRICE LOWER FOR EVEN LONGER AFTER OPEC

Investors are betting on the oil price staying lower for even longer after OPEC's decision to ditch a formal production ceiling, pushing U.S. crude futures for delivery nearly 10 years away below $60 a barrel.

This could possibly harm the ability of U.S. shale producers, among the casualties of OPEC's strategy of pumping hard to retain market share, to lock in profitable prices for future deliveries.

OPEC UNSHACKLED FROM QUOTA COULD ADD MILLIONS OF BARRELS

OPEC’s new free-for-all production stance could lift the lid on millions of barrels of additional crude supply next year.

“Everyone does whatever they want” now that the Organization of Petroleum Exporting Countries has effectively abandoned its formal production target, Iranian Oil Minister Bijan Namdar Zanganeh said after the group met on Friday. What Iran wants is to revive exports by about 1 million barrels a day when sanctions are removed next year. It’s not the only member with potential to swell the global oil surplus, with millions of barrels of capacity lying unused under the sands of Saudi Arabia and Libya.

“It means more OPEC oil next year,” Jamie Webster, a Washington-based oil analyst for IHS Inc., said of the organization’s Dec. 4 decision. “OPEC is not cutting. With Iran looming, as well as largely only upside risk for Libya, the smart money is on more, and not less, production.”

GTI RESEARCH: NIGERIA BREWERIES Q3-2015 REPORT

INVESTMENT HIGHLIGHT

Nigerian Breweries Plc (“The Company” or “NB”) released its Q3 2015 un-audited statement of comprehensive income for the nine months ended September 30 2015 on October 21 2015. YoY, the company recorded a 10.36% hike in turnover, however, this was eroded by the growths in distribution/administrative expenses and finance cost. PAT consequently shed 12.24% YoY. 

The surge in administrative cost is expected given the toughened macro-economic environment during the quarter under review. Similarly, finance cost grew as a result of the NB’s expanding financial liabilities which was channeled towards its acquisition and merger of consolidated breweries. Following this investment it became imperative for NB to further invest in the quality of products it acquired from the deal. The Benue Brewery was hugely invested in to facilitate the re-branding of the ‘More Lager Beer’ and generate added value for the brand.

A Q3 YoY analysis of the company’s result highlights a 10.36% growth in turnover to N214.9bn ($1.07ml) from N194.7bn ($97ml) while PBT was down by 11.79% to N37.562bn ($185ml) from N42.583bn ($21ml). Moreso, PAT plummeted by 12.24% to N26.18bn ($13ml) from N29.83bn ($149.15ml) YoY. The YoY dip in PAT is on the back of the growth in administrative expenses accompanied by a significant 69.83% slid in other income. Furthermore, the M&A which was concluded in 2014 resulted in the surge in finance cost YoY. 

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OIL BULLS BRACE FOR REPEAR OF OPEC'S BEARISH BLOW AT MEETING

Hedge funds are betting this week’s OPEC meeting will deliver another bearish blow to crude.

l Prices

A year ago, Saudi Arabia led the Organization of Petroleum Exporting Countries in keeping production quotas steady, exacerbating a global glut and sending prices tumbling. Analysts surveyed by Bloomberg expect a repeat this year when the group meets on Dec. 4 in Vienna. Iran has said it will announce plans during the meeting to expand its output.

"Without the Saudis nothing is going to happen and it’s pretty clear they aren’t about to cut," said Mike Wittner, head of oil-market research in New York at Societe Generale SA. "It’s hard to even come up with a scenario where there would be an agreement for a cut."

GTI TOP 5 STOCK PICKS FOR THE WEEK COMENCING 30/11/2015

Julius Berger returns to the top spot on the top 5 this week. The focus on infrastructure in Nigeria to help jump start the economy in 2016 is a major incentive for stocking up on the shares of Julius Berger. We expect  increased business activities in the construction sector in 2016 and we expect that this will translate to a boost in the company’s income.

UBA claims the second spot on the table this week. This is yet another company making its debut on our top 5. The bank has shown some consistency since the beginning of this year. We were particularly concerned about the bank’s capital adequacy in the past, but are impressed by the progressive growth in the bank’s shareholders fund since the beginning of the year

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https://drive.google.com/file/d/0B7bfqve2E3QrdmY2eVA0dXMwQUE/view?usp=sharing

IMF APPROVES RESERVE-CURRENCY STATUS FOR CHINA'S YUAN

The IMF will add the yuan to its basket of reserve currencies, an international stamp of approval of the progress China has made integrating into a global economic system dominated for decades by the U.S., Europe and Japan.

The International Monetary Fund’s executive board, which represents the fund’s 188 member nations, decided the yuan meets the standard of being “freely usable” and will join the dollar, euro, pound and yen in its Special Drawing Rights basket, the organization said Monday in a statement. Approval was expected after IMF Managing Director Christine Lagarde announced Nov. 13 that her staff recommended inclusion, a position she supported.

WORLD BIGGEST PENSION FUND LOSES $64 BILLION AMID EQUITY ROUT

The world’s biggest pension fund posted its worst quarterly loss since at least 2008 after a global stock rout in August and September wiped $64 billion off the Japanese asset manager’s investments.

The 135.1 trillion yen ($1.1 trillion) Government Pension Investment Fund lost 5.6 percent last quarter as the value of its holdings declined by 7.9 trillion yen, according to documents released Monday in Tokyo. That’s the biggest percentage drop in comparable data starting from April 2008. The fund lost 8 trillion yen on its domestic and foreign equities and 241 billion yen on overseas debt, while Japanese bonds handed GPIF a 302 billion yen gain.

OIL'S BIG PLAYERS LINE UP FOR $30 BILLION OF PROJECTS IN IRAN

Total SA, Royal Dutch Shell Plc and Lukoil PJSC are among international companies that have selected oil and natural gas deposits to develop in Iran as the holder of the world’s fourth-largest crude reserves presents $30 billion worth of projects to investors.

Total is one of the companies that have been in the forefront of discussions and Eni SpA is also looking to invest, Oil Minister Bijan Namdar Zanganeh said. Shell, Total and Lukoil all specified fields they would be interested in developing in Iran, Ali Kardor, deputy director of investment and financing at National Iranian Oil Co. said in an interview in Tehran.

Bijan Namdar Zanganeh

 

Photographer: Atta Kenare/AFP/Getty Images

“Many companies are interested. Europeans are interested, Asian companies are interested,” Zanganeh told reporters at a conference in Tehran on Saturday. “Total is interested, Eni is interested.”

GOLD FALLS TO LOWEST SINCE 2010 AS RISING DOLLAR CURBS DEMAND

Gold fell to the lowest in five years as speculation that U.S. policy makers will raise interest rates next month helped boost the dollar, curbing the metal’s appeal as an alternative asset.

The greenback climbed as much as 0.3 percent against a basket of 10 currencies on Friday to near the highest since at least 2004. Odds that the Federal Reserve will increase rates next month for the first time since 2006 advanced to 74 percent on Friday, from 35 percent a month ago, Fed-fund futures data show.

Bets on higher rates have risen as a resilient U.S. labor market powers consumer spending, adding to signs that the economy may be robust enough to withstand higher rates. Tighter monetary policy reduces the allure of gold because it doesn’t pay interest, unlike competing investments. Assets in exchange-traded products backed by the metal have fallen to the lowest since 2009, while hedge funds are holding a net-short position.

INVESTING IN RUSSIA OR TURKEY?, WINNER SAYS IGNORE DOWNED JET

Marko Daljajev says he’s made money on Turkish and Russian stocks by ignoring the big international events that make headlines.

That’s good advice now, when tensions between the two countries are sizzling after Turkey this week shot down a Russian fighter jet. Daljajev runs the SEB Eastern Europe Small Cap Fund, which is the best performer this year out of the 100 with sizable holdings in both countries.

Over the past 12 months Turkey has experienced a hung parliament, record lira weakness, terrorism and a flood of Syrian refugees. Russia’s been in recession, crippled by the plunge in world oil prices. Even so, Daljajev’s euro-denominated fund is up 17 percent, while the MSCI Eastern European benchmark is down by 5 percent.

BUHARI BOUNCE BECOMES BUST AS NIGERIA POLICIES IRK INVESTORS

When Muhammadu Buhari clinched victory in Nigeria’s presidential elections in March, stocks soared as investors looked to the former military ruler to reverse decades of economic mismanagement and policy inertia. Now hopes have fizzled in his ability to turn around Africa’s largest economy and oil producer.

Money that flowed into stocks and bonds in the West African nation, which McKinsey & Co. says could become one of the world’s 20 biggest economies by 2030, is now fleeing as growth prospects diminish along with oil prices. While Buhari, 72, has prioritized stamping out the graft that has plagued Nigeria since independence from Britain in 1960, policy-making appears as uncertain and haphazard as ever.

BARCLAYS FINED $109 MILLION FOR RISK FAILINGS ON 'ELEPHANT DEAL'

Barclays Plc was fined 72.1 million pounds ($109 million) by U.K. regulators for failing to fully probe a group of “politically exposed” ultra-high-net-worth clients tied to a transaction of 1.9 billion pounds.

The lender executed the so-called elephant deal in 2011 and 2012 for a number of clients, the Financial Conduct Authority said in a statement on Thursday. While the individuals should have been “subject to enhanced levels of due diligence and monitoring,” Barclays didn’t follow standard procedures, “preferring instead to take on the clients as quickly as possible” and generating 52.3 million pounds in revenue, the FCA said, without disclosing the customers’ identity.

SAUDI ARABIA'S NET FOREIGN ASSETS SLIDE TO THREE-YEAR LOW

Saudi Arabia’s net foreign assets dropped to $640 billion in October, the lowest level in three years as the oil rout strains government finances in the biggest Arab economy.

Net foreign assets held by the Saudi Arabian Monetary Agency fell 1 percent in October, according to central bank data released Thursday. The reserves have plunged more than $95 billion since peaking at an all-time high of $737 billion in August 2014.

The economy of the world’s largest oil exporter is coming under pressure after oil prices tumbled more than 40 percent over the past year, pushing authorities to search for savings and sell bonds for the first time since 2007. The International Monetary Fund predicts a budget deficit exceeding 20 percent of economic output this year, and says at that rate Saudi savings would run out after five years.

“The key challenges are our over-dependence on oil and the way we prepare and spend our budgets,” Deputy Crown Prince Mohammed bin Salman told The New York Times in an interview published on Wednesday. The government is planning reforms including subsidy cuts, the privatization and taxation of mines and a turn to nuclear and solar power to reduce domestic oil consumption, he said.

source: Bloomberg

WHY THE MPC DECIDED TO REDUCE INTEREST RATE BY KOREDE OLOGUN

“Now that policy rate is presumably below the neutral interest rate to buttress Nigeria’s stance on expanding the economy, there is no room for an insensible fiscal interaction”. The Central Bank of Nigeria (CBN) reversed the trend of interest rate hikes on the 24th of November, 2015 in its last Monetary Policy Committee (MPC) meeting for the year in an effort to soften grounds for an expansionary drive. The interest rate was reduced sporadically during and after the 2008 financial crisis to absorb market disruptions caused by the crisis until the end of 2011 where it was maintained at 12% for about 23 months. The benchmark interest rate was increased to 13% in 2014 while inflation crept up well above the apex bank’s target. 

The decision to reduce interest rate by 200 basis points to 11% was partly informed by the assertion that the CBN has been involved in unconventional form of monetary policy in an effort to promote increased lending and liquidity. The CBN intervention has properly focused on money rate of interest using control over bank reserves as leverage to influence the pace of lending after the Treasury Single Account (TSA) that drained some liquidity from the economy. Cash Reserve Ratio for banks was reduced from 25% to 20% in a model that monitors injection of unlocked money into the economy. Expectations are in favour of the Federal Government using its power to promote maximum employment, production and purchasing power as a new political consensus. It is expected to experience a difficult and frustrating market when major policy decisions are made, a relief is that hard markets are typically followed by easier markets. 

The CBN has opened a lot of “what if doors” in the economy caused by a major shift in interest rate policy. It won’t be totally wrong to say that government’s efforts are progressing towards completely deemphasizing dependency on oil in the long term. Going forward, the struggle will be to restore discipline into an economy with excess money in supply and a demand pull inflation in the long term. On the other hand, liquidity trap could render the monetary policy ineffective in an economy that looks to benefit from potential rise in interest rates. The effectiveness of this new policy will thrive on the willingness of banks to lend greater amounts, flexibility of short term rates (below zero short term rates) and the credibility of the monetary authority.

POST MPC REVIEW REPORT

Our Overview…

The MPC’s contraction of the key bench-mark rate from 13% to 11% as well as the reduction of the CRR to 20% from 25% was largely unexpected at this time. Our expectation was that the committee would maintain status quo and allow the impact of the previous policy decision to permeate more into the system, especially with the moderation in October’s inflation figure to 9.3% from 9.4% in September    (after 10 consistent month on month uptick).

The CBN highlighted that the impetus to ease the key bench mark rate and unlock liquidity into the system in order to jump start the economy and channel liquidity into the real sector was gotten from the positive October inflation figure as well as the upswing in GDP growth rate after a long progressive decline as a result of the steep crash in oil prices.

In our analysis of the MPC decision, we have decided to evaluate the positive implication of the MPC’s decision on Macroeconomic indicators and the equities market as well the pressure points of the policy on the economy.

MPC Decision, the pro’s…

The proposed expansionary budget of the Federal Government of N8triillion (over 80% rise from the 2015 budget)  and  about 40% proposed for capital expenditure, is a clear indication that the new government is focused on economic growth (which in any case is an imperative considering that our bread and butter income head has experienced + 50% price tank).

   

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https://drive.google.com/file/d/0B7bfqve2E3QrWmlqdUZDY0J2Zzg/view?usp=sharing

OIL ADVANCE AS SAUDI ARABIA REITERATES MARKET STABILITY PLEDGE

Oil gained amid a reiteration by Saudi Arabia that the world’s biggest exporter is committed to working with OPEC members and other producers to stabilize the crude market.

Futures rose as much as 1.2 percent in New York. Saudi Arabia strives to “cooperate with all oil producers and exporters, from inside and outside of OPEC, to preserve the stability of the market and prices,” the nation’s cabinet said in a statement Monday. U.S. crude stockpiles probably rose for a ninth week through Nov. 20, according to a Bloomberg survey before Energy Information Administration data Wednesday.

OPEC SEEN HOLDING THE LINE AS $40 CRUDE LOOMS OVER VIENNA

It’ll take more than $40 crude to make OPEC change its mind, analysts said before the group’s Dec. 4 meeting in Vienna.

In the year since the Organization of Petroleum Exporting Countries chose to defend its market share, and let prices sink, a 44 percent plunge in crude has slashed members’ revenues by almost half a trillion dollars. Undeterred, the group will press on with its strategy to batter rival producers when ministers meet next week, according to 30 analysts and traders surveyed by Bloomberg.

Saudi Arabia, OPEC’s biggest member, appears determined to see through its plan to eliminate a supply glut by squeezing out competitors like U.S. shale drillers, even as the resulting price collapse spurs dissent from Venezuela, Algeria and Iran. The kingdom’s tactic is “having the intended effect” as non-OPEC supply heads for its steepest retreat since the fall of the Soviet Union, according to the International Energy Agency.

OIL DEAL OF THE YEAR: MEXICO SET FOR $6 BILLION WINDFALL

Mexico is set to get a record payout of at least $6 billion from its oil hedges this year, according to data compiled by Bloomberg.

The Latin American country locks in oil sales as a shield against price declines through a series of financial deals with banks including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. For 2015, Mexico guaranteed sales at almost $30 a barrel higher than average prices over the past year.

The 2015 payment, due next month, is set to surpass the record from 2009, when the Mexican government said it received $5.1 billion after prices plunged with the global financial crisis. The country’s crude has fallen by almost half over the hedging period so far this year. Crude sales historically cover about a third of the government budget.

GTI 5 WEEKLY STOCK PICKS FOR THE WEEK ENDING 27TH NOVEMBER 2015

THE LAST MPC FOR THE YEAR STARTS IN THE MIDST OF A BEARISH MARKET TREND

Dear Investor,

The Monetary Policy Committee will hold its last MPC meeting for the fiscal year 2015 today the 23^rd of November 2015 and tommorow the 24^th of November 2015.

The MPC in their last meeting, voted to retain the key bench mark rate at 13% and to harmonize the CRR for both public and private sector deposits at 25%.   Considering that inflation was on the increase and the bearish sentiments in the equities market was biting hard, that decision was apt in other to put some satibility in the economy.  The major talking point for this MPC will be;

·         2016 budget and fiscal policy

·         Inflation

·         Economic growth

·         Exchange rate.

The moderation in inflation to 9.3% from 9.4% between September and October, as well as the stronger GDP growth reported in October are strong indications that the tight monetary policy disposition of the committee is effective and achieving desired result.

We expect that the MPC will still retain status quo until next year so that the effect might seep deeper into the system , but will need to ease the rate probably in the first MPC for 2016 considering that the proposed 2016 budget which focuses on jump- starting the economy needs to be funded.

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AB-INBEV AND SABMILLER MERGER/AQUISITION, WHAT IS MEANS FOR NIGERIA BY GTI RESEARCH

The Anheuser-Busch InBev and SABMiller Merger- the third largest takeover in history

At around $108 billion (£44 for each share in SABMiller), this is the third largest deal in corporate history and the new company will produce an estimated one-third of all beer sold worldwide.

For obvious reasons, the merger is driven by prospects for expansion in developing countries, with a particular emphasis on Africa as a critical driver of growth for the combined company. As expected, the combination is more about exploiting the potential in Asian and African beer markets, and further strengthening Latin American operations.

The sale of SABMiller’s interest in its joint venture in the U.S., the home market for Anheuser, reflects how the merger is not really bringing anything new to AB InBev’s business in Anheuser’s home market. SABMiller is selling its 50% voting interest and 58% economic interest in MillerCoors to Molson Coors, its partner in the joint venture, for around $12 billion. The deal gives Molson Coors the global rights to the Miller brand, and also the right to continue selling brands it currently holds in its portfolio in the U.S. (MillerCoors).

click link for full report

https://drive.google.com/file/d/0B7bfqve2E3QrXzR1VUxDTWVVN0E/view?usp=sharing

PRE MPC METING REVIEW BY GTI RESEARCH

Nigeria Economy: … All is set for November MPC Meeting

All is now set for the last MPC meeting for the year billed to hold on Monday and Tuesday, 23rd and 24th of November, 2015. The meeting is coming at a time when challenges that confront us as a nation have been x-rayed and packaged for immediate attention from all stakeholders.

Major highlights of September Meeting….

At the last meeting of the MPC in September, the committee acknowledged severity of challenges in the economic environment amongst which are;

 weakened GDP

 mounting inflation

 continued pressure on the Naira and foreign reserve account

 protracted weakness in global crude oil price

 and mounting credit to the government.

Notwithstanding the above challenges, the committee voted to maintain status quo

on the MPR and exchange rate and harmonize CRR on public and private at 25%.

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https://drive.google.com/file/d/0B7bfqve2E3QrMlJHWWZvZHFsX00/view?usp=sharing

NIGERIA: STATE OF AFFAIRS II BY KOREDE OLOGUN

Nigeria; State of Affairs II Keen observers will admit that Nigeria’s economy entered into its expected second phase after the swearing-in of trusted Ministers of the Federal Republic of Nigeria on the back of the game changing general elections earlier in the year where power changed hands smoothly. The economy has continued to slow down into what many has labelled a recession that could last for a couple of years pending when the country rids its system of core corrupt practices to build a solid foundation for policies and institutions. 

The potential growth and opportunity priced into the President Buhari led Nigerian economy is one of the reasons the country experienced a sharp uptrend of 8.30% in the stock market after winning the elections in March 2015. With inflation figure for October down by 10 basis points to 9.3% in October and the economy growing at 2.84% in the third quarter (2.35% in Q2), expectations are fast shaping into tangible reality although this could be another ephemeral moment. However, this is a sign that the economy is responding to the strategies of the new administration. Year to date loss on the stock market stood at 18.83% as financial markets continue to grapple with capital flight. 

GTI RESEARCH : CSCS THIRD QUARTER 2015 REPORT

INVESTMENT HIGHLIGHT

9 Months 2015: Market decline scrapes earnings

Central Securities Clearing System (or the “Company” or “CSCS”) Plc, released its unaudited Financial Statement for the period ended September 30, 2015 in October 2015. Total revenue declined by 7.58% to ₦5.68 billion ($28.83mn) from ₦6.14 billion ($31.42mn) Year-on-Year (YoY). Profit after tax (PAT) also declined by 10.83% to ₦3.36 billion ($17.05mn) from ₦3.77 million ($19.13mn) YoY. The Company battled with expenses which rose by 16.17% leading to a decline of 18.76% in profit before tax. Expense to revenue ratio grew to 28.31% in Q3 2015 compared to 22.52% in previous year. Cost to revenue ratio also grew in the period under review.

Trading activities on the Nigerian Stock Exchange reduced significantly YoY with total deals reducing from 936,697 deals to 771,706 deals (17.61% decline). Q3 2015 YTD showed value of trades at ₦829.21 billion as against ₦1.021 trillion (18.82% decline) for comparative period in 2014.

Interest income grew by 25.38% compared to same period in 2014 while the Company’s operating profit margin declined to 71.69% compared to 77.48% in 2014.

click on link for details
https://drive.google.com/file/d/0B7bfqve2E3QrVjVhMG4tSGhocWc/view?usp=sharing

AB INBEV STOCK RALLY COMPLICATES DEAL FOR SABMILLER HOLDERS

Anheuser-Busch InBev NV crafted its bid for SABMiller Plc to ensure the target’s two largest shareholders got a lower price for their shares than other investors, as part of a plan to cut their tax bill. Instead, they’re on track to receive a premium.

Under the terms of AB InBev’s bid, SABMiller shareholders can choose 44 pounds a share in cash or a mix of cash and stock that was valued at just over 39 pounds a share when the terms were announced Oct. 13. Because AB InBev’s stock has gained 17 percent to 117.35 euros since the agreement, the value of the share alternative has jumped to about 43.52 pounds per SABMiller share, nearly eliminating the discount to the cash offer.

DUBAI BANKS BRACE FOR BAD DEBT AS BORROWERS FLEE THE COUNTRY

Dubai’s slowing economy, the rout in commodities and strict debt repayment laws are reviving a phenomenon that symbolized the emirate’s crash in 2009: “skips,” or business owners who quietly leave the country to avoid punishment for defaulting on loans.

A rising number of smaller and medium-sized company owners are abandoning the United Arab Emirates without repaying debt, according to Emirates NBD PJSC, the country’s second-largest bank. People in the SME sector may have left behind 5 billion dirhams ($1.36 billion) of loans this year, Abdul Aziz Al Ghurair, Chief Executive Officer of Mashreqbank PSC and chairman of the U.A.E. Banks Federation, said in Dubai on Monday.

NIGERIA GROSS DOMESTIC PRODUCT REPORT, QUARTER 3 2015

In the Third Quarter of 2015, the nation’s Gross Domestic  Product (GDP) grew by 2.84% (year-on-year) in real terms. This was higher by 0.49% points from growth recorded in the preceding quarter, yet lower by 3.38% points from growth recorded in the corresponding quarter of 2014. Quarter on quarter, real GDP increased by 9.19%. 

During the quarter, aggregate GDP stood at N24,313,636.94 million (in nominal terms) at basic prices. Compared to the Third Quarter 2014 value of N22,933,144.01million, nominal GDP was 6.02% higher. Nominal GDP growth was also higher relative to growth recorded in Q1 of 2015 by 0.85% points. The Nigerian economy can be more clearly understood according to the oil and non-oil sector classifications: The Oil Sector The Non-Oil Sector During the period under review, Preliminary data on Oil production reflects output at 2.17 million barrels per day (mbpd) up from production in the Second Quarter of 2015 by 0.17mbpd. Oil production was also marginally higher to the corresponding quarter in 2014 by 0.02  mbpd when output was recorded at 2.15 mbpd.

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https://drive.google.com/file/d/0B7bfqve2E3QrRVp4VjB4YTZGbUk/view?usp=sharing

THIS MAY BE THE BEGINNING OF THE END FOR WEAK U.K. INFLATION

Britain's headline inflation rate stayed below zero for a second month in October, and the big factor keeping it down was university tuition fees. A lesser role was played by food, alcohol, and tobacco costs. 

The picture isn't universally weak, however. The core inflation rate, which excludes those last three things as well as energy prices, picked up slightly to 1.1 percent. It's not a big jump, to be sure, but it was more than the 1 percent economists had forecast in a Bloomberg News survey, and helped lift the pound against the dollar.

CHAMPION BREWERIES: Operational Efficiency boost Growth

INVESTMENT HIGHLIGHT

Champions Breweries Plc (“The Company” or “CB”) released its Q3 2015 unaudited statement of comprehensive income for the nine months ended September 30 2015 on October 23 2015.  The Company recorded a 387% hike in turnover YoY. The result was impressive given the toughened macro-economic environment and weak consumer discretionary spend during the quarter under review. CB has continued to benefit from its 2014 capital injection through the issuance of 6.3bn units of ordinary shares of N11bn ($55ml) through rights issue. The success of this issue enabled CB eradicate finance cost charges which consequentially eroded profitability in the same period of the prior year.

A YoY analysis of the Company’s Q3 result highlights a 3.94% growth in turnover from N2.18bn ($0.01ml) to N2.27bn ($0.011ml) PBT was up by 104.66% to N62.59ml ($0.31ml) in Q3 2015 from a loss position of N1.344bn ($0.0067ml) recorded in Q3 2014. Similarly, PAT YoY skyrocketed by 103.26% to N43.81ml ($0.22ml) from a loss position of N1.344bn ($0.0067). The YoY substantial growth experienced is on the back of The Company’s operational efficiencies which enabled the eradication of finance cost which trapped the company in a loss position over the last five years.  

Furthermore, Q3 2015 shareholders’ equity grew by 20.58% from N5.87bn ($0.029ml) to N7.08bn ($0.035ml) YoY, while EPS widened by 100.37% from a loss position of N149.38 ($0.74) to N0.56 ($0.0028). The company’s share price has shed 58% which equates to N4.17 ($0.021) in Q3 2015 compared to the N9.94 ($0.05) recorded in the same period in the prior year.

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GTI 5 STOCK PICKS FOR THE WEEK

GTI 5 Weekly Stock picks for the week 16/11/ 2015-23/11/2015

Commentary

Champion Breweries makes its debut on the top 5 this week and claims the top spot. The small sized brewer attracted investor’s attention after its acquisition by Global brewery giant, Heineken, and the contract brewing  arrangement in place with Nigeria Breweries as well as the injection of fresh capital has given the company a new lease of life. The Company has turned the corner and is back to profitability after over 5years of consistent losses declared. Even though this Company doesn’t not totally fit the profile of companies that make our top-5 because of the lack of dividend history. We have however made an exceptional waiver because of the expected upside momentum.  

UBA claims the second spot on the table this week.  This is yet another company making its debut on our top 5.  The bank has shown some consistency since the beginning of this year. We were particularly concerned about the bank’s capital adequacy in the past, but are impressed by the progressive growth in the bank’s shareholders fund since the beginning of the year

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EX-DEUTSCHE BANK, BARCLAYS TRADERS CHARGED AS LIBOR PROBE WIDENS

The U.K. Serious Fraud Office charged 10 former Deutsche Bank AG and Barclays Plc employees with manipulating Euribor, including high-profile trader Christian Bittar, as a global probe into interest-rate benchmark rigging expands.

Six former Deutsche Bank employees and four ex-Barclays employees will be charged with conspiracy to defraud, the SFO said in an e-mailed statement Friday. The nine men and one woman are scheduled to appear at London’s Westminster Magistrates Court on Jan. 11.

Alongside Bittar, ex-Deutsche Bank employees Andreas Hauschild, Joerg Vogt, Ardalan Gharagozlou,  Achim Kraemer and Kai-Uwe Kappauf have been charged. Former Barclays employees Colin Bermingham, Carlo Palombo, Philippe Moryoussef and Sisse Bohart also face charges.

IEA SAYS RECORD 3BILLION-BARREL OIL STOCKS MAY WEAKEN PRICES

Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency.

This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry.

U.K. NEEDS URGENT ACTION TO KEEP BANKS IN LONDON , BBA SAYS

British lawmakers need to take “urgent action” to ensure the U.K. maintains its position as the leading global financial center or risk the departure of banks to cities such as Singapore and Hong Kong, according to the British Bankers’ Association.

New regulations, taxes and depressed economic activity in Europe have resulted in an 8 percent drop in British banking jobs, with two-thirds of BBA members saying they’ve moved business elsewhere since 2010, the lobby group said in a report Friday. The BBA recommends a softening of the law separating retail operations from investment banking, further tax cuts and a reworking of visa limits to make it easier to hire from abroad.

AFTER SAB PROPOSAL, INBEV STILL YEARNS FOR CZECH RUNAWAY BRIDE

Anheuser-Busch InBev NV may have finalized its $107 billion marriage proposal to SABMiller Plc, but the giant brewer has never stopped thinking about the one that got away.

In Ceske Budejovice, a town of 93,000 nestled among the rolling hills of the southern Czech Republic, there’s a state-owned brewery called Budejovicky Budvar. Given that the town is called Budweis in the native German of most of its residents in the 19th century, the company’s beer is often known as Budweiser.

Crates of Budweiser Budvar beer sit at the Budejovicky Budvar plant

 

Photographer: Martin Divisek/Bloomberg

That name has obvious appeal to the makers of the top-selling American beer, now controlled by InBev. For more than a century, the two sides have engaged in a legal tussle over the rights to the name, and at various times over the past couple of decades the Americans have sought to buy the Czech brewer. Currently, Budvar says there are active court battles in about a dozen countries, with simmering disputes in another 25 or so.

MEET NIGERIA'S NEW MINISTER OF TRADE, INDUSTRY AND INVESTMENT

Dr. Okechukwu Enyinna Enelamah, also known as Okey, M.D., CFA is the Chief Executive Officer, Partner, and Co-Founder at African Capital Alliance. He founded the firm in 1997. Dr. Enelamah was one of the original principals of Zephyr Capital and South Africa Capital Growth Fund, Ltd. Previously, he was employed at Arthur Andersen and Goldman Sachs. He was an investment professional of Zephyr Management, L.P. He serves as a Director of Dorman Long Engineering Limited. He has been a Non-Executive Director of UAC of Nigeria Plc since 2010.

 He also serves on the Board of various companies including eTranzact, Cornerstone Insurance Plc, Technoserve, Inc., Africa Leadership Initiative West Africa (ALIWA), and Business Day. Dr. Enelamah also serves as the Director of African Venture Capital Association. He serves as a Member of the Board of Africa Venture Capital Association and the Emerging Markets Private Equity Association. Dr. Enelamah serves as a Director of Emerging Markets Private Equity Association. He is a Member of the Advisory Boards Africa Leadership Initiative West Africa. He serves on the Board of Flavours Food Limited and Landmark Property Development Company. He served as a Director of Associated Bus Company Plc. He is a Fellow of the Aspen Institute. He is a qualified medical doctor. 

Dr. Enelamah is a Chartered Financial Analyst and a qualified Chartered Accountant in Nigeria, winning two national prizes in the qualifying examinations. Dr. Enelamah holds an M.B.A. degree with high distinction from the Harvard Business School, where he was a Baker Scholar.

MAJOR OIL COMPANIES HAVE HALF A TRILLLION DOLLARS TO FUND TAKEOVERS

The world’s six largest publicly traded oil producers have more than a half-trillion dollars in stock and cash to snap up rival explorers.

Exxon Mobil Corp. tops the list with a total of $320 billion for potential acquisitions. Chevron is next with $65 billion in cash and its own shares tucked away, followed by BP Plc with $53 billion, according to data from corporate filings compiled by Bloomberg.

RUSSIA'S OIL RIVALRY WITH SAUDI'S MASKS THE BIGGER IRANIAN THREAT

Competition is growing in Russia’s biggest oil market. While Saudi Arabia’s encroachment in Europe is getting all the attention, the biggest threat comes from another part of the Middle East -- Iran.

The world’s largest oil exporter has started shipping crude to traditional Russian markets like Poland and Sweden, but Saudi supplies to Europe won’t increase by enough to reduce prices, said Texas-based consultant Stratfor. In contrast, a surge in Iranian exports after the lifting of sanctions could erode the value of Russian shipments to the region as soon as next year, according to KBC Advanced Technologies.

FORTE OIL PLC: a growing energy powerhouse

INVESTMENT HIGHLIGHT

9 Months 2015: Revenue down by 25.26%; Profit After Tax up by 6.69%

Forte Oil (or the “Company” or “FO”) Plc, an indigenous marketing petroleum Company released its third quarter earnings for the period ended September 30, 2015 on the 16th of October 2015. The result showed a 25.26% decline in sales revenue to ₦91.61 billion ($458.05mn) from ₦122.58 billion ($612.90mn) Year-on-Year (YoY) while profit after tax (PAT) grew by 6.69% to ₦4.28 billion ($21.40mn) from ₦4.01 billion ($20.05mn) YoY. Gross profit and operating profit declined by 2.37% and 12.10% YoY respectively while net finance cost reduced by 74.44% YoY.

FO recorded an improved third quarter performance compared to the second quarter as revenue and profit after tax grew by 8% and 0.36% respectively quarter on quarter (QoQ).

Most recently, FO sold 17% ($200mn) equity stake to Mercuria Energy Holdings SA, the world’s third largest independent energy trader and asset operator, as part of its commitment towards expansion. Forte Oil Plc is a well-placed player in the oil and gas downstream business, upstream services, power generation and upstream exploration although more than 89% of its revenue still comes from fuel sales.

We have adjusted for increased contribution of FO’s power business and our analysis clearly shows the growth potentials inherent in FO as the Company continues to make investment efforts to becoming Nigeria’s premier integrated energy solution provider. With aggressive drive to compete in upstream sector and power business, we have made a two year forecast which reflects moderate growth in 2015 and an improved growth in 2016. 

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MEET NIGERIA'S NEW FINANCE MINISTER

NAME:  KEMI ADEOSUN

AGE 48

Kemi ADEOSUN

MARITAL STATUS : MARRIED

OCCUPATION:ECONOMIST/CHARTERED ACCOUNTANT

PREVIOUS JOBS IN PRIVATE SECTOR
(i) SENIOR MANAGER, PRICE WATERHOUSE COOPERS
(ii) CHAPELHILL DENHAM

PREVIOUS POSITION IN PUBLIC SECTOR
COMMISSIONER FOR FINANCE, OGUN STATE

EDUCATION (WITH YEARS)

B. Sc (HONS) APPLIED ECONOMICS, UNIVERSITY OF EAST LONDON (1986-1989)

ACHIEVEMENTS AND AWARDS

INSTITUTE OF CHARTERED ACCOUNTANT (ENGLAND AND WALES)

AB INBEV GETS SABMILLER FOR $107 BILLION AS U.S. DEAL AGREED

Anheuser-Busch InBev NV made a formal $107 billion offer to buy SABMiller Plc, sealing a long-anticipated deal that combines the world’s biggest brewers into a company controlling about half the industry’s profit.

To help gain antitrust approval, Molson Coors Brewing Co. will acquire SABMiller’s 58 percent stake in MillerCoors LLC for $12 billion, giving it full control of a business that makes Coors Light and Blue Moon. The Budweiser maker will pay 44 pounds a share in cash for a majority of the stock, the companies said, confirming a price accord announced on Oct. 13. The deal will lead to annual pretax cost synergies of at least $1.4 billion, they said.

UBA: a giant en masse, or not?

INVESTMENT HIGHLIGHT

9M -2015: Gross Earnings rose by 17.32%, while net income spiked by 44.39% in the review period

UBA (‘’The Comspany’’) released its unaudited 9M -2015 result for the period ended September, 30 2014 on 15^th October 2014.

 The Company reported a 17.32% rise in gross earnings to N247.20billion ($1.23B) from N210.71billion ($1.05B) YoY, which was translated to a 44.4% surge in net income to N48.56billion ($242.78M) from N33.63billion ($168.14M) YoY.  

On a quarter on quarter analysis of gross earnings performances over the last three quarters released, gross earnings recorded its weakest performance in Q3 -2015, declining by 4.37% to N80.26billion ($401.31M) from N83.84billion ($419.22M) in Q2-2015.

We adduce the 17% rise in the Bank’s gross earnings YoY to the efficient deployment of the Bank’s assets in response to the rapid policy changes of the CBN especially in the third quarter.  The marked reduction in financial assets held for trading between H1 2015 and 9M -2015 (51%) was in a reaction to the sell down pressure encountered in the Nigerian fixed income market as a result of the pressure on the local currency due to the steep decline in oil prices.

The bank also increased its exposure to inter-bank lending which rose by 13% between H1 2015 and 9M- 2015 possibly to take advantage of the spike in inter-bank rates caused by the liquidity squeeze as a result of the implementation of the Treasury Single Account (TSA) policy which was implemented in the twilight of the third quarter.

The bank also managed to keep operational expenses in check comparative to its income within the review period. Operating income widened by 21%, while operating expenses roseat a comparatively slower pace of 12%. Cost to income ratio (operating cost/operating income) consequently dropped to 62.48% down from 67.53% YoY.

Profit before tax advanced by 35% to N57.36billion ($286.83M) from N42.54billion ($212.71M) YoY while net income rose stronger by 44% to N48.56billion ($242.78M) from N33.63billion ($168.14M). The vastly stronger net income growth compared with the pre-tax income is adduced to the reduced effective tax rate of 15.36% compared with the 20.96% effective tax provision for 9M-2014. 

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