Weekly Market Review & Stock Recommendations -January 30, 2023

Dear Client/Reader,

Global Economic Roundup

Big Oil Set to Report Record $200 billion Profits for 2022

The five biggest oil majors in the world are expected to report record profits for 2022 in the coming days, for around $200 billion in combined yearly earnings thanks to the jump in oil and gas prices last year. This year, earnings at ExxonMobil, Chevron, BP, Shell, and TotalEnergies are set to be around a quarter lower than the combined profits for 2022, but they will still be a whopping $150 billion for 2023, analysts say. The record quarterly earnings which the majors reported for the second and third quarters of 2022 have already drawn intense criticism from the White House, which has scrambled to have gasoline prices down from the record levels seen in June. The Biden Administration has accused Big Oil of “war profiteering” and has called on companies to invest in more supply or “face higher taxes.” In Europe, the record earnings are already subject to windfall taxes, which ExxonMobil has challenged in court. 

U.S. Unemployment System still Plagued by Delays 3 Years after Covid-era Downturn

These days the U.S. unemployment system is somewhat of an anomaly. Almost three years after the Covid-19 pandemic caused the worst jobless crisis in the U.S. since the Great Depression, unemployment has recovered to near-historic lows. Applications for unemployment insurance have been at or below their pre-pandemic trend for the better part of a year. Yet Americans who need jobless benefits aren’t getting them quickly — a dynamic at odds with an apparent lack of stress on the system. The federal government considers a first payment “timely” if states issue funds within 21 days of an initial claim for benefits. In March 2020, 97% of payments were timely; today, the share is 78%, on average, according to U.S. Department of Labor data. The Labor Department views an 87% share as the barometer of success for first-payment timeliness.

Experts see improved performance in H2 

Ahead of the general elections, economists and allied professionals are beginning to see improved economic performance in the second half of the year. Some of the experts, who spoke at the yearly Nigeria Economic Outlook organised by First Bank of Nigeria Limited, based their optimism on the forthcoming change in the political leadership, rising confidence in the economy and possible commencement of Dangote Refinery. The projection came ahead of the first Monetary Policy Committee (MPC) meeting which held on Monday and Tuesday in Abuja. Speaking at the event, the Chief Consultant of B.Adedipe Associates, Dr. Biodun Adedipe, said the assumption of new political leadership would boost confidence and trigger new growth momentum. If nothing else is certain, he said, all the leading presidential candidates have business-friendly manifestoes. “To that extent, we project that there is the likelihood that if any of the candidates get to the office, he is likely going to put a cabinet together before September and start running. If that happens, we will see a second half-year that will be better than the first half-year,” Adedipe said. The economist also projected the country’s gross domestic product (GDP) to close last year at about 3.1 per cent with this year’s growth expected to surpass the figure. Besides leadership change, his optimism was informed by the expected impacts of the renewed focus on infrastructure on business performance, the positive signal from purchasing manager index (PMI), possible monetary policy normalisation among others.

Some of our recommended stocks are mentioned below;

NB PLC:

Nigerian Breweries Plc is projected to have a 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 1.81x and P/E ratio of 17.22x. 

ACCESSCORP:

Access Holdings Plc is projected to have a FY 2022 revenue of N740.81bn, up by 23.12% from N601.71bn in FY 2021. Profit after tax is estimated to grow from N160..22bn in FY 2021 to N197.26 bn in FY 2022 with an EPS of N5.63

Access Holdings Plc Q3 2022 results showed that interest income advanced by 21.46% from N470.9 bn in Q3 2021 to N571.98 bn in the current period. Net interest income went up by 4.78% from N267.73 bn in Q3 2021 to N280.53 bn in Q3 2022. Profit before tax grew by 8.97% from N135.06 bn in Q3 2021 to N147.18 bn in the current period due to the 36.05% increase in net impairment charges, 17.27% rise in fees and commission expense and 11.62% rise in net foreign exchange gain. Profit after tax went up by 12.54% from N121.88bn in Q3 2021 to N137.17bn in the current period, on the back of a 22.92% fall in income tax expense. Consequently, Access recorded a 12.14% rise in earnings per share from N3.46 in Q3 2021 to N3.88 in Q3 2022. Access Holdings Plc has a BVPS of N29.11, P/BV of 0.31x and P/E ratio of 1.75x.

Kindly find here weekly review and stock recommendations

Thank you.