Weekly Market Review & Stock Recommendations – October 11, 2021

Weekly Market Review & Stock Recommendations – October 11, 2021

Dear Client/Reader,

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.

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