Weekly Market Review & Stock Recommendations – August 29, 2022

Dear Client/Reader,

Global Economic Roundup

U.S. Stocks Plunge after Jerome Powell Warns Inflation Requires ‘Restrictive’ Policy for ‘Some Time’

Stocks took a hit Friday after Federal Reserve Chair Jerome Powell in his highly awaited Jackson Hole speech doubled down on the central bank’s commitment to ease decades-high inflation with ongoing interest rate hikes, keeping in line with investor expectations but doing little to quell fears of additional hikes could tip the economy into a recession. In the speech, Powell said restoring price stability will “take some time” and requires the Fed to use its tools “forcefully” in order to bring high demand into a better balance with struggling supply. “We must keep at it until the job is done,” Powell said, adding that history shows bringing inflation down often comes with “employment costs” that increase with a delay. Stocks fell sharply after Powell’s comments, with the Dow Jones Industrial Average erasing morning gains and falling 420 points or 1.2%, the S&P 500 dipped 1.6%, and the tech-heavy Nasdaq 1.9%.

Europe Electricity Prices Soar as Tough Winter Looms

European electricity prices soared to new records on Friday, presaging a bitter winter as Russia’s invasion of Ukraine inflicts economic pain across the continent. The year-ahead contract for German electricity reached 995 euros ($995) per megawatt hours while the French equivalent surged past 1,100 euros — a more than tenfold increase in both countries from last year. In Britain, energy regulator Ofgem said it would increase the electricity and gas price cap almost twofold from October 1 to an average £3,549 ($4,197) per year. Ofgem blamed the increase on the spike in global wholesale gas prices after the lifting of Covid restrictions and Russian curbs on supplies. Energy prices have soared in Europe as Russia has slashed natural gas supplies to the continent, with fears of more drastic cuts in the winter amid tensions between Moscow and the West over the war.

Nigeria’s real GDP grows by 3.54% in Q2 2022

Nigeria’s gross domestic product (GDP) grew by 3.54% year-on-year in real terms in the second quarter of 2022, an improvement compared to the 3.11% growth recorded in the previous quarter. This is according to the recent GDP report released by the National Bureau of Statistics. The aggregate real GDP stood at N17.29 trillion in the second quarter of 2022, a marginal decline (-0.37%) when compared to N17.35 trillion recorded in Q1 2022. The growth recorded in the review quarter also indicates the seventh consecutive quarter of GDP growth in the country, since the recession recorded in Q3 2020. Meanwhile, the Agricultural sector grew by 1.2% year on year, the Services sector expanded by 6.7%, and the Industrial sector contracted by 2.3%. The oil sector dipped by 11.77% year-on-year in Q2 2022, compared to a contraction of 26.04% recorded in Q1 2022. The contraction in the sector’s GDP is following the decline in crude oil production capacity. 

Some of our recommended stocks are mentioned below;

FIDSON PLC:

Fidson Q2 2022 results showed an increase in revenue by 57.62% from N12.93bn in Q2 2021 to N20.38bn in Q2 2022. Operating profit advanced from N5.97bn in Q2 2021 to N9.86bn in Q2 2022, reflecting an increase of 65.23%. Profit before tax went up by 128.85% from N1.75bn in Q2 2021 to N4.01bn in the current period. Profit after tax grew by 127.16% from N1.19bn in Q2 2021 to N2.7bn in Q2 2022. EPS grew by 128% to N1.30 in Q2 2022 from N0.57 in Q2 2021. Fidson has a BVPS of N7.89, P/BV of 1.15x, and P/E ratio of 3.50x.

WAPCO PLC:

Lafarge Africa (WAPCO) Plc Q2 2022 results showed that earnings advanced by 28.67% from N145.02bn in Q2 2021 to N186.59bn in the current period. Gross profit increased by 32.55% to N96.07bn in Q2 2022 from N72.48bn in Q2 2021. In a similar tune, profit before tax advanced by 27.57% from N36.75bn recorded in Q2 2021 to N46.88bn in the current period. Likewise, profit after tax grew by 32.09% from N28.32bn in Q2 2021 to N37.41bn in Q2 2022. Consequently, Earnings per share went up by 31.82% from N1.76 in Q2 2021 to N2.32 in Q2 2022. Lafarge Africa has a BVPS of N24.82, P/BV of 0.96x and P/E ratio of 5.15x.

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