News

Weekly Market Review & Stock Recommendations – September 21, 2020

Dear Client/Reader,

Global Economic Roundup

OPEC+ urges full conformity with production cuts.

·         Crude oil was under pressure on Friday and in a position to close lower for a second consecutive week on growing demand worries and an unexpected rise in U.S. stockpiles that raised new concerns about oversupply.

Fed holds rates steady near zero; indicates it will stay there for years.

•       Fed said short-term rates would remain targeted at 0%-0.25%. They equally changed their economic forecasts to reflect a smaller decline in GDP and a lower unemployment rate in 2020. They now see a full-year GDP decline of 3.7%, considerably better than the 6.5% drop forecast in June.

Domestic Economic Roundup

Nigeria’s inflation rate hits 13.22% in August 2020, highest in 29 months.

•       Nigeria’s inflation rate rose to 13.22% in August 2020, highest recorded in 29 months, since March 2018 (13.24%). This was due to an increase in prices of Passenger transport by air, Hospital services, bread and cereals, potatoes amongst others.

CBN to increase loans to agricultural sector to 10% of total bank credit.

•       The CBN said the country needs to increase its bank credit to the agricultural sector by over 50% within the next 4 years to boost food production. This is expected to drive the allocation to the sector to 10% of the entire credit in the banking sector from the current 4%.

Equities Market

The Nigerian Stock Exchange closed bearish last week as the ASI declined by 0.08% week-on-week to close at 25,572.57 points.

The current low prices of stocks still provide good buying opportunities in the market. Some of our recommended stocks are mentioned below;

DANGSUGAR – Dangote Sugar Plc. HY’2020 results showed that revenue grew by 28.46% from N80.36 bn in HY’2019 to N103.23 bn in HY’2020. However, gross profit went down by 1.38% to N20.82 bn in HY’2020 from N21.12 bn in HY’2019. The decline in gross profit was driven by a 39.09% hike in cost of sales. Profit from operations advanced by 0.68% from N17.28 bn in HY’2019 to N17.40 bn in HY’2020, due to a 434.33% increase in other income and a 15.93% decline in selling and distribution expenses. Profit before tax inched up marginally by 0.07% to N17.05 bn in HY’2020 from N17.03 bn in HY’2019. Profit after tax grew by 5.51% from N10.98 bn in HY’2019 to N11.58 bn in HY’2020, on the back of a 9.79% decline in income tax expenses. Consequently, earnings per share rose by 5.43%, from N0.92 in HY’2019 to N0.97 in HY’2020. Dangote Sugar has a BVPS of N9.98, P/BV of 1.20x and P/E ratio of 6.19x.

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. We saw their revenue from the retail and industrial sale of sugar increase by 30 percent and 69 percent, respectively in the first half of the year, hence supporting a bottom-line growth. While the manufacturing industry in general is projected to contract by 5.10% in 2020, following the 8.78% contraction in Q2, it has been observed that the demand for sugar has remained high, hence, allowing Dangote Sugar to grow their revenue by maneuvering around the distribution limitations during the lockdown. Hence, we expect their 2020 PAT to move past N23.00 billion, taking the EPS above N2.00.     

UCAP – United Capital’s result for HY’2020 showed that gross earnings increased by 37.26% from N3.24 bn in HY’2019 to N4.45 bn in HY’2020. Net operating income rose by 45.40% from N2.82 bn in HY’2019 to N4.10 bn in HY’2020, due to a 347.65%, 85.03% and 77.15% increase in net interest margin, net trading income and fees and commission income, respectively. Profit before tax rose by 14.10% from N1.99 bn in HY’2019 to N2.27 bn in the current period, despite the surge in key expenditure line items, such as the personnel expenses which rose by 7.86%, and the other operating expense which increased by 87.73%.  Profit after tax increased by 15.98% to N1.91 bn in the current period from N1.65 bn in HY’2019. Consequently, Earnings per share went up by 14.29% from N0.28 in HY’2019 to N0.32 in the current period. UCAP has a BVPS of N3.02, P/BV of 1.04x and P/E ratio of 4.92x

The financial services sector grew by 28.41% in Q2, and is projected to grow by 20.50 percent this year, supported by the performance of highly digitized firms such as United Capital. The company has been able to digitize their products, with various online and mobile platforms for service delivery. This in turn serves them, as the Covid induced restrictions on movement has minimally disrupted some aspects of their business. Hence, we should see the PAT climb above N5.4 billion, while the EPS is projected above N0.90. Please find attached our Weekly Market Review & Stock Recommendations for this week.

Thank you.

Click here for the Weekly Market Review & Stock Recommendations.

Read more...

Headline Inflation Increased by 13.22% in August 2020; 0.40% higher than July 2020 (12.82%) Rate

Dear Client/Reader,

The National Bureau of Statistics just reported that the consumer price index, (CPI) which measures inflation increased by 13.22% (year-on-year) in August 2020. This is 40 basis points higher than the rate recorded in July 2020 (12.82%).

The percentage change in the average composite CPI for the twelve months period ending August 2020 over the average of the CPI for the previous twelve months period was 12.23%, indicating a 0.18% increase from 12.05% recorded in July 2020.

Food Index Rose by 16.00%

Food index rose by 16.00% in August 2020. The average annual rate of change of the Food sub-index for the twelve-month period ending August 2020 over the previous twelve-month average was 14.87%, 0.24% higher than the average annual rate of change recorded in July 2020 (14.63%). This rise in the food index was caused by increases in prices of Bread and cereals, Potatoes, Yam and other tubers, Meat, Fish, Fruits, Oils and fats and Vegetables. On a  month-on-month basis, the food sub-index increased by 1.67% in August 2020, up by 0.15% from 1.52% recorded in July 2020.

Core Index stood at 10.52%

Price movements recorded by the Core index stood at 10.52% (year -on-year) in August 2020, up by 42 basis points as against 10.10% recorded in July 2020. The highest increases were recorded in prices of Passenger transport by air, Hospital services, Medical services, Pharmaceutical products, Maintenance and repair of personal transport equipment, Vehicle spare parts, Motor cars, Passenger transport by road, Miscellaneous services relating to the dwelling, Repair of furniture and Paramedical services. On a month-on-month basis, the core sub-index increased by 1.05% in August 2020, up by 30 basis points from 0.75% recorded in July 2020.

Urban Index increased by 13.83%

The Urban index increased by 13.83% (year-on-year) in August 2020 compared to 13.40% recorded in July 2020, while the Rural index increased by 12.65% (year -on-year) in August 2020 as against 12.28% in July 2020. On a month-on-month basis, the urban index rose by 1.42% in August 2020, up by 0.15% from 1.27% recorded in July 2020, while the rural index also rose by 1.27% in August 2020, up by 0.04% from the rate recorded in July 2020 (1.23%).

Regards,

Read more...

GTB Plc. HY’2020- Profit after tax dips by 4.90% to N94.27 billion

Dear Client/Reader,

Stanbic Plc HY’2020 showed an increase in bottom-line result as profit for the period grew by 24.72%. Interest income declined by 9.30% from N60.78 bn in HY’2019 to N55.13 bn in the current period. Net interest income went down by 4.48% from N39.31 bn in HY’2019 to N37.55 bn in HY’2020. Profit before tax advanced by 17.37% from N44.65 bn in HY’2019 to N52.41 bn in the current period. The increase in profit before tax is attributable to a 94.63% increase in trading income, and supported by declines in key expenditure line items, such as; the fees and commission expense and operating expense, which both went down by 5.41% and 3.06%, respectively. Profit after tax went up by 24.72% from N36.25 bn in HY’2019 to N45.20 bn in the current period, due to a 14.31% decline in income tax expense. Consequently, Stanbic recorded a 22.51% increase in earnings per share from N3.42 in HY’2019 to N4.19 in HY’2020. The company proposed an interim dividend of N0.40. Stanbic currently trades at N37.50.

Please find attached GTB Plc HY-2020 result analysis.  

Regards,

Click here for the full result analysis.

Read more...

UBA Plc. Posts 21.69% PAT Decline in HY’2020

Dear Client/Reader, 

The HY’2020 result of UBA Plc showed that Interest income advanced by 0.34% from N204.89 bn in HY’2019 to N205.59 bn in the current period. Net interest income increased by 8.36% to N119.32 bn in HY’2020 from N110.12 bn in HY’2019. The increase in net interest income was driven by the rise in interest income and an 8.97% drop in the interest expense. In a similar tune, operating income increased by 7.70% from N182.64 bn in HY’2019 to N196.71 bn in the current period, on the back of a 6.73% and 7.52% increase in fees and commission income and net trading and foreign exchange income, respectively. However, profit before tax declined by 18.71% from N70.27 bn recorded in HY’2019 to N57.13 bn in the current period. The decline in profit was due to a 150.22% and 20.57% increase in net impairment loss and operating expenses, respectively. Likewise, profit after tax declined by 21.69% from N56.74 bn in HY’2019 to N44.43 bn in HY’2020. Consequently, earnings per share went down by 23.46% from N1.62 in HY’2019 to N1.24 in HY’2020. The company proposed an interim dividend of N0.17. UBA currently trades at N6.45.

Please find attached UBA Plc HY-2020 result analysis.  

Regards,

Click here for the full result analysis.

Read more...

STANBIC Plc. HY’2020- Profit after tax grew by 24.72% to N45.20 billion

Dear Client/Reader, 

Stanbic Plc HY’2020 showed an increase in bottom-line result as profit for the period grew by 24.72%. Interest income declined by 9.30% from N60.78 bn in HY’2019 to N55.13 bn in the current period. Net interest income went down by 4.48% from N39.31 bn in HY’2019 to N37.55 bn in HY’2020. Profit before tax advanced by 17.37% from N44.65 bn in HY’2019 to N52.41 bn in the current period. The increase in profit before tax is attributable to a 94.63% increase in trading income, and supported by declines in key expenditure line items, such as; the fees and commission expense and operating expense, which both went down by 5.41% and 3.06%, respectively. Profit after tax went up by 24.72% from N36.25 bn in HY’2019 to N45.20 bn in the current period, due to a 14.31% decline in income tax expense. Consequently, Stanbic recorded a 22.51% increase in earnings per share from N3.42 in HY’2019 to N4.19 in HY’2020. The company proposed an interim dividend of N0.40. Stanbic currently trades at N37.50.

Please find attached STANBIC Plc HY-2020 result analysis.        

Regards,

Click here for the full result analysis.

Read more...

Nigeria Records GDP Growth of -6.10% in Q2’2020 lower than 2.12% in Q2’2019

Dear Client/Reader,

The National Bureau of Statistics just released the second quarter 2020 GDP report. According to the report, the nation’s Gross Domestic Product (GDP) contracted by 6.10% (year-on-year) in real terms.

This growth in Q2’2020 is 8.22% points lower than the rate recorded in the corresponding quarter of 2019 (2.12%) and 7.97% points lower than the rate recorded in Q1’2020 (1.87%).

In the quarter under review, aggregate GDP stood at N34.02 trillion in nominal terms. This represents 2.80% year on year decline in nominal GDP when compared to the corresponding quarter of 2019 (N35.00 trillion). The nominal GDP growth rate in Q2’2020 was lower than the rate recorded in Q2’2019 by 16.81%.

The Oil Sector

During the period under review, Oil production stood at 1.81 million barrels per day (mbpd), 0.21 million barrels lower than the daily average production recorded in the second quarter of 2019 (2.02 mbpd).

Real growth of the oil sector was -6.63% (year-on-year) in Q2’2020. This is lower by 13.80% points compared to the rate recorded in the same quarter, 2019. Oil sector growth decreased by -11.69% points when compared to the second quarter of 2019 (5.06%). Quarter-on-Quarter, the oil sector recorded a growth rate of -10.82% in Q2’2020. As a share of the economy, the Oil sector contributed 8.93% to total real GDP in Q2’2020, up from figures recorded in the corresponding period of 2019 and the preceding quarter, where it contributed 8.98% and 9.50%, respectively.

The Non-Oil sector

The non-oil sector declined by -6.05% in real terms during the reference quarter. This is lower by -7.70% point compared to the rate recorded in the same quarter of 2019 and -7.60% points lower than the first quarter of 2020. The non-oil sector output was mainly driven by Financial and Insurance (Financial Institutions), Information and Communication (Telecommunications), Agriculture (Crop Production), and Public Administration. On the other hand, sectors which experienced the highest negative growth included Transport and Storage, Accommodation and Food Services, Construction, Education, Real estate and Trade among others

In real terms, the Non-Oil sector contributed 91.07% to the nation’s GDP during the reference quarter, higher than the 91.02% recorded in Q2’2019 and the 90.50% recorded in the first quarter of 2020.

Regards.

Read more...

2020 Economic Model and Sectoral Opportunities

Dear Client/Reader,
The Nigerian Economy is faced with the twin problem of low oil prices and the Covid-19 pandemic. Consequently, growth forecast for 2020 will be built around the expected impact of the crash in oil prices on the performance on the economy and on different sectors – as observed in the 2016 oil induced recession, and also factor in the impact of the virus and its containment measures on economic activities. In addition, our economic expectations would account for the unprecedented policy response proposed by the government to tackle this economic crisis by way of a N2.3 billion stimulus plan.
Despite the ravaging pandemic, there are still viable investment opportunities in the equity market. Equities that exist in the identified opportunity sectors are best poised to weather the headwind and sustain their growth and profitability. Consequently, we have identified, and recommended stocks that are strategically positioned to offer attractive returns even during a pandemic.
Please find attached our full report titled “2020 Economic Model and Sectoral Opportunities”.

Read more...

NESTLE Plc: PAT Dips by 16.84% to N21.83 bn in HY-2020

Dear Client/Reader, 

Nestle Plc. HY’2020 results showed that revenue dipped by 0.62% from N141.91 bn in HY’2019 to N141.03 bn in HY’2020. Similarly, gross profit went down by 7.93% to N60.84 bn in HY’2020 from N66.08 bn in HY’2019. The decline in gross profit was driven by the fall in revenue and by a 5.75% hike in cost of sales. Profit from operations declined by 15.10% from N40.43 bn in HY’2019 to N34.33 bn in HY’2020, due to a 50.68% increase in administrative expenses. Profit before tax fell by 16.26% to N33.86 bn in HY’2020 from N40.44 bn in HY’2019, on the back of a 47.03% decline in finance income and a 5.48% rise in finance costs. In the same vein, profit after tax declined by 16.84% from N26.25 bn in HY’2019 to N21.83 bn in HY’2020, despite a 16.48% decline in income tax expense. Consequently, earnings per share fell by 16.85%, from N33.11 in HY’2019 to N27.53 in the current period. Nestle currently trades at N1,175.00

Please find attached Nestle Plc HY-2020 result analysis.

Read more...

FCMB Plc. Posts 28.83% PAT Growth in HY’2020

Dear Client/Reader, 

The HY’2020 result of FCMB Plc showed that gross earnings rose by 9.35% to N98.18 bn in the current period from N89.79 bn in HY’2019. Interest income advanced by 8.20% from N70.38 bn in HY’2019 to N76.15 bn in the current period. Net interest income increased by 17.40% to N45.38 bn in HY’2020 from N38.65 bn in HY’2019. The increase in net interest income was driven by the rise in interest income and by a 3.01% decline in interest expense. Profit before tax increased by 25.58% from N8.82 bn recorded in HY’2019 to N11.07 bn in the current period. The increase in profit was due to a 149.79% and 10.93% increase in other revenue and net trading income, respectively. Profit after tax advanced by 28.83% from N7.53 bn in HY’2019 to N9.70 bn in HY’2020. Consequently, earnings per share went up by 28.95% from N0.38 in HY’2019 to N0.49 in the current period. FCMB currently trades at N1.95.

Please find attached FCMB Plc HY-2020 result analysis.              

Read more...

FGN SOVEREIGN SUKUK BOND OFFER

Dear Esteemed Client,

The Federal Government of Nigeria has begun the sale of its second tranche of the 7 year NGN100 billion Ijara (lease) sukuk bond due 2025 at an annual rental rate of 15.743%. Rentals will be paid in two equal instalments annually, while purchase price representing principal investment will be paid to investors at the end of the 7th year of the sukuk.

Sukuk is an investment certificate that represents ownership interest of the holder in an asset or pool of assets.

The Offer for Subscription opened on Thursday, December 06, 2018 and closes on Monday December 17, 2018. We highlight below the details of the FGN Sovereign Ijarah Sukuk that the DMO released to the public:

IssuerFGN Roads Sukuk Company on behalf of the Federal Government of Nigeria.
TrancheII
Programme SizeUp to NGN100 billion
Tenor7 Years
Rental rate15.743%
Use of proceedsConstruction and rehabilitation of key roads across the six geopolitical zones of the country.
Status1. Qualifies as securities in which trustees can investunder the Trustee Investment Act.2. Qualifies as Government securities within themeaning of Company Income Tax Act (“CITA”)and Personal Income Tax Act (“PITA”) for TaxExemption for Pension Funds, amongst otherinvestors.3. To be listed on The Nigerian Stock Exchange andFMDQ OTC Securities Exchange.4. Classified as Liquid Asset by the Central Bank ofNigeria.5. Certified by the Financial Regulatory AdvisoryCouncil of Experts (FRACE) of the Central Bank ofNigeria.
FormRegistered

To participate, kindly send an email instruction authorizing us to bid on your behalf by indicating the tenor and the amount, then credit our account with the required amount as the case may be.

Also submit the completed form to MBC Securities before the close of business on Monday December 17, 2018. 

Please see below our bank details.

GTBMBC SECURITIES LIMITED0012200376
FIRST BANK PLCMBC SECURITIES LIMITED2005543742
ECOBANK PLCMBC SECURITIES LIMITED2562036993
ZENITH BANKMBC SECURITIES LIMITED1011736779

 For further enquiries, kindly reach:

Obianuju Egwuatu- oegwuatu@mbcgroup.com.ng/08137475868

Yussuf Apena- yapena@mbcgroup.com.ng/08062070332  

Vivian Onije- vonije@mbcgroup.com.ng/08022307996  

Thank you. 

Read more...
Scroll Up