Weekly Market Review & Stock Recommendations – March 21, 2022Yahya Abdulrahman
Global Economic Roundup
OPEC+ Supply Gap Widens Further as February Compliance Jumps
The International Energy Agency said the oil market was set for a 700,000 bpd supply deficit in the second quarter as Western sanctions on Moscow and buyer reluctance could lead Russian oil supplies to drop by 3 million bpd from April. OPEC+ produced about 1.05 million bpd below its agreed targets in February, up from 0.97 million bpd in January. Several major consuming nations, including the United States, have called on OPEC+ to raise its output at a faster rate to help calm oil prices which soared to 14-year highs after Russia’s invasion of Ukraine.
U.S. Federal Reserve Raised Interest Rates by a Quarter Percentage Point
The U.S. Federal Reserve raised interest rates by a quarter percentage point and signaled hikes at all six remaining meetings this year. It was the first increase since 2018 and comes after two years of holding borrowing costs near zero to insulate the economy from the coronavirus pandemic. The federal funds rate now stands at 0.25-0.5%. Prices have soared over the past year for the majority of Americans, pushing inflation well above the Fed’s long-term target of 2% and forcing its hand. Fed Chief dismissed talks about the possibility of a recession. Officials also pledged to start shrinking their $8.9 trillion balance sheet at a coming meeting.
Nigeria’s Total Public Debt Rises to N39.55 Trillion as of December 2021
The Debt Management Office (DMO) has revealed that Nigeria’s total public debt has risen to N39.55 trillion as of December 2021. The amount represented the total external and domestic debts of the Federal Government, 36 state governments as well as the Federal Capital Territory (FCT). The DMO Director-General pointed out that the new loan stocks were raised from different sources which included the issuance of Eurobonds, Sovereign Sukuk, and Federal Government of Nigeria Bonds, adding that the country’s debt situation is within reasonable limits. With the total Public Debt-to-Gross Domestic Product ratio of 22.47%, the debt ratio still remains within Nigeria’s self-imposed limit of 40%. This ratio is prudent when compared to the 55% limit advised by the World Bank and the International Monetary Fund (IMF) for countries in Nigeria’s peer group.
Some of our recommended stocks are mentioned below;
May & Baker FY 2021 results showed an increase in revenue by 26.74% from N9.39bn in FY 2020 to N11.9bn in FY 2021. Operating profit advanced from N1.41bn in FY 2020 to N1.7bn in FY 2021, reflecting an increase of 20.74%. PBT went up by 15.37% from N1.25bn in FY 2020 to N1.44bn in the current period, despite a 12.83% increase in Administrative Expenses. PAT grew by 1.53% from N964.56 million in FY 2020 to N979.35 million in FY 2021, despite a 62.42% surge in taxes. EPS grew by 1.79% to N0.57 in FY 2021 from N0.56 in FY 2020. May & Baker has a BVPS of N4.18, P/BV ratio of 1.08x, and P/E ratio of 7.89x.
Conoil Plc’s result for FY 2021 showed that revenue increased from N117.47bn in FY 2020 to N126.7bn in FY 2021 by 7.86%. Gross earnings also increased by 16.89% from N9.82in FY 2020 to N11.48bn in FY 2021. Finance costs rose by 7.95% from N704.57 million in FY 2020 to N760.6 million in FY 2021. Profit before tax rose by 76.60% from N2.15bn in FY 2020 to N3.79bn in the current period. Profit after tax increased by 111.08% to N3.04bn in FY 2021 from N1.44bn in FY 2020. Consequently, EPS increased by 110.58% from N2.08 in FY 2020 to N4.38 in the current period. Conoil Plc has a BVPS of N31.01, P/BV of 0.77x, and P/E ratio of 5.48x.
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