Recommendations

Weekly Market Review & Stock Recommendations – August 3, 2021

Dear Client/Reader,

Global Economic Roundup

Oil climbs, notches fourth monthly gain on growing demand

Oil prices edged higher on Friday, with global benchmark Brent posting a fourth monthly gain, with demand growing faster than supply and vaccinations expected to alleviate the impact of a resurgence in Covid-19 infections across the world. Brent crude futures for September, which expired on Friday, rose 28 cents, or 0.4%, to settle at US$76.33 a barrel. The more active contract for October ended the session up 31 cents at US$75.41 per barrel. US West Texas Intermediate (WTI) crude futures rose 33 cents, or 0.5%, to end the session at US$73.95 a barrel. Both benchmarks notched gains of more than 2% for the week, while Brent rose 1.6% in July, its fourth straight monthly increase. WTI was unchanged for the month. 

Euro zone growth rebounds, inflation tops ECB target

The euro zone economy grew faster than expected in the second quarter, pulling out of a pandemic-induced recession, while the easing of coronavirus curbs also helped inflation shoot past the European Central Bank’s 2% target in July. Compared to the same period a year earlier, when lockdowns to slow the spread of the coronavirus brought economic activity close to a standstill, GDP jumped 13.7%. But unlike the U.S. and Chinese economies, which have pulled above their pre-pandemic peaks, the euro zone economy remains some 3% smaller than it was at the end of 2019.

Private Sector Owns 70% of N12.7tn Pension Fund

The National Pension Commission (PENCOM) has revealed that private sector workers own 70 per cent of the N12.7 trillion in the Retirement Savings Account (RSA) under the contributory pension scheme. This money is a contribution that belongs to 9.3 million people, including people who are working for the federal government, the states and, largely, private sector. About 5.8 million are actually people from the private sector. The private sector owns over 70 per cent of this money because they contribute more.

Some of our recommended stocks are mentioned below;

MTNN PLC:

MTNN’s Q2 ‘2021 results showed an increase in revenue by 31.4% from N308.90bn in Q2 2020 to N405.94 bn in Q2’2021. Operating profit advanced from N110.58 bn in Q2’2020 to N133.11 bn in Q2’2021, reflecting an increase of 30.28%. The growth in operating profit was buoyed by a 1.7% decrease in Finance Cost even though there was a 23.1% increase in costs of accessories, advertisement, sponsorship and sales promotion. PBT went up by 79.9% from N62.33bn in Q2’2020 to N112.13bn in the current period, despite a 22.9% increase in expenses. PAT grew by 59.1% from N42.80bn in Q2’2020 to N68.08bn in Q2 2021, despite a 124.15% surge in taxes. EPS grew by 59.90% to N3.47 in Q2’2021 from N2.17 in Q2’2020.

NB PLC:

NB Plc Q2 2021 results showed that revenue grew by 37.8% from N151.81bn in Q2 2020 to N209.2bn in Q2 2021. Similarly, gross profit increased by 31.7% to N77.91bn in Q2 2021 from N59.14 bn in Q2 2020. Profit from operations advanced by 32.4% from N15.04bn in Q2 2020 to N19.91bn in Q2 2021. Profit before tax grew by 43.1% to N11.94bn in Q2 2021 from N8.34bn in Q2 2020. Profit after tax grew by 38.1% from N5.58bn in Q2 2020 to N7.71bn in Q2 2021, with a 32.0% decrease in Sales and Administrative Expenses. Consequently, EPS rose by 35.2% from N0.71 in Q2 2020 to N0.96 in Q2 2021. NB Plc has a BVPS of N20.14, P/BV of 2.86x and a P/E ratio of 13.91x.

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

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Weekly Market Review & Stock Recommendations – July 26, 2021

Dear Client/Reader,

Global Economic Roundup

Oil edges up in weekly rebound on forecasts for tight supplies

Oil prices edged higher on Friday and for the week after a strong recovery from Monday’s steep slide, underpinned by expectations that supply will remain tight through the year. The price of oil and other riskier assets tumbled at the start of the week on concern over the impact on the economy and crude demand from surging cases of the COVID-19 Delta variant in the United States, Britain, Japan and elsewhere. Brent crude ended the session up 31 cents, or 0.4%, at $74.10 a barrel after jumping 2.2% on Thursday. U.S. West Texas Intermediate (WTI) crude settled up 16 cents, or 0.2%, at $72.07, after gaining 2.3% on Thursday.

Beijing tutoring crackdown slams U.S.-listed Chinese stocks

Fears of increased of regulation from Beijing crushed U.S.-listed Chinese stocks on Friday following a Chinese government crackdown on private educators. U.S. shares of TAL Education Group (TAL.N) and New Oriental Education & Technology Group Inc, which provide tutoring and test preparation services in China, each dropped more than 50% after news that the government is barring tutoring for profit in core school subjects to ease financial pressures on families that have contributed to low birth rates. 

Nigeria, others to benefit as UK considers new trade scheme for growth

The UK Government has launched a consultation on new trading rules that will help countries like Nigeria grow its trade and and help British businesses and consumers at the same time. The UK Developing Countries Trading Scheme (DCTS) is a major opportunity to grow free and fair trade with developing nations. The proposed scheme will apply. 

Some of our recommended stocks are mentioned below;

AFRIPRUD PLC:

Afriprud Plc’s result for Q2’2021 showed that revenue contract from N0.59b in Q2  2020 to N0.52b in Q2 2021 by 12%. Gross earnings also  decreased by 11% from N1.87 bn in Q2’2020 to N1.67bn in Q2 2021. Interest  income dropped by 10% from N1.28 bn in Q2’2020 to N1.15bn in Q2’2021. Profit before tax went down  by 20% from N1.22 bn in Q2’2020 to N0.97 bn in the current period. Profit after tax contracted by 24% to N0.83 bn in the current period from N1.08 bn in Q2’2020. Consequently, Earnings per share went down by 24% from N0.54 in Q2’2020 to N0.41 in the current period. Afriprud has a BVPS of N4.08, P/BV of 1.69x and P/E ratio of 8.41x. 

UCAP PLC:

United Capital’s result for Q2’2021 showed that gross earnings increased by 54% from N4.45 bn in Q2’2020 to N6.85bn in Q2 2021. Net operating income rose by 57% from N4.35 bn in Q2’2020 to N6.81bn in Q2’2021. Profit before tax rose by 65% from N2.27 bn in Q2’2020 to N3.74 bn in the current period. Profit after tax increased by 64% to N3.14 bn in the current period from N1.91 bn in Q2’2020. Consequently, Earnings per share went up by 64% from N0.64 in Q2’2020 to N1.05 in the current period. UCAP has a BVPS of N3.61, P/BV of 1.58x and P/E ratio of 5.92x. Please find attached.

Thank you.

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Weekly Market Review & Stock Recommendations – July 19, 2021

Dear Client/Reader,

Global Economic Roundup

OPEC+ agrees oil supply boost after UAE wins argument with Saudi

OPEC+ ministers agreed on Sunday to boost oil supply from August to cool prices which have climbed to 2-1/2 year highs as the global economy recovers from the coronavirus pandemic.

OPEC+ last year cut production by a record 10 million barrels per day (bpd) amid a pandemic-induced slump in demand and collapsing prices. It has gradually reinstated some supply to leave it with a reduction of about 5.8 million bpd. From August until December 2021 the group will increase supply by a further 2 million bpd or 0.4 million bpd a month, OPEC said in a statement. The group had agreed to extend their overall pact until the end of 2022 from an earlier planned date of April 2022, to leave more room for manoeuvre in case global recovery stalls due to new virus variants.

China’s postal sector sees rapid H1 growth

China’s postal industry registered accelerated revenue and business volume growth in the first half of 2021, official data shows. From January to June, the sector’s business revenue totaled 614.39 billion yuan (about 95.05 billion U.S. dollars), up 22.2 percent year on year, according to a statement released by the State Post Bureau. The sector’s business volume jumped 34.4 percent from the same period last year to 642.47 billion yuan in the first half, according to the statement. In June alone, the sector’s business revenue and volume respectively climbed 13.6 percent and 22.9 percent.

China’s express delivery firms handled 49.39 billion parcels in the first six months, up 45.8 percent from one year earlier. Their business revenue during the period reached 484.21 billion yuan, up 26.6 percent year on year.

CBN restricts sugar importation to Flour Mills, Dangote, BUA

The Central Bank of Nigeria (CBN) has restricted the importation of sugar to three companies due to their backward integration programmes. The companies are Dangote Sugar Refinery Plc, BUA Sugar Refinery Limited, and Golden Sugar Company – owned by Flour Mills of Nigeria Plc. In April, CBN had hinted that it is planning to include sugar on the list of import items banned from accessing foreign exchange (FX) to reduce the $1 billion annual import bill and encourage local production..

Some of our recommended stocks are mentioned below;

UCAP PLC:

United Capital’s result for Q2’2021 showed that gross earnings increased by 54% from N4.45 bn in Q2’2020 to N6.85bn in Q2 2021. Net operating income rose by 57% from N4.35 bn in Q2’2020 to N6.81bn in Q2’2021. Profit before tax rose by 65% from N2.27 bn in Q2’2020 to N3.74 bn in the current period. Profit after tax increased by 64% to N3.14 bn in the current period from N1.91 bn in Q2’2020. Consequently, Earnings per share went up by 64% from N0.64 in Q2’2020 to N1.05 in the current period. UCAP has a BVPS of N3.61, P/BV of 1.58x and P/E ratio of 5.92x.

ZENITH PLC:

The Q1’2021 result of Zenith Plc showed that Net interest income increased marginally by 2.05% to N83.17 bn in Q1’2021 from N81.50 bn in Q1’2020. However, Interest income declined by 11.50% from N114.33 bn in Q1’2020 to N101.18 bn in the current period. The increase in net interest income was driven by a 45.14% decline in interest expense. Likewise, profit before tax advanced by 3.79% from N58.79 bn recorded in Q1’2020 to N61.02 bn in the current period.. Profit after tax grew by 5.01% from N50.53 bn in Q1’2020 to N53.06 bn in Q1’2021, due to a 3.63% decline in income tax expense. Consequently, earnings per share went up by 4.97% from N1.61 in Q1’2020 to N1.69 in Q1’2021. Zenith Bank has a BVPS of N34.78, P/BV of 0.64x and P/E ratio of 3.40x.

Please find attached.

Thank you.

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

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Weekly Market Review & Stock Recommendations – July 12, 2021

Dear Client/Reader,

Global Economic Roundup

Oil prices rise over 2% as U.S. inventories decline

Oil prices rose for a second day on Friday as the market reacted to falling US inventories, and signs of strong Asian demand from both China and India added support. Brent crude oil futures were up $1.43, 1.93%, at $75.55. U.S. West Texas Intermediate futures were up $1.62, or 2.2%, at $74.56.

Still, prices on both sides of the Atlantic ended the week little changed, despite significant daily fluctuations. Prices were weighed down early in the week by the collapse of output talks between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together known as OPEC+. Gains in oil prices were capped by worries that members of the OPEC+ group could be tempted to abandon output limits that they have followed during the COVID-19 pandemic. 

UK’s trade minister to meet U.S. counterpart on free trade threats

Britain’s international trade minister Liz Truss will discuss how to tackle threats to free and fair trade with U.S. Trade Representative Katherine Tai during a five-day visit to the United States .

She will visiting the U.S. to build on the progress already made on tackling market-distorting practices that threaten the future progress and prosperity we can make around the world through free and fair trade. She will also travel to the West Coast to meet businesses in a bid to promote Britain as a destination for tech investment. Britain and the United States had started talks on a post-Brexit bilateral free trade deal while former President Donald Trump was in office but failed to reach an accord before Joe Biden entered the White House in January.

Twitter ban: ECOWAS court merges four suits against Nigerian government

The Community Court of Justice of the Economic Community of West African States, ECOWAS, has merged all the four cases brought before it by different applicants against the Federal Government of Nigeria over the suspension of the microblogging platform, Twitter in Nigeria. 

These cases were filed by the Socio-Economic Rights and Accountability Project, SERAP, and 196 others, Media Rights Agency and eight others, Patrick Elohor and Malcolm Omirhobo, respectively.

In the suit against the Nigerian government, the applicants sought to challenge the action of the respondent in suspending Twitter in Nigeria. The ECOWAS also adjourned to September 29, 2021, for a hearing to enable all parties to organize themselves for trial.

Some of our recommended stocks are mentioned below;

DANGSUGAR PLC:

Dangsugar Q1 2021 results showed that revenue grew by 41.46% from  N47.63bn in Q1 2020 to N67.39bn in Q1 2021. Similarly, gross profit increased by 41.82% to  N18.04bn in Q1 2020 from N12.72 bn in Q1 2020. Profit from operations advanced by 47.72% from N10.75bn in  Q1 2020 to N15.88bn  in Q1 2021. Profit  before tax grew by 25.66% to N9.51bn in Q1 2021 from N11.95bn in Q1 2020. Profit after tax grew by 30.30% from N6.37bn in Q1 2020 to N8.30bn in Q1 2021, despite a 16.24%increase in income tax expenses. Consequently, EPS rose by 28.30% from N0.53 in Q1 2020 to N0.68 in Q1 2021. Dangsugar has a BVPS of N10.95,P/BV of 1.55x and a P/E ratio of  6.25x.

PRESCO PLC:

Presco Plc Q1 2021 result showed that Revenue grew by 47.40% from N5.38bn in Q1 2020 to N7.93bn in the current period. Similarly, gross profit increased by 52.86% from N4.20bn in Q1 2020 to N6.42bn in the current period. Operating profit went up by 84.21% from N2.85bn in Q1 2020 to N5.25 in the current period. Profit before tax rose by 110.64% to N4.95bn in Q1’2021 from N2.35 bn in Q1’2020, supported by an 40.92% decline in finance cost. Profit after tax advanced by 113.33% from N1.80 bn in Q1’2020 to N3.80 bn in Q1’2021. Consequently, earnings per share grew by 113.33%, from N1.80 in Q1’2020 to N3.84 in Q1’2021. Presco has a BVPS of N34.89, P/BV of 2.18x and a P/E ratio of 0.94x. Please find attached.

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

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Weekly Market Review & Stock Recommendations – June 28, 2021

Dear Client/Reader,

Global Economic Roundup

Oil rises for 5th week to highest since 2018 on strong demand

Oil prices climbed to their highest ($76.10) since October 2018 on Friday, putting both benchmarks up for a fifth week in a row on expectations demand growth will outstrip supply and OPEC+ will be cautious in returning more crude to the market from August. Brent futures rose 62 cents, or 0.8%, to settle at $76.18 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 75 cents, or 1.0%, to $74.05. Those were the highest closes for both benchmarks since October 2018 and put both contracts up over 3% for the week.

Global stocks finish at record highs, oil climbs for 5th week

Wall Street notched broad gains on Friday, with the S&P 500 index closing at a record and global shares also finished at an all-time high, while oil prices rose for a fifth straight week. Weaker-than-expected inflation data and news that U.S. President Joe Biden has secured a bipartisan infrastructure agreement with lawmakers gave a boost to stocks. The plan is valued at $1.2 trillion over eight years, of which $579 billion is new spending. The S&P 500 rose 2.7% for the week, its strongest weekly gain since early February as Nike and bank stocks rose, and weaker-than-expected inflation data eased worries about a sudden tapering in stimulus by the Federal Reserve.

The Dow Jones Industrial Average (.DJI) rose 0.71% to end at 34,438.58 points, while the S&P 500 (.SPX) gained 0.34%. The Nasdaq Composite (.IXIC) dropped 0.06% after holding near the previous session’s record high.

Chaka gets SEC’s 1st Fintech license

The Securities and Exchange Commission (SEC) has granted the digital sub-broker licence to Chaka Technologies Limited. This makes Chaka the first recipient of this newly created licence by the SEC, as part of the Commission’s efforts to foster regulation within the investment-tech space, to ensure the safety of the investing public while encouraging innovation within the sector. Nigeria remains an attractive hive for fintech innovation, this new license from the SEC is the much-needed guide to help safeguard the investing public amid the ever-evolving landscape.

Some of our recommended stocks are mentioned below;

GTCO PLC:

GTCO Plc Q1’2021 showed that interest income declined by 26.85% from N75.36 bn in Q1’2020 to N55.13bn in the current period. Net interest income went down by 18.43% from N64.28bn in Q1’2020 to N52.44 bn in Q1’2021. Similarly, Profit before tax declined by 7.77% from N58.21bn in Q1’2020 to N53.68bn in the current period. Profit after tax went down by 9.03% from N50.07 bn in Q1’2020 to N45.55bn in the current period. Consequently, GTB recorded a 9.06% fall in earnings per share from N1.77 in Q1’2020 to N1.60 in Q1’2021. GTB has a BVPS of N24.50, a P/BV of 1.18x and a P/E ratio of 4.53x.

ACCESS PLC:

Access Bank Plc. results for Q1’2021 showed that Interest income advanced by 10.74% from N113.75 bn in Q1’2020 to N125.97 bn in the current period. Similarly, Net interest income advanced by 30.12% from N72.21bn in Q1’2020 to N93.96 bn in the current period. Profit before tax grew by 29.73% from N46.29bn in Q1’ 2020 to N60.05bn in the current period. Profit after tax advanced by 28.39% from N40.93 bn in Q1’2020 to N52.55 bn in the current period. Earnings per share EPS went up by 23.14% to N1.49 in the current period from N1.21 in Q1’2020. Access has a BVPS of N22.31, a P/BV of 0.38x and a P/E of 5.67x.

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

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Weekly Market Review & Stock Recommendations – May 24, 2021

Dear Client/Reader,

Global Economic Roundup

Crude oil jumps on weather concerns in Gulf of Mexico•Oil prices jumped 2% on Friday after three days of losses, driven higher as a storm formed in the Gulf of Mexico, but were on track for a weekly fall as investors braced for the return of Iranian crude supplies after officials said Iran and world powers made progress a nuclear deal.

US open: Stocks trade higher as tech stocks attempt rebound

• Wall Street stocks traded higher amid a rebound in tech shares.

The Dow Jones Industrial Average was up 0.27% at 33,986.80, while the S&P 500 was 0.62% firmer at 4,141.30 and the Nasdaq Composite came out the gate 1.20% stronger at 13,458.99.

GDP: Agriculture sector grows by 2.28% in Q1 2021

•Nigeria’s agricultural sector grew by 2.28% in real terms in Q1 2021 compared to a growth of 3.42% in Q4 2020 and 2.20% in Q1 2020.

This was disclosed in the Q1 2021 GDP report, released by the National Bureau of Statistics (NBS) on Sunday. Real GDP grew 0.51% in Q1 2021 compared to 0.11% in Q4 2020.

Equities Market

The Nigerian Bourse closed bearish last week as the ASI declined by 2.93% week-on-week to close at 38,324.07 points. Year-to-date returns closed at -4.83% at the end of the week.

Some of our recommended stocks are mentioned below;

GUARANTY BANK PLC :

GTB holds a well structured and appropriately positioned balance sheet which has assisted in delivering reasonable and sustainable returns, despite the macroeconomic uncertainties that persist in the business environment. Guaranty is expected to benefit from the move to holdco structure by tier 1 banks to improve their revenue sources. The Bank has clearly distinguished itself in the Nigerian financial services industry through superior service quality, unique customer experience and sound financial indices.

The Q1’2021 result of GTB Plc showed that;

  • Interest income declined by 26.85% from N75.36 bn in Q1’2020 to N55.13bn in the current period. 
  • Net interest income went down by 18.43% from N64.28bn in Q1’2020 to N52.44 bn in Q1’2021
  • Profit before tax declined by 7.77% from N58.21bn in Q1’2020 to N53.68bn in the current period.         
  • Profit after tax went down by 9.03% from N50.07 bn in Q1’2020 to N45.55bn in the current period.
  • Earnings per share from N1.77 in Q1’2020 to N1.60 in Q1’2021.               
  • GTB has a BVPS of N24.50, a P/BV of 1.18x and a P/E ratio of 18.13x.

DANGOTE SUGAR PLC :

Dangote Sugar’s revenue drew strength from the performance of its flagship brand, the 50kg sugar, which accounted for N206.444 billion or at least 96 per cent of its share of the sugar market. We see their revenue from the retail and industrial sale of sugar increase significantly through out the year, hence supporting a bottom-line growth. 

The Q1′ 2021 result of Dangote Sugar Plc result showed that:

  • Revenue grew by 41.46% from N47.63 bn in Q1’2020 to N67.39 bn in Q1’2021.        
  • Gross profit increased by 41.82% to N18.04 bn in Q1’2021 from N12.72 bn in Q1’2020. 
  • Profit from operations advanced by 47.72% from N10.75 bn in Q1’2020 to N15.88 bn in Q1’2021. 
  • Profit before tax grew by 25.66% to N9.51bn in Q1’2021 from N11.95 bn in Q1’2020. 
  • Profit after tax grew by 30.30% from N6.37 bn in Q1’2020 to N8.30 bn in Q1’2021, despite a 16.24% increase in income tax expenses.          
  • Earnings per share rose by 28.30%, from N0.53 in Q1’2020 to N0.68 in Q1’2021. 
  • Dangote Sugar has a BVPS of N10.95, P/BV of 1.55x and P/E ratio of 25.00x.

Please find here our Weekly Market Review & Recommendations update for today, May 24th, 2021

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Weekly Market Review & Stock Recommendations – May 17, 2021

Dear Client/Reader,

Global Economic Roundup

Crude oil falls further on India Covid-19 cases, US pipeline restart•Oil prices fell on Friday after dropping about 3% a day earlier as coronavirus cases remained high in major oil consumer India and as a key fuel pipeline in the United States resumed operations after being shut due to a cyber attack.

US open: Stocks advance despite weaker-than-expected retail sales report

• Wall Street stocks opened higher on Friday despite market participants digesting a weaker-than-expected monthly retail sales report.

CBN Erases Exchange Rate on Its Website as Naira Falls

•The Naira fell against the U.S. Dollar on Friday as the Central Bank of Nigeria erased from its website the exchange rate that for about a year was seen as the government’s official rate.

Equities Market

The Nigerian Bourse closed bullish last week as the ASI advanced by 0.72% week-on-week to close at 39,481.89 points. Year-to-date returns closed at -1.96% at the end of the week.

Some of our recommended stocks are mentioned below;

ACCESS PLC :

Access bank delivered strong bottom-line figures despite a challenging and fast-changing macro and banking landscape occasioned by the COVID-19 pandemic. Access Bank has been driving its revenue growth through retail expansion, which has grown consistently across all income lines, driven by a strong focus on consumer lending, payments and remittances, digitisation of customer journeys, and customer acquisition at scale. Based on their performance over the years we see Access bank sustaining their positive results through the year.

The Q1’2021 result of ACCESS Plc showed that;

  • Interest income advanced by 10.74% from N113.75 bn in Q1’2020 to N125.97 bn in the current period.
  • Net interest income advanced by 30.12% from N72.21bn in Q1’2020 to N93.96 bn in the current period. 
  • Profit before tax grew by 29.73% from N46.29bn in Q1’ 2020 to N60.05bn in the current period           
  • Profit after tax advanced by 28.39% from N40.93 bn in Q1’2020 to N52.55 bn in the current period
  • Earnings per share EPS went up by 23.14% to N1.49 in the current period from N1.21 in Q1’2020.               
  • Access has a BVPS of  N22.31, a P/BV of  0.38x and a P/E of 5.67x.

UCAP PLC :

UCAP has over the years increased focus on the mass retail segment of the economy, which has been the center of their  product development initiatives as well as marketing activities. Products such as mutual funds allows the company to pool the investments of several investors and invest the pool in high yield, risk free instruments. In 2021, we see them growing their earnings through the optimisation of their channels and digitization of their platforms thereby maintaining impressive growth in their Profit after tax thereby impacting their EPS positively.

The Q1′ 2021 result of UCAP Plc result showed that:

  • Gross earnings increased by 62.50% from N1.92 bn in Q1’2020 to N3.12 bn in Q1’2021.       
  • Net operating income rose by 64.02% from N1.89 bn in Q1’2020 to N3.10 bn in Q1’2021.
  • Profit before tax rose by 66.95% from N1.18 bn in Q1’2020 to N1.97 bn in the current period.
  • Profit after tax increased by 67.68% to N1.66 bn in the current period from N991 mn in Q1’2020.       
  • Earnings per share went up by 68.18% from N0.66 in Q1’2020 to N1.11 in the current period.
  • UCAP has a BVPS of N3.61, P/BV of 1.73x and P/E ratio of 5.63x

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

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Weekly Market Review & Stock Recommendations – March 29, 2021

Dear Client/Reader,

Global Economic Roundup

Crude oil rates drop as Covid-19 lockdown concerns outweigh Suez Canal disruptions

•  Oil prices skidded around 2% as fuel demand concerns re-emerged alongside fresh coronavirus pandemic lockdowns, trimming overnight gains spurred by the grounding of a giant container ship blocking crude shipments through the Suez Canal.

Companies raise record $140bn in US junk bond market in first quarter

•  Corporations have issued $140bn within the US junk bond market over the previous three months, outpacing a file sprint for money within the second quarter of 2020 when teams raced for funding to outlive the shock of coronavirus.

CBN holds MPR at 11.5%, other parameters constant

        • The Monetary Policy Committee (MPC), of the Central Bank of Nigeria (CBN),               has voted to retain the Monetary Policy Rate (MPR) at 11.5%.

Equities Market

The Nigerian Bourse closed bullish last week as the ASI advanced by 2.17% week-on-week to close at 39,216.20 points. Year-to-date returns closed at -2.62% at the end of the week.

Some of our recommended stocks are mentioned below;

FBNH PLC :

First Bank being the premier bank in West Africa has undoubtedly witnessed change over time. FBNH is one the major companies that was forecasted to support the 2020 20.50 percent growth for the financial services sector, as FBNH leveraged their diversified business model, to prop up their revenue from other sources, during the heat of the pandemic. 

The FY’2020 result of FBNH Plc showed that;

  • Profit before tax grew by 3.76% from N75.29 billion in FY’2019 to N78.11billion in FY’2020.
  • Net interest income went down by 8.19% from N279.59 billion in FY’2019 to N256.69 billion in FY’2020.  
  • The growth in Profit before tax can be attributed to a 190.50% and 18.94% increase in net gains on sale of investment securities and fees and commission income.
  • Profit after tax grew by 10.40% from N208.84 bn in FY’2019 to N230.57 bn in Q4’2020, due to a 26.57% decline in income tax expense.  
  • Earnings per share grew by 11.79% to N2.18 in FY’2020 from N1.95 in FY’2019.
  • FBNH has a BVPS of N21.05, P/BV of 0.36x and P/E ratio of 3.49x

PRESCO PLC :

PRESCO recent move to expand its existing Palm Oil mill from 60 ton/hour to a 90 ton/hour milling plant by year-end 2020, construction of a new 60 ton/hour Palm Oil mill in Sokoban estate, which is to be completed in 2023, and expansion of the company’s palm kernel oil plant to 350 ton/day (current capacity: 60 ton/day), will support their topline growth in subsequent quarters.

The FY’ 2020 result of PRESCO Plc result showed that:

  • Revenue increased by 21.22% from N19.72 bn in FY’2019 to N23.91bn in the current period.  
  • Gross profit went up by 11.29% to N14.16 bn in FY’2020 from N12.72 bn in FY’2019.
  • Profit before tax rose by 59.92% to N8.95bn in FY’2020 from N5.59 bn in FY’2019, supported by an 28.07% decline in finance cost.
  • Profit after tax advanced by 108.57% from N3.37 bn in FY’2019 to N7.04 bn in FY’2020. 
  • Earnings per share grew by 108.57%, from N3.37 in FY’2019 to N7.03 in FY’2020. 
  • Presco has a BVPS of N32.92, P/BV of 2.28x and a P/E ratio of 10.67x. 

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

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Weekly Market Review & Stock Recommendations – March 08, 2021

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.

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Weekly Market Review & Stock Recommendations – February 08, 2021

Dear Client/Reader,

Global Economic Roundup

Oil Price Rally Buoyed by Signs of Stronger Demand and Subdued Supply

•    The price of oil trades to fresh yearly highs as the decline in US crude inventories boosts the outlook for consumption, and the ongoing efforts by the Organization of the Petroleum Exporting Countries (OPEC) may keep crude prices afloat as Saudi Arabia remains on track to reduce supply by 1 million b/d until April.

US economy adds 49,000 jobs as Biden aims for further Covid relief

•      The US economy added back 49,000 jobs last month as coronavirus restrictions eased and fiscal stimulus from Washington goosed up the economy, the labor department announced on Friday.

World Bank to boost Nigeria’s power distribution with $500 million

•     The World Bank has approved $500 million to support Nigeria in improving electricity distribution in the country. This was disclosed by the global financial institution firm via a statement seen by Friday.

•      In the statement, Shubham Chaudhuri, World Bank’s Country Director, explained that the project will help boost electricity access by improving the performance of the Electricity Distribution Companies (DisCos) through a large-scale metering program desired by Nigerians for a long time.

Equities Market

The Nigerian Bourse closed bearish last week as the ASI declined by 1.66% week-on-week to close at 41,709.09 points. Year-to-date returns closed at 3.57% at the end of the week.

Some of our recommended stocks are mentioned below;

FLOURMILL Plc – Flourmill Plc. Q3’2020 results for the period ended December 2020 showed that revenue grew by 31.14% from N423.48 bn in Q3’2019 to N555.34 bn in Q3’2020. Similarly, gross profit went up by 51.47% to N72.45 bn in Q3’2020 from N47.83 bn in Q3’2019. The growth in gross profit was driven by the rise in revenue. Profit from operations advanced by 42.66% from N24.68 bn in Q3’2019 to N35.21 bn in Q3’2020, despite a 5.54% and 6.28% increase in selling and distribution and administrative expenses. Profit before tax rose by 92.08% to N23.61 bn in Q3’2020 from N12.29 bn in Q3’2019, on the back of a 356.87% rise in investment income. Profit after tax grew by 90.94% from N8.16 bn in Q3’2019 to N15.58 bn in Q3’2020. Consequently, earnings per share rose by 109.24%, from N1.84 in Q3’2019 to N3.85 in Q3’2020. Flourmill has a BVPS of N40.40, P/BV of 0.78x and P/E ratio of 8.17x.

Flourmill has proven to be immune to the negative impacts of the pandemic, as the company’s strong product offerings in the value segments and their cost optimization strategies, helped offset the impact of the weakening consumer spending in the economy, disruptions to the supply chain and the existing currency risks in their export segment. Accordingly, their Food, Agro Allied and Sugar revenue segments grew  by 12%, 29% and 12%, respectively, as the company continues to deepen their market share amidst competing brands. Hence, we expect their 2020 PAT to move to N18.00 billion, taking the EPS above N4.38. 

WAPCO – Lafarge Africa Plc. Q3’2020 results showed that 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. Accordingly, we expect to see the PAT cross N30.00 billion, hence, taking the EPS above N1.86.

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

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