Weekly Market Review & Stock Recommendations -January 9, 2023
Dear Client/Reader,
Global Economic Roundup
Oil Prices Plunge Below $80 As Near-Term Demand Worries Grow
Oil prices crashed early on Wednesday, with Brent Crude falling below the $80 a barrel mark again, as concerns about immediate global oil demand intensified with soaring Covid cases in China and slowing economies globally. The U.S. benchmark, WTI Crude, had plummeted below $75 per barrel and traded down by 2.68% at $74.91. The international benchmark, Brent Crude, dipped below $80 and the front-month contract was down by 2.70% at $79.92. The recent sell-off in oil was the result of gloomy economic expectations from the International Monetary Fund (IMF) regarding the state of the Chinese and global economy in the early weeks of 2023, and a strong U.S. dollar. Surging Covid cases in China and a slowdown in the Chinese economy are expected to weigh on oil demand and prices in the immediate term.
US Stocks Close Higher Despite Hawkish Minutes
US stocks closed marginally higher on a choppy Wednesday, as minutes from the December FOMC meeting confirmed policymakers’ previous signals that interest rates must continue to rise and remain elevated for the foreseeable future. Officials also emphasized that investors should not interpret the slower 50bps rate hike as a dovish pivot, warning markets against pricing interest rate cuts this year.
The Dow added 130 points, while the S&P 500 and the Nasdaq added 0.8% and 0.7%, respectively. In the meantime, ISM PMI data showed that factory activity in the US contracted for a second straight month, adding to investors’ skepticism that the central bank can maintain high borrowing costs without major damage. Also, US job openings fell slightly to 10.5 million in December but remained at considerably high levels.
Nigeria’s Debt to Hit 77 Trillion Naira
Nigeria’s Debt Management Office (DMO) on Thursday said that the next administration will inherit a public debt of N77 trillion if the N23 trillion loans from the CBN are securitized. In recent weeks, there have been heated debates on the sustainability of Nigeria’s debt amid shrinking revenue and mounting CBN loans. Last week, President Muhammadu Buhari requested a delayed approval for the N23.7 trillion loan that had already been spent, causing an uproar in the Senate. Lawmakers rejected the request and accused the president of violating the constitution. They also demanded details of how the money was spent. The DG of the DMO, Mrs Oniha noted that Nigeria’s total debt stock rose to N44.06 trillion as of the end of September 2022, largely reflecting the weakness of the local unit, Naira. She added, however, that should the CBN loans be added to the debt profile, the nation’s debt portfolio would increase significantly. The DMO boss added that the projected debt stock for May 2023 remains at about N5.567 trillion.
Some of our recommended stocks are mentioned below;
NB PLC:
Nigerian Breweries Plc is projected to have an FY 2022 revenue of N576.07bn, up by 31.74% from N437.28bn in FY 2021. Profit after tax is estimated to grow from N12.67bn in FY 2021 to N16.70bn in FY 2022 with an EPS of N2.06.
Nigerian Breweries Plc Q3 2022 results showed an increase in revenue by 27.21% from ₦309.28bn in Q3 2021 to ₦393.45bn in Q3 2022. Operating profit advanced from ₦24.74bn in Q3 2021 to ₦35.39bn in Q3 2022, reflecting an increase of 43.06%. Profit before tax grew by 49.89% from ₦12.74bn in Q3 2021 to ₦19.09bn in the current period, as finance income grew by 172.63% and finance cost dropped by 48.82%. Profit after tax rose by 79.58% from ₦8.22bn in Q3 2021 to ₦14.76bn in Q3 2022. EPS increased by 78.43% to ₦1.82 in Q3 2022 from ₦1.02 in Q3 2021. Nigerian Breweries has a BVPS of ₦23.06, P/BV of 1.80x, and P/E ratio of 15.45x.
WAPCO PLC:
Lafarge Africa (WAPCO) Plc is projected to have an FY 2022 revenue of N366.68bn, up by 25.11% from N293.09bn in FY 2021. Profit after tax is estimated to grow from N51.03bn in FY 2021 to N63.81bn in FY 2022 with an EPS of N3.97
Lafarge Africa (WAPCO) Plc Q3 2022 results showed that earnings advanced by 23.11% from N219.20bn in Q3 2021 to N269.85 bn in the current period. Gross profit increased by 3199% to N134.77bn in Q3 2022 from N102.11bn in Q3 2021. In a similar tune, profit before tax advanced by 22.88% from N43.90bn recorded in Q3 2021 to N53.95 bn in the current period. Likewise, profit after tax grew by 11.15% from N40.40bn in Q3 2021 to N44.90bn in Q3 2022. Consequently, Earnings per share went up by 11.16% from N2.51 in Q3 2021 to N2.79 in Q3 2022. Lafarge Africa has a BVPS of N25.29, P/BV of 0.88x and P/E ratio of 5.98x.
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