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Dear Client/Reader,

Negative Trend Reverses …ASI Gains 168 Basis Point

The Nigerian Stock Exchange (NSE) closed positive as bulls dominated proceedings in the market today. The benchmark All Share Index (ASI) appreciated by 1.68% to close at 34,818.01. Similarly, Market Capitalization increased by N300.55 billion to close at N18.19 trillion while the Year-to-Date (YtD) returns settled at 29.71%.

Sectors performance was broadly bearish

Performance across sectors was broadly bullish as 3 out of the 5 sectors closed in the green zone. Banking, Industrial, and Consumers Goods indices advanced by 2.53%, 2.81% and 2.98% respectively, on the back of buy interests recorded in the shares of Sterling (10.00%), WAPCO (9.55%), ETI (8.59%), NB (7.41%), DANGSUGAR (5.95%), CADBURY (4.92%), DANGCEM (4.22%), ACCESS (4.17%), UBA (3.57%), UCAP (3.23%) and ZENITH (3.09%) among others. While Insurance and Oil and Gas indices closed in the red zone on the back of sell interests in the shares of CORNERST (-8.62%), REGALINS (-8.33%), MBENEFIT (-7.14%) and ARDOVA (-6.25%).

NASD Market

The NASD market closed flat after today’s trading activities as the Unlisted Securities Index (USI) closed positive to close at 736.53. Consequently, Market Capitalization also closed flat by 0.07% to close at N547.46 billion. Market activity measured by aggregate volume increased by 2,900.95% while value increased by 127.63%. Investors traded a total of 12,121,740 units of shares valued at N13.33 mn in 8 deals. 

Please click here to view Daily Financial Market update for today, November 18th , 2020.

 

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Dangote Sugar Plc. Posts Highest Profit in 7yrs for 9M’ 2020 result

Dangote Sugar Plc. sustained its strongest momentum during 9M’2020 as it reported its highest profit in 7years at 26.63 billion, 81% higher than its 9M’2019 PAT. Revenue was also up in the period by 36.69% from 117.43 billion in 2019 to 160.51 billion in 2020. The profit jump was as a result of a combination of factors: strong revenue growth triggered by increased demand, higher tax credit, increased prices across all products and a reduction in cost of raw materials aided by the acquisition of Savannah Sugar Company in July 2020.  Despite the 10.73% increase recorded in Administrative expenses, Operating profit grew by 21.73%. Consequently, PBT increased by 26.60%. EPS grew by 76.61% y/y from N1.24 in 9M’2019 to N2.19 in 9M 2020.

Please click here to view Dangote Sugar Plc 9M-2020 result analysis.    

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Daily Financial Market Report for November 17, 2020

Dear Client/Reader,

Bearish Run Continues in the Equities Market …ASI Loses 153 Basis Point

The Nigerian Stock Exchange (NSE) closed negative as bears dominated proceedings in the market today. The benchmark All Share Index (ASI) depreciated by 1.53% to close at 34,242.83. Similarly, Market Capitalization decreased by N278 billion to close at N17.89 trillion while the Year-to-Date (YtD) returns settled at 27.57%.

Sectors performance was significantly bearish

Performance across sectors was significantly bearish as 4 out of the 5 sectors closed in the red zone. Insurance, Industrial, Consumer Goods and Oil and Gas indices declined by -0.49%, -3.33%, -3.21% and -0.87% respectively, on the back of sell interests recorded in the shares of Oando (-10.00%), WAPIC (-10.00%), CADBURY (-9.85%), NB (-6.90%), INTBREW (-6.57%), DANGCEM (-6.45%), STERLING (-3.55%), NESTLE (-3.45%), GUINNESS (-2.26%) and FLOURMILL (-0.18%) among others. While Banking indices closed in the green zone on the back of buy interests in the shares of GUARANTY (2.78%), FIDELITY (2.30%), UBN (1.75%) and FBNH (0.66%).

NASD Market

The NASD market closed positive after today’s trading activities as the Unlisted Securities Index (USI) closed positive to close at 735.99. Consequently, Market Capitalization also increased by 0.91% to close at N547.06 billion. Market activity measured by aggregate volume decreased by 94.25% while value decreased by 57.65%. Investors traded a total of 403,930 units of shares valued at N5.86 mn in 2 deals.

Please click here to view our Daily Financial Market update for today, November 17th , 2020.

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Weekly Market Review & Stock Recommendations – October 19, 2020

Dear Client/Reader,

Global Economic Roundup

Oil gained nearly 2% as robust China trade data offsets returning supply

  • Oil prices rebounded on Tuesday, supported by robust economic data from China that offset returning supply in other regions but gains were capped by forecasts for a slow recovery in global oil demand as coronavirus cases rise.

Coronavirus spending pushes U.S. 2020 fiscal year deficit to $3.132 trillion

  • The U.S. budget deficit hit a record $3.132 trillion during fiscal 2020, more than triple the 2019 shortfall due to massive coronavirus rescue spending. The deficit more than doubled the previous record of $1.416 trillion in fiscal 2009, when the United States was battling a financial crisis.

Domestic Economic Roundup

Nigeria’s inflation rate hits 13.71% as food prices soar

  • The Nigerian inflation rate rose to 13.71% Y-o-Y in September 2020 indicating 0.49% point higher than 13.22% recorded in August 2020. On a M-o-M basis, the Headline index increased by 1.48% in September 2020. This is 0.14% rate higher than in August 2020 (1.34%). Also, the urban inflation rate increased by 14.31% Y-o-Y in review period from 13.83% recorded in August 2020, while the rural inflation rate increased by 13.14% in September 2020 from 12.65% in August 2020.
  • DMO offers for subscription N30 billion FGN bonds on October 21.
  • The Debt Management Office (DMO) has announced the offer for subscription by auction, a total of N30bn worth of bonds on October 21. The sum of N15 billion will be a 15-year re-opening bond at 12.5% per annum, that would mature in March 2035 and another N15 billion 25-year re-opening bond at 9.8% per annum, that would mature in July 2045.

Equities Market

The Nigerian Bourse closed bullish last week as the ASI improved by 0.86% week-on-week to close at 28,659.45 points, while year-to-date returns closed at 6.77%.

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

PRESCO Plc Presco’s results for HY’2020 revealed that revenue increased by 29.35% from N10.41 bn in HY’2019 to N13.46 bn in the current period. Similarly, gross profit went up by 32.10% to N9.04 bn in HY’2020 from N6.85 bn in HY’2019, despite a 24.06% surge in cost of sales. In the same vein, operating profit increased by 51.73% from N4.35 bn in HY’2019 to N6.60 bn in the current period. The growth recorded in the operating profit was supported by reductions in key expenditure line items, such as; the administrative expenses and selling and distribution expenses, which both declined by 21.01% and 18.00%, respectively. Profit before tax rose by 67.71% to N5.77 bn in HY’2020 from N3.44 bn in HY’2019, supported by an 8.64% decline in finance cost. Profit after tax advanced by 70.51% from N2.58 bn in HY’2019 to N4.39 bn in HY’2020. Consequently, earnings per share grew by 70.82%, from N2.57 in HY’2019 to N4.39 in HY’2020. Presco has a BVPS of N32.28, P/BV of 2.04x and a P/E ratio of 7.51x.

Presco has been able to take advantage of greater government support and increased investor sentiment to sustain their growth through the recent economic crises. This was evidenced in their half year results, which stood in line with our earlier projections. The 2020 growth outlook for the agricultural sector remains positive at 4.20 percent, buoyed by the performance of key public companies, such as Presco, which are able to leverage the increased relevance of agriculture, during times of economic hardship that have been sponsored in part or in whole by crude oil shocks. Accordingly, see the 2020 PAT crossing N7.00 bn, taking the EPS past N7.00.

FIDELITY BANK – Fidelity Bank’s HY’2020 showed that interest income advanced by 2.09% from N85.83 bn in HY’2019 to N87.62 bn in the current period. Net interest income went up by 30.95% from N36.90 bn in HY’2019 to N48.32 bn in HY’2020. The increase in the net interest income was driven by the rise in interest income, and by a 19.68% decline in interest expense. Profit before tax advanced by 21.92% from N9.81 bn in HY’2019 to N11.96 bn in the current period. The growth in profit before tax is attributable to a 2,191% and 80.78% increase seen in the net gains from financial assets and other operating income, respectively. Increments in the revenue line items offset a 27.04% fall in fees and commission income, and a 15.12% and 8.28% hike in the fees and commission expense and operating expense, respectively. Profit after tax went up by 33.01% from N8.50 bn in HY’2019 to N11.30 bn in the current period, on the back of a 49.77% decline in income tax expense. Consequently, Fidelity recorded a 34.48% growth in earnings per share from N0.29 in HY’2019 to N0.39 in HY’2020. Fidelity has a BVPS of N8.65, P/BV of 0.24x and P/E ratio of 2.67x.

Fidelity Bank was able to deploy some cost reduction strategies to compliment the growth seen in their interest income, which helped the company improve all growth margins. The company’s effort to improve the volume of transactions on its electronic channels and also restructure and grow their loan book, yielded positive results, as the company was able to sustain their service delivery during the lockdown, and maintain their asset quality. Accordingly, we expect the 2020 PAT to reach N34.00 billion, taking the EPS near N1.18.

Please find attached our Weekly Market Review & Stock Recommendations for this week.

Thank you.

Click here for our Weekly Market Review & Stock Recommendations for this week.

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Weekly Market Review & Stock Recommendations – October 12, 2020

Dear Client/Reader,

Global Economic Roundup

Oils jumps 9% for the week, snapping two-week losing streak

•      Oil prices eased on after an oil worker strike in Norway ended, which should boost output, even though production was still down in the United States ahead of a hurricane. Norwegian oil firms have struck a wage bargain with labor union officials, ending a strike that had threatened to cut the country’s oil and gas output by close to 25% next week

Democrats and Republicans dismiss Trump’s coronavirus stimulus offer

•      Democrats in the House and Republicans in the Senate expressed opposition to President Donald Trump’s $1.8 trillion coronavirus stimulus offer, further complicating a week of already confusing negotiations and dimming hopes for a deal before Election Day.

Domestic Economic Roundup

The proposed 2021 FGN Budget was passed to the National Assembly

•      The President presented the 2021 Appropriation Bill and the performance of the 2020 budget as at July 2020. The budget was a 27% increase from the approved N10.3 trillion for 2020.  Some of the assumptions underlying the appropriation bill includes; Benchmark Oil price of 40 US dollars per barrel, daily oil production at 1.86 million barrels and exchange rate at N379 per Us dollars.

Lagos State Accounted for 78.94% of Credit by Geographical Distribution in Q2 2020

•      The Nigerian Selected Banking sector data as at Q2 2020 revealed that total Geographical Distribution of Credit by State stood at N18.90trn compared to N18.56trn in Q1 2020 and N15.44trn in Q2 2019. This represents 1.82% increase in credit Quarter on Quarter and 22.38% Year on Year. Lagos State recorded the highest credit by geographical distribution with N14.92trn accounting for 78.94% while Yobe State recorded the least with N13.8bn accounting for 0.07% in Q2 2020.

Equities Market

The Nigerian Bourse closed bullish last week as the ASI improved by 5.30% week-on-week to close at 28,415.31 points, while year-to-date returns closed at 5.86%.

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

OKOMU OIL PLC – Okomu Oil Palm Plc. HY’2020 results showed that revenue grew by 57.92% from N8.57 bn in HY’2019 to N13.53 bn in the current period. Similarly, gross profit went up by 81.03% to N12.44 bn in HY’2020 from N6.87 bn in HY’2019. The growth in gross profit was driven in part by the growth in revenue, and by a 35.98% decline in cost of sales. Profit before tax grew by 94.15% to N5.51 bn in the current period from N2.84 bn in HY’2019. Profit after tax rose by 64.29% from N2.44 bn in HY’2019 to N4.01 bn in the current period. Earnings per share increased by 58.49% from N2.65 in HY’2019 to N4.20 in the current period. Okomu has a  BVPS of N32.79, P/BV of 1.76x and P/E ratio of 9.52x.

The agricultural sector is projected to grow by 8.20 percent, as the economic slowdown will shift attention to the sector as an alternative to oil investment, similar to what was witnessed in 2016. The structural vulnerabilities that derive from our reliance on crude oil has caused attention to be pivoted from crude oil and to other revenue generating sources in our economy, and Okomu is receiving increased attention in this regards. Accordingly, we expect their PAT to cross N7 billion and their EPS to soar past N7.

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 1.17x and P/E ratio of 5.53x

The financial services sector is projected to grow by 8.50 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 our Weekly Market Review & Stock Recommendations.

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Weekly Market Review & Stock Recommendations – October 5, 2020

Dear Client/Reader,

Global Economic Roundup

Oil prices drop as Trump test positive for coronavirus

  • Oil prices fell 3% on Friday after U.S. President Donald Trump tested positive for COVID-19, roiling risky assets, and as rising global crude output threatens to overwhelm the market’s weak recovery. International benchmark Brent crude futures were down 2.42% to $39.94 per barrel. U.S. crude futures also shed 2.43% to $37.78 per barrel.

President Trump and First lady test positive for coronavirus

  • President Donald Trump tested positive for coronavirus on Friday, plunging the United States into further upheaval and uncertainty just over a month away from Election Day. Shortly after Trump’s tweet, U.S. stock futures moved sharply lower with Dow futures falling more than 500 points at one point, while stock markets in Asia backtracked sharply.

Domestic Economic Roundup

P&ID: London Court orders release of $200m to Nigeria

  • Nigeria’s Foreign Exchange Reserves boosted by over $200Million when the London Commercial Court ordered the release of the $200Million guarantee put in place as security in respect of the execution of the P&ID $10 Billion Arbitral Claim. The CBN also disclosed that the court awarded £70,000 cost in favour of Nigeria in addition to an earlier award of £1.5 million.

Income of Nigerians households decline – NBS

  • The NBS has reported that the total income of over 67% of households declined in August, when compared to the same period in August 2019. Across the three main income-generating activities (wages, agriculture, and non-farm enterprises), there was a significant decrease in income compared to last year. A decline in income was highest for non-farm family business activities at 65% of households, compared to 58% for agriculture (household farming, livestock or fishing); and 43% for wage employment.

Equities Market

The Nigerian Bourse closed bullish last week as the ASI improved by 2.53% week-on-week to close at 26,985.77 points, while year-to-date returns closed at 0.54%.

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

DANGOTE Dangote Cement Plc. results for HY’2020 showed that revenue increased by 1.95% from N467.73 billion in HY’2019 to N476.85 billion in HY’2020. Gross profit dipped marginally by 0.05% from N274.56 billion in HY’2019 to N274.43 billion in HY’2020, due to a 4.79% increase in cost of sales. Operating profit advanced from N170.50 billion in HY’2019 to N173.48 billion in HY’2020, reflecting a growth of 1.75%. The growth recorded in operating profit can be attributed to a 123.13% increase and 3.32% decline, recorded in other income and selling and distribution expenses, respectively. Profit before tax also rose by 4.74% from N155.49 billion in HY’2019 to N162.85 billion in HY’2020, due to a 121.77% increase in finance income. Profit after tax advanced by 5.79% from N119.24 billion in HY’2019 to N126.14 billion in HY’2020. Consequently, EPS grew by 6.28% to N7.45 in HY’2020 from N7.01 in HY’2019. Dangcem has a BVPS of N43.39, P/BV of 3.32x and P/E ratio of 9.66x.

While Dangote operates in the construction sector for which we maintain a negative growth outlook, the company however is well insulated from the existing recessionary drivers that are expected to blight the industry. During the lockdown Dangote was able to continue operations in their single largest cement production plant in Obajana, Kogi, and was also able to sustain their distribution channels. Furthermore, to compensate for an expected decline in demand, cement producers have implemented an organized increase in their cement prices. Hence, we expect the 2020 PAT to increase marginally to N206 billion, while the EPS should move to N12.

WAPCO – Lafarge Africa Plc. HY’2020 results showed that revenue grew by 2.25% from N117.89 bn in HY’2019 to N120.54 bn in HY’2020. Similarly, gross profit went up by 5.70% to N41.71 bn in HY’2020 from N39.46 bn in HY’2019. The growth in gross profit was driven by the growth in revenue. Profit from operations rose by 17.81% from N27.85 bn in HY’2019 to N32.81 bn in HY’2020, due to an 30.64% and 9.93% decline in administrative expenses and selling and distribution expense, respectively. Profit before tax grew by 86.09% to N28.76 bn in HY’2020 from N15.45 bn in HY’2019, on the back of a 66.77% decline in finance cost. Profit after tax rose by 47.29% from N15.84 bn in HY’2019 to N23.33 bn in HY’2020, despite a 1,506% increase in taxes. Consequently, earnings per share increased by 158.93%, from N0.56 in HY’2019 to N1.45 in HY’2020. Wapco has a BVPS of N21.91 P/BV of 0.69x and P/E ratio of 5.22x.

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 half of the year. Accordingly, we expect to see the PAT cross N28.00 billion, hence, taking the EPS above N10.00.

Please find attached our Weekly Market Review & Stock Recommendations for this week.

Thank you.

Click here for our Weekly Market Review & Stock recommendation.

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Weekly Market Review & Stock Recommendations – September 28, 2020

Dear Client/Reader,

Global Economic Roundup

Oil declines owing to demand concerns globally

  • Oil slipped on Friday and was on track for a more than 2% weekly decline due to mounting worries about resurgent coronavirus infections crushing fuel demand and as Libyan crude exports resume.

Weekly jobless claims (US) rise unexpectedly as stimulus boost fades

  • The Labor Department reported that initial jobless claims for the week ending Sept. 19 were at 870,000. Economists polled by Dow Jones expected first-time claims to come in at 850,000, down slightly from the 860,000 claims reported for the previous week.

Domestic Economic Roundup

CBN reduces MPR from 12.5% to 11.5%

  • The Monetary Policy Committee reduced the MPR from 12.5% to 11.5%. They adjusted the asymmetric corridor, from +200/-500 to +100/-700 basis points around the MPR. The committee retained CRR at 27.5%, stating that the recent inflationary pressures is not driven by monetary policies, rather as a result of structural policies

Petrol supply drops by over 23% due to decline in consumption

  • The total volume of petrol supplied in Nigeria declined by 23.88% in July, when it fell from 1.34 billion litres in June 2020 to 1.02 billion litres. Experts in Agusto & Co, in a report, have noted that the impact of the COVID-19 pandemic on economic activities in the country resulted in a decline in the consumption of petroleum products.

Equities Market

The Nigerian Stock Exchange closed bullish last week as the ASI improved by 2.92% week-on-week to close at 26,319.34 points.

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

ZENITH – The HY’2020 result of Zenith Plc showed that Interest income advanced by 1.10% from N214.60 bn in HY’2019 to N216.95 bn in the current period. Net interest income increased by 10.45% to N157.41 bn in HY’2020 from N142.52 bn in HY’2019. The increase in net interest income was driven by the rise in interest income and a 17.40% drop in the interest expense. Likewise, profit before tax advanced by 2.19% from N111.68 bn recorded in HY’2019 to N114.12 bn in the current period. The growth in profit was driven by a 174.01% and 30.45% increase in other operating income and trading income, respectively, but subdued by a 74.18% hike in impairment charge and a 39.97% fall in net fees and commission income. Profit after tax grew by 16.81% from N88.88 bn in HY’2019 to N103.83 bn in HY’2020, due to a 54.82% decline in income tax expense. Consequently, earnings per share went up by 16.61% from N2.83 in HY’2019 to N3.30 in HY’2020. The company proposed an interim dividend of N0.30. Zenith has a BVPS of 31.50, P/BV of 0.55x and P/E ratio of 2.62x.

Zenith remains the leading tier-1 lender based on the size of their tier-1 capital; hence, they are well equipped to sit through a recession, and stage a post-covid recovery. The company is expected to grow tepidly this year, as the strength of their balance sheet should withstand headwinds that derive from the Covid-19 pandemic. Accordingly, the company is expected to maintain its PAT above N200 billion and maintain their dividend payment at the same level from last year’s.

FIDELITY – Fidelity Bank’s HY’2020 showed that interest income advanced by 2.09% from N85.83 bn in HY’2019 to N87.62 bn in the current period. Net interest income went up by 30.95% from N36.90 bn in HY’2019 to N48.32 bn in HY’2020. The increase in the net interest income was driven by the rise in interest income, and by a 19.68% decline in interest expense. Profit before tax advanced by 21.92% from N9.81 bn in HY’2019 to N11.96 bn in the current period. The growth in profit before tax is attributable to a 2,191% and 80.78% increase seen in the net gains from financial assets and other operating income, respectively. Increments in the revenue line items offset a 27.04% fall in fees and commission income, and a 15.12% and 8.28% hike in the fees and commission expense and operating expense, respectively. Profit after tax went up by 33.01% from N8.50 bn in HY’2019 to N11.30 bn in the current period, on the back of a 49.77% decline in income tax expense. Consequently, Fidelity recorded a 34.48% growth in earnings per share from N0.29 in HY’2019 to N0.39 in HY’2020. Fidelity has a BVPS of N8.65, P/BV of 0.22x and P/E ratio of 2.44x.

Fidelity Bank was able to deploy some cost reduction strategies to compliment the growth seen in their interest income, which helped the company improve all growth margins. The company’s effort to improve the volume of transactions on its electronic channels and also restructure and grow their loan book, yielded positive results, as the company was able to sustain their service delivery during the lockdown, and maintain their asset quality. Accordingly, we expect the 2020 PAT to reach N34.00 billion, taking the EPS near N1.18.

Regards.

Thank you.

Click here for the Weekly Market Review & Stock Recommendations for this week.

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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.

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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,

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