Weekly Market Review & Stock Recommendations -February 6, 2023

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Global Economic Roundup

OPEC+ To Leave Oil Production Quotas Unchanged

The Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ group recommended that no changes be made to the current oil production quotas during a meeting on Wednesday, as widely expected. The members of the JMMC “reaffirmed their commitment to the DoC which extends to the end of 2023 as agreed in the 33rd OPEC and Non-OPEC Ministerial Meeting (ONOMM) on 5th of October 2022,” OPEC said in a brief statement after the meeting. The panel is meeting next on April 3, 2023. The no-change in policy was widely expected by the market, considering the uncertainties in both supply and demand in the coming months. Analysts expected OPEC+ to adopt a wait-and-see approach amid significant uncertainties going forward. Going forward, OPEC, OPEC+, and market participants will look to China and Russia for the most immediate clues on global demand and supply.

Important wage inflation measure for the Fed rose less than expected in Q4

Employment costs increased at a slower than expected pace in the fourth quarter, indicating that inflation pressures on business owners are at least leveling off. The employment cost index, a barometer the Federal Reserve watches closely for inflation signs, increased 1% in the October-to-December period, the Labor Department reported Tuesday. That was a bit below the 1.1% Dow Jones estimate and less the 1.2% reading in the third quarter. It also was the lowest quarterly gain in a year. Wages and salaries for the period also rose 1%, down 0.3 percentage point, while the cost of benefits increased just 0.8%, down from 1% in the previous period. Compensation for government workers grew at a much slower pace comparatively in the quarter, slowing to a 1% gain from 1.9% in Q3. Fed officials consider the ECI an important inflation gauge because it adjusts for occupations that are in higher demand and for outsized wage gains in particular industries, such as those that were most affected by the pandemic. 

Dangote, Sinoma sign agreement on new cement plant in Ogun

Dangote Industries Limited (DIL) has signed an agreement with China Sinoma International Engineering to build a six million tons per annum cement plant in Itori, Ogun State. The agreement was signed by the Chairman of Dangote Cement Plc, Aliko Dangote alongside the Group Executive Director, Strategy, Capital Projects & Portfolio Development, DIL, Devakumar Edwin, while China Sinoma Engineering was represented by its Group President, Yin Zhisong, and the company’s Chairman, Liu Renyue. Mr Dangote speaking at the signing ceremony, said that new integrated cement plant at completion will strengthen the local production capacity of Dangote Cement, bringing its local capacity to 41.25 million tons per annum and total African capacity to 57.6 million tons per annum. He said the Itori Cement Plant will also increase Nigeria’s capacity to export cement, thereby enabling more diversification and foreign exchange inflows for the economy. According to Mr Dangote, the project is further expected to develop the domestic economy through creation of thousands of indirect and direct jobs and drive economic development in the Itori axis. Ancillary businesses, he stated will be drawn to the axis, who will be seeking to take advantage of the location of the cement plant to provide goods and services to staff, contractors and other stakeholders.

Some of our recommended stocks are mentioned below;

GTCO:

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 2022with 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.

FIDSON:

Fidson Plc is projected to have a FY 2022 revenue of N40.69bn, up by 31.86% from N30.86bn in FY 2021. Profit after tax is estimated to grow from N3.72bn in FY 2021 to N4.91bn in FY 2022 with an EPS of N2.34

Fidson Q3 2022 results showed an increase in revenue by 44.48% from N21.75bn in Q3 2021 to N31.43bn in Q3 2022. Operating profit advanced from N4.29 bn in Q3 2021 to N6.35bn in Q3 2022, reflecting an increase of 48.03%. Profit before tax went up by 49.06% from N3.42bn Q3 2021 to N5.10bn in the current period. Profit after tax grew by 47.97% from N2.32bn in Q3 2021 to N3.44bn in Q3 2022. EPS grew by 35.14% to N1.50 in Q3 2022 from N1.11 in Q3 2021. Fidson has a BVPS of N5.92, P/BV of 1.67x and P/E ratio of 4.95x.

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