Dear Client/Reader,
Global Economic Roundup
Crude oil extends gains on OPEC+ supply restraint
• Oil prices rose early on Friday, adding to big gains overnight after OPEC and its allies agreed to not increase supply in April as they await a more solid recovery in demand from the coronavirus pandemic.
U.S. West Texas Intermediate (WTI) crude futures climbed 17 cents, or 0.3%, to $64.00 at 0128 GMT, holding below a 13-month high hit on Thursday.
Brent crude rose 10 cents, or 0.2%, to $66.84 a barrel, but down from a high of $67.75 hit on Thursday.
U.S., EU to suspend tariffs in effort to resolve Boeing-Airbus subsidy dispute
• The U.S. and the European union will suspend tariffs for four months tied to a long-running dispute over illegal subsidies for Boeing and Airbus, the president of the European Commission said Friday.
The agreement is a step toward resolving the 17-year dispute that has led to retaliatory tariffs on billions of dollars of goods affecting a range of exports from both sides of the Atlantic.
CBN extends Covid-19 forbearance for intervention loans by another 12 months
• The Central Bank of Nigeria has announced an extension of its regulatory forbearance for the restructuring of its intervention facilities by another 12 months. In a circular signed by Dr. Kevin Amugo, the Director of Financial Policy and Regulatory of the apex bank said it will continue to charge its borrowers an interest rate of 5% per annum as against the 9% originally offered. The CBN had on March 20th reduced the interest rates on its intervention loans from 9% to 5% as part of its response to the economic crunch brought on by Covid-19 induced lockdowns.
Equities Market
The Nigerian Bourse closed bearish last week as the ASI declined by 1.18% week-on-week to close at 39,331.61 points. Year-to-date returns closed at -2.33% at the end of the week
Some of our recommended stocks are mentioned below;
Dangote Sugar Plc – Dangote Sugar Plc. showed that Revenue grew by 33.03% from N161.09 bn in FY’2019 to N214.30 bn in FY’2020. Similarly, gross profit increased by 40.38% to N53.75 bn in FY’2020 from N38.29 bn in FY’2019. The increase in gross profit was driven by the surge in revenue despite a 30.74% hike in cost of sales. Profit from operations advanced by 48.46% from N29.93 bn in FY’2019 to N44.44 bn in FY’2020, due to a 49.67% increase in other income and a 16.83% decline in selling and distribution expenses. Profit before tax grew by 52.98% to N45.62bn in FY’2020 from N29.82 bn in FY’2019. Profit after tax grew by 33.15% from N22.36 bn in FY’2019 to N29.77 bn in FY’2020, despite a 112.5% increase in income tax expenses. Consequently, earnings per share rose by 31.02%, from N1.87 in FY’2019 to N2.45 in FY’2020. Dangote Sugar has a BVPS of N10.39, P/BV of 1.73x and P/E ratio of 7.35x.
Dangote Sugar has managed to shield itself from the slowdown witnessed in the consumer goods industry, owing to the increased sale of sugar and related products before and even during the lockdown experienced in the first six months in year 2020. We saw their revenue from the retail and industrial sale of sugar increase significantly through out the year, hence supporting a bottom-line growth.
WAPCO PLC- Wapco Plc is projected to have a Q4 2020 Revenue of N228bn. Likewise, PAT is estimated to grow by 7.45% from N20.57bn in Q4 2019 to N22.11 bn in Q4 2020, taking the EPS to N1.37.
However, the Q3 2020 results are as follows: Revenue grew by 10.32% from N163.06 bn in Q3’2019 to N179.88 bn in Q3’2020. Similarly, gross profit went up by 9.46% to N56.12 bn in Q3’2020 from N51.27 bn in Q3’2019. The growth in gross profit was driven by the growth in revenue. Profit from operations rose by 15.68% from N35.54 bn in Q3’2019 to N41.11 bn in Q3’2020, due to an 0.81% and 11.85% decline in administrative expenses and selling and distribution expense, respectively. Profit before tax grew by 70.27% to N34.29 bn in Q3’2020 from N20.14 bn in Q3’2019, on the back of a 54.51% decline in finance cost. Profit after tax rose by 37.05% from N20.57 bn in Q3’2019 to N28.20 bn in Q3’2020, despite a 1,504.38% increase in taxes. Consequently, earnings per share decreased by 76.54%, from N7.46 in Q3’2019 to N1.75 in Q3’2020. Wapco has a BVPS of N22.16 P/BV of 0.84x and P/E ratio of 10.69x.
Wapco is expected to shield itself from the adverse impacts of the Covid-19 pandemic, as the company has been able to sustain their revenue during the lockdown by leveraging an organized price increase of their cement product to fill the shortfalls left by reduced demands. This aggressive revenue growth strategy has also been met with effective cost reduction tactics, both of which will support a full year growth similar to what was seen the first three quarters of the year.
Please find here our Weekly Market Review & Stock Recommendations for this week.
