Weekly Market Review & Stock Recommendations -January 16, 2023
Dear Client/Reader,
Global Economic Roundup
Oil Drops on Huge Unexpected Crude Inventory Build
Crude oil inventories rose by 14.865 million barrels, American Petroleum Institute (API) data showed on Tuesday, as refining activity begins to return to normal following previous weather-related shutdowns. U.S. crude inventories increased 13 million barrels over the course of 2022, according to API data, while crude stored in the nation’s Strategic Petroleum Reserves sunk by 221 million barrels. Oil prices were relatively flat on Tuesday as traders take a wait-and-see attitude with upcoming rate hikes. WTI was trading up $0.54 (0.72%) on the day to $75.17 per barrel. This is a weekly increase of roughly $2 per barrel. Brent crude was trading up $0.48(0.60%) on the day at $80.13—a weekly increase of just over $2 per barrel. U.S. crude oil production rose to 12.1 million bpd in the final week of the year, bringing the total production increase for 2022 to 400,000 bpd , and 1 million bpd lower than peak production seen in March 2020
US Inflation Rate Slows to 6.5% as Expected
The annual inflation rate in the US slowed for a sixth straight month to 6.5% in December of 2022, the lowest since October of 2021, in line with market forecasts. It follows a 7.1% reading in November. Energy cost increased 7.3%, well below 13.1% in November, as gasoline cost dropped 1.5%, following a 10.1% surge in November. Also, fuel oil cost slowed (41.5% vs 65.7%) while electricity prices rose slightly faster (14.3% vs 13.7%). A slowdown was also seen in food prices (10.4% vs 10.6%) while cost of used cars and trucks continued to decline (-8.8% vs -3.3%). On the other hand, the cost of shelter increased faster (7.5% vs 7.1%). Compared to the previous month, the CPI edged 0.1% lower, the first decline since May of 2020, and beating forecasts of a flat reading. Inflation seems to have peaked at 9.1% in June of 2022 but it still remains more than three times above the Fed’s 2% target.
Weak oil sector to slow Nigeria’s economic growth in 2023
The World Bank said Nigeria’s economy will slow down to 2.9% in 2023 due to oil sector weakness. Nigeria’s economic growth is projected to decelerate to 2.9% in 2023 and remain at that pace in 2024, which is barely above population growth. According to the World Bank, growth momentum in the non-oil sector is likely to be restrained by continued weakness in the oil sector. The World Bank also noted that Nigeria’s economy weakened to 3.1% in 2022. And this was due to a number of factors, including lower crude oil, rising production costs, crude oil theft, lack of payment discipline in joint ventures, and persistent under-investment. The World Bank blames some of these challenges on the diversion of oil revenues to petrol subsidies, estimated at over 2% of gross domestic product (GDP) in 2022.
Some of our recommended stocks are mentioned below;
MTNN PLC:
MTNN Plc is projected to have a FY 2022 revenue of N2.00tn, up by 21.01% from N1.65tn in FY 2021. Profit after tax is estimated to grow from N298.65bn in FY 2021 to N361.39bn in FY 2022 with an EPS of N17.75
MTNN Plc Q3 2022 results showed an increase in revenue by 20.71% from ₦1.21 trn in Q3 2021 to ₦1.46 trn in Q3 2022. Operating profit advanced from ₦418.35bn in Q3 2021 to ₦537.68bn in Q3 2022, reflecting an increase of 28.52%. Profit before tax grew by 24.68% from ₦321.35bn in Q3 2021 to ₦400.67bn in the current period, despite a 40.10% increase in finance costs. Profit after tax rose by 22.12% from ₦220.31bn in Q3 2021 to ₦269.04bn in Q3 2022. EPS increased by 22.92% to ₦13.30 in Q3 2022 from ₦10.82 in Q3 2021. MTNN has a BVPS of ₦9.14, P/BV of 25.15x and P/E ratio of 13.42x.
GTCO PLC:
GTCO Plc is projected to have a FY 2022 revenue of N312.64bn, up by 17.14% from N266.89bn in FY 2021. Profit after tax is estimated to grow from N174.83bn in FY 2021 to N204.81bn in FY 2022 with an EPS of N6.96
Gtco Plc Q3 2022 results showed that interest income advanced by 19.20% from N195.03bn in Q3 2021 to N232.49 bn in the current period. Net interest income went up by 16.41% from N162.94 bn in Q3 2021 to N189.69 bn in Q3 2022. Profit before tax grew by 11.73% from N151.91bn in Q3 2021 to N169.72bn in the current period due to 18.27% rise in fees and commission income and 42.32% rise Net gains on financial instruments. Profit after tax went up by 0.73% from N129.40bn in Q3 2021 to N130.35bn in the current period. Consequently, Gtco recorded a 0.22% rise in earnings per share from N4.54 in Q3 2021 to N4.55 in Q3 2022. Gtco Plc has a BVPS of N29.66, P/BV of 0.82x and P/E ratio of 4.03x.
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