While stocks in the Nigerian Stock Exchange (NSE) All-Share Index slid by 2.4% this week, and trading was halted in shares of the five banks that saw their CEOs unceremoniously sacked late last week, there may ultimately be attractive values forming among sound companies. For instance, Renaissance Capital, a Moscow-based investment bank, gave a ‘buy’ rating to Skye Bank last month and named it the ‘fastest growing tier-two Nigerian bank’. Of note, analysts remarked on the bank’s leading role in retail public sector collections for federal and state governments and tax authorities, as well as utilities, customs agencies, commercial subscriptions, regulatory institutions and examination bodies. Moreover, as noted earlier this year by RTC Capital, it is a “dominant player in Lagos state, Nigeria’s largest revenue collecting state. [And] with increased focus on diversifying revenue away from oil, this competence can only acquire more value.” Renaissance gave Skye a N12.20 share target price on the strength of the fact that it trades at a “2009 price earning ratio of 4.4x and 2009 p/b of 0.64x, representing discounts to our universe of Nigerian banks of 37% on 2009ep/b and 65% on 2009ep/b”. Yet Skye’s shares have suffered along with just about every other NSE listing, falling under N5 on Monday. Broad-based and swiftly declining asset values are as unsustainable as indiscriminate and rapidly rising ones, meaning that in the case of Nigerian stocks and financial services ones in particular, the likelihood of a significant market overshoot is probable. As Silk Invest’s Baldwin Berges noted this week about the country, “our view is that, in time, this clearly presents a fantastic opportunity for the alert and well informed investor to invest in well managed companies that find themselves valued well below their intrinsic value.”

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