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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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