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Global Economic Roundup

OPEC+ Choice to Gradually Boost Oil Supply Sends Price to 7-Year High

The Organization of the Petroleum Exporting Countries is standing by its plan to gradually boost oil output as demand recovers, defying pressure to open its taps wider and delivering another jolt to crude prices. OPEC+ said that they would stick to a previous decision to increase supply by 400,000 barrels per day in November. That sent Brent crude futures, the global oil benchmark, up 2.5%. They continued to rally on Tuesday, hitting their highest level since 2018. West Texas Intermediate futures, the US benchmark, have reached their highest level in seven years. Oil prices could be pushed even higher thanks to the soaring cost of natural gas and coal, which may trigger a scramble for crude to generate power over the winter.

China needs coal, and Australia has it.

China needs to bolster its coal supply to avoid an economic slowdown this quarter, but Beijing’s icy relations with Australia could make that difficult. The world’s second-largest economy is facing a power shortage owing to a combination of factors such as extreme weather, surging demand for Chinese exports and a national push to reduce carbon emissions. China generates most of its electricity by burning coal but inventory of major power plants reached a 10-year low in August. Late last year, China stopped buying coal from Australia — which used to be the biggest exporter of the commodity to the country.

FG to Borrow Again to Finance N6.258 Trillion 2022 Budget Deficit

The Federal Government has given an indication of its readiness to borrow from both local and foreign sources to finance the N6.258 trillion deficit in the proposed 2022 budget. This is just as the Federal Executive Council (FEC) has approved the 2022 Appropriation Bill with an aggregate expenditure of N16.39 trillion. In her defense of the frequent borrowings by the federal government despite concerns raised from different quarters, the minister of finance said the move is necessary to be able to build projects and to ensure they are developed on a sustainable basis insisting that the total size of the borrowing is still within healthy and sustainable limits.

Some of our recommended stocks are mentioned below;

MAYBAKER PLC:

Maybaker Plc is projected to have a Q3 2021 revenue of N9.12bn, up by 41.71% from N6.44bn in Q3 2020. PAT is estimated to increase from N681.73 million in Q3 2020 to N966.10 million in Q3 2021, bringing the EPS up to N0.56. Maybaker Q2 2021 results showed an increase in revenue by 35.67% from N4.07bn in Q2 2020 to N5.52 bn in Q2 2021. Operating profit advanced from N687 million in Q2 2020 to N936 million in Q2 2021, reflecting an increase of 36.21%. PBT went up by 26.52% from N645 million in Q2 2020 to N816 million in the current period. PAT grew by 26.52% from N438 million in Q2 2020 to N555 million in Q2 2021, despite a 26% surge in taxes. EPS grew by 26% to N0.32 in Q2 2021 from N0.25 in Q2 2020. Maybaker has a BVPS of N3.93, P/BV ratio of 1.21x and P/E ratio of 7.41x.

NB PLC:

Nigerian Breweries Plc is projected to have a Q3 2021 revenue of N309.84bn from N234.02bn in Q3 2020. Likewise, PAT is estimated to grow by 32.40% from N6.94bn in Q3 2020 to N9.19bn in Q3 2021. EPS is expected to rise to N1.17 in Q3 2021. NB Plc Q2 2021 results showed that revenue grew by 37.8% from N151.81bn in Q2 2020 to N209.2bn in Q2 2021. Similarly, gross profit increased by 31.7% to N77.91bn in Q2 2021 from N59.14bn in Q2 2020. Profit from operations advanced by 32.4% from N15.04bn in Q2 2020 to N19.91bn in Q2 2021. Profit before tax grew by 43.1% to N11.94bn in Q2 2021 from N8.34bn in Q2 2020. Profit after tax grew by 38.1% from N5.58bn in Q2 2020 to N7.71bn in Q2 2021. Consequently, EPS rose by 35.2% from N0.71 in Q2 2020 to N0.97 in Q2 2021. NB Plc has a BVPS of N20.14,P/BV of 2.46x and a P/E ratio of 25.52x.

Please find here our Weekly Market Review & Stock Recommendations for this week.

Dear Client/Reader,

Global Economic Roundup

Oil Prices Rise Amid Prospect of Widespread Fuel Shortfalls

Signs of a global energy crunch pushed up oil prices as markets grappled with the prospect of widespread fuel shortfalls heading into the end of the year. Brent crude, the world benchmark, touched $80 per barrel on Tuesday, reaching a three-year high. Goldman Sachs forecast on Sunday that Brent would hit $90 (approximately €77) a barrel before the end of the year, up from its previous call for $80 (€68). A shortfall in global gas production, along with a concerted drive in China to cut down on pollution from heavy industry, is expected to push crude higher as industries shift to using oil to generate power.

China Power Crunch Is Next Economic Shock After Evergrande

China may be diving head first into a power supply shock that could hit Asia’s largest economy hard just as the Evergrande crisis sends shockwaves through its financial system. The crackdown on power consumption is being driven by rising demand for electricity and surging coal and gas prices as well as strict targets from Beijing to cut emissions. Economists are warning of lower economic growth in China as electricity shortages worsen, forcing businesses to cut back on production. The crisis is also beginning to hit people where they live, adding the risk of social instability on top of potential global supply chain disruptions.

Naira Depreciates At Official Window Despite a 266% Increase In Dollar Supply

The exchange rate between the naira and the US dollar closed at N414.73/$1, at the official Investors and Exporters window. Naira depreciated against the US dollar on Wednesday, to close at N414.73/$1, representing a 0.06% drop when compared to N414.50/$1 recorded on Tuesday 28th September 2021. Meanwhile, the exchange rate at the parallel market closed at N574/$1 on Tuesday. The naira fell at the official market despite a massive 266.2% increase in dollar supply. The local currency is still hitting record lows against the US dollar at the black market despite the news of Nigeria’s Eurobond sales which is meant to boost the nation’s external reserves.

Some of our recommended stocks are mentioned below;

ACCESS PLC:

Access Bank Plc is projected to have a Q3 2021 interest income of N447.79bn, up by 19.32% from N375.28bn in Q3 2020. PAT is estimated to increase from N102.30bn in Q3 2020 to N122.07bn in Q3 2021, bringing the EPS up to N3.43. Access Plc Q2 2021 showed that interest income advanced by 29.59% from N246.72bn in Q2 2020 to N319.73bn in the current period. Net interest income went up 58.52% from N126.21bn in Q2 2020 to N200bn in Q2 2021. Profit before tax advanced by 31.21% from N74.31bn in Q2 2020 to N97.5bn in the current period. Profit after tax went up by 42.44% from N61.03bn in Q2 2020 to N86.94bn in the current period. Consequently, Access recorded a 43.35% rise in earnings per share from N1.73 in Q2 2020 to N2.48 in Q2 2021. Access has a BVPS of N21.82, P/BV of 0.42x and P/E ratio of 1.84x.

DANGSUGAR PLC:

Dangsugar Plc is projected to have a Q3 2021 revenue of N216.11bn, up by 34.64% from N160.51bn in Q3 2020. PAT is estimated to increase from N26.63bn in Q3 2020 to N35.85bn in Q3 2021, bringing the EPS up to N2.95. Dangsugar Plc’s result for Q2’2021 showed that revenue increased from N103.23bn in Q2  2020 to N131.95bn in Q2 2021 by 28%. Operating profit also increased by 35% from N17.39bn in Q2’2020 to N23.48bn in Q2 2021. Net finance expense increased by 224% from N1.47bn in Q2’2020 to N4.79bn in Q2’2021. Profit before tax rose by 10% from N17 bn in Q2’2020 to N18.75bn in the current period. Profit after tax increased by 9% to N12.6bn in Q2 2021 from N11.5bn in Q2 2020. Consequently, Earnings per share increased by 7% from N0.97 in Q2’2020 to N1.04 in the current period. Dangsugar Plc has a BVPS of N9.80, P/BV of 1.78x and P/E ratio of 8.37x. 

Please find here our Weekly Market Review & Stock Recommendations for this week.