Three penny stocks show impressive performance with jumbo year to date returns
Penny stocks got their appellation based on the fact that they are owned by small companies and trade at lower share prices relative to other stocks listed on the stock market. Shareholders of three of these microcap stocks on the Nigerian Stock Exchange (NSE) have garnered more returns on their investments this year compared with most listed stocks in the market.
That reward came amidst high risk that abounds in small-cap stocks and that is only accruable by investors with high tolerance for risk. The other side to it is that the investors could as well have lost a sizeable amount or all their investment owing to the stocks’ high volatility and speculative nature.
A million naira invested in Chams Plc at the beginning of this year means N1.8 million value for the shareholder, implying with a 9.09 percent increase in share price to 36 kobo on Thursday, the stock has delivered 80 percent return for its shareholders so far in 2019. That places the ICT company as the second-best performer at the NSE.
The appreciation in Chams’ share price reflects buying interests from investors having come out of the woods in 2018 with 130 percent growth in net profit to N380 million from N1.27 billion loss in the fullyear 2017.
Consequently, Chams rewarded its shareholders for the first time in five years with 3 kobo final dividend declaration in 2018 despite recording negative retained earnings of N1.92 billion for the year.
Nigerian mid-tier lender, Sterling Bank Plc, trailed with 44.21 percent share return for its shareholders since the start of this year, implying one million naira invested in Sterling Bank in January 1, 2019 would amount to N1.44 million for the investor as of Thursday, April 18.
The stock remained unchanged at 52-week high of N2.74 per share after the close of business on the NSE on Thursday.
Sterling Bank was able to sustain its profit growth, although at a slower pace, for the second consecutive year in 2018 by 19 percent to N9.47 billion, this is after it halved its profit after tax to N5.18 billion in 2015 from N10.29 billion. However, its retained earnings still remain within the negative territory at N3.1 billion as of endDecember 2018.
Caverton Offshore Support Group Plc followed with the third-most impressive share performance among Nigerian-listed penny stocks. The company’s stock has a year to date return of 32.81 percent to N2.55, even though it neither appreciated nor lost value on Thursday.
A look into Caverton’s full-year 2018 audited financial results shows the company’s net income, which stood at N4.29 billion for the year, was 64 percent more than N2.62 billion achieved in 2017.
Owing to this, the directors of the company excited the owners of the company by declaring a final dividend payment of 25 kobo, translating to 67 percent from 15 kobo paid in 2017. Unlike Chams and Sterling Bank, Caverton’s retained earnings was N9.98 billion in 2018 from N7.42 billion a year earlier.