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Global Economic Roundup

Oil Prices Rise Further On Large Crude Inventory Draw

Crude oil prices went up on bullish news from the U.S. Energy Information Administration, which reported a 6.4-million-barrel draw in crude oil inventories and another draw in fuel inventories. A week earlier, the EIA had estimated a modest 1.3-million-barrel decline in crude oil inventories but a sizable draw in gasoline pushed prices higher, signaling that strong demand has not wavered amid the latest surge in Covid-19 infections. In its latest monthly oil report, the International Energy Agency forecast a 1.6-million-bpd rebound in global oil demand next month as the Delta variant of the coronavirus releases its grip on economies.

Biden Team Weighs China Trade Probe in Bid to Press Beijing

President Joe Biden is fighting his own trade war with China. The White House is weighing a new investigation into Chinese subsidies and their damage to the U.S. economy as a way to pressure Beijing. The news comes after a phone call Thursday between Biden and China President Xi Jinping after months of increasingly frosty relations between the two nations. The US also signed a security agreement with the UK and Australia in what is seen as an effort to counter China. China’s embassy in Washington accused the countries of a “Cold War mentality and ideological prejudice”.

Nigeria’s oil production drops to 1.2m b/d in August — lowest in 2021

Nigeria’s oil production dropped to an average 1.23 million barrels per day in August, representing the lowest figure recorded yet in 2021. According to the report, Nigeria’s crude fell from an average 1.36 million barrels per day in January to 1.23 million b/d in August, representing a 9 percent decline. By implication, the development would affect the nation’s crude exports and foreign earnings. Checks showed that difficulties in some oil terminals caused the decline in Nigeria’s oil output.

Some of our recommended stocks are mentioned below;

FIDELITY BANK PLC:

Fidelity Bank Q2 2021 results showed that interest income declined by 2.89% from N87.62 bn in Q2 2020 to N85.09 bn in the current period. Net interest income increased by 4.09% to N50.30 bn in Q2 2021 from N48.32bn in Q2 2020. Profit before tax increased by 72.43% from N11.96 bn recorded in Q2 2020 to N20.63 bn in the current period. Profit after tax increased by 70.80% from N11.30 bn in Q2 2020 to N19.31 bn in Q2 2021, despite a 100% surge in income tax expense. EPS increased by 71.79% from N0.39 in Q2 2020 to N0.67 in the current period. Fidelity Bank has a BVPS of N9.43, P/BV of 0.26x and P/E ratio of 1.80x.

WAPCO PLC:

Wapco is projected to have a Q3 2021 revenue of N209.12bn from N179.88bn in Q3 2020. Likewise, PAT is estimated to grow by 16.26% from N28.20bn in Q3 2020 to N32.78bn in Q3 2021 taking the EPS up to N2.04. Wapco Plc Q2 2021 results showed that revenue grew by 20.3% from N120bn in Q2’2020 to N145bn in Q2’2021. Profit before tax grew by 27% to N36.75 bn in Q2’2021 from N26.75bn in Q2’2020, on the back of a 40% decline in finance cost. Profit after tax rose by 21.4% from N23.3bn in Q2’2020 to N28.3bn in Q2’2021, despite a 55% surge in taxes. Consequently, EPS increased by 21%, from N1.45 in Q2’2020 to N1.76 in Q2’2021. Wapco has a BVPS of N23.09, P/BV of 0.95x and P/E ratio of 6.25x.

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Global Economic Roundup

OPEC+ raises forecast for oil demands next year

The Organisation of the Petroleum Exporting Countries and allies, including Russia, collectively known as OPEC+, has raised its forecast for oil demand next year, in a move that might help to build a case for raising output. Brent crude for November delivery gained 18 cents, or 0.3 per cent to touch 71.81 dollars a barrel, U.S. West Texas Intermediate (WTI) crude for October was up 17 cents, or 0.3 percent at $68.67. Prices were also supported by a U.S. industry report showing that crude inventories fell more than expected last week, though much U.S. refinery capacity remains offline in the wake of Hurricane Ida.

U.S. Hiring Slows Sharply Amid Delta, Complicating Fed Taper

U.S. hiring downshifted abruptly in August with the smallest jobs gain in seven months, complicating a potential decision by the Federal Reserve to begin scaling back monetary support by year end. Payrolls rose 235,000 in August, short of the forecasted 733,000 jobs. The unemployment rate also dipped further to reach a pandemic-era low of 5.2%, while holding above the 50-year low of 3.5% from early 2020. Still, this marked an eighth consecutive month of net job growth, and brought total employment closer to pre-pandemic levels.

Nigeria’s international trade deficit hits N5.81 trillion in H1 2021

The recent report from NBS showed that Nigeria exported total merchandise valued at N7.99 trillion in the review period, opposed to a total import value of N13.8 trillion, indicating a trade balance of -N5.81 trillion between January and June 2021. This is by far the highest trade deficit recorded by Nigeria in any half-year period. Despite recent data indicating improved inter-border trade activities, it is increasingly becoming a major forex burden for the country as scarce forex is still being used to import merchandise, while earnings from exports continue to dwindle.

Some of our recommended stocks are mentioned below;

UBA PLC:

UBA Plc Q2 2021 result showed that Interest income advanced by 8.29% from N205.59bn in Q2 2020 to N222.63 bn in the current period. Net interest income increased by 24.09% to N148.07 bn in Q2 2021 from N119.32 bn in Q2 2020. Likewise, profit after tax advanced by 36.35% from N44.43 bn in Q2 2020 to N60.58 bn in Q2 2021 despite a 22.89% increase in tax expense. Consequently, earnings per share went up by 36.29% from N1.24 in Q2 2020 to N1.69 in Q2 2021. UBA has a BVPS of N22.00, P/BV of 0.35x and P/E ratio of 2.25x.

GTCO PLC:

GTCO Plc Q2 2021 showed that interest income declined by 17.97% from N153.71 bn in Q2 2020 to N126.09 bn in the current period. Net interest income went down by 16.11% from N127.62bn in Q2 2020 to N107.06 bn in Q2 2021. Profit before tax also declined by 15.18% from N109.71 bn in Q2 2020 to N93.06 bn in the current period. Profit after tax went down by 15.76% from N94.27 bn in Q2 2020 to N79.41 bn in the current period. Consequently, GTCO recorded a 16% fall in earnings per share from N3.32 in Q2 2020 to N2.79 in Q2 2021. GTCO has a BVPS of N24.50, a P/BV of 1.10x and a P/E ratio of 4.85x.

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

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Global Economic Roundup

Hurricane Ida Hurts Oil Demand Ahead of OPEC+ Meeting

Hurricane Ida made the headlines this week, forcing the evacuation and shut-downs of offshore platforms in the Gulf of Mexico, shutting in some 1.7 million barrels per day (mbpd) of crude output and 2 mbpd of refining capacity. Simultaneously, the upcoming OPEC+ meeting on 01 September has left market watchers guessing as to how the oil-producing club will react to the US’ call to produce more. We assume that the initial production target allocation, agreed last month, will remain unchanged.

U.S Stocks Hit Highs Ahead of US Jobs Report

US stock markets hit record highs on Thursday ahead of Friday’s keenly watched labour market report which will help set the path of monetary policies that have shored up markets during the pandemic. The blue-chip S&P 500 rose 0.3 per cent, while the tech-focused Nasdaq Composite edged up 0.1 per cent, both record highs. Economists polled by Bloomberg expect that Friday’s non-farm payrolls report, a monthly data release scrutinized by traders, will show US employers added 725,000 jobs in August.

Nigeria to launch Eurobond on Oct. 11, with Lagos, NY roadshows

Nigeria will launch its planned Eurobond issue on Oct. 11, its finance minister said. Zainab Ahmed also said the country would hold roadshows for the dollar-denominated issuance, which aims to raise roughly $3 billion, in Lagos and New York. The government is also targeting raising the same amount via multilateral and bilateral borrowing to fund its 2021 budget deficit. The ministry of finance has an approval in the 2021 budget to fund the budget deficit 50% locally and 50% externally. The ministry plans to do about half of that in eurobonds and the other half through other windows such as multilateral and bilateral sources. Parliament in July approved external borrowing of roughly $6.2 billion.

Some of our recommended stocks are mentioned below;

ACCESS BANK PLC:

Access Bank Plc Q2 2021 results showed that interest income advanced by 29.59% from N246.72bn in Q2 2020 to N319.73bn in the current period. Net interest income went up 58.52% from N126.21bn in Q2 2020 to N200bn in Q2 2021. Profit before tax advanced by 31.21% from N74.31bn in Q2 2020 to N97.5bn in the current period. Profit after tax went up by 42.44% from N61.03bn in Q2 2020 to N86.94bn in the current period. Consequently, Access recorded a 43.35% rise in earnings per share from N1.73 in Q2 2020 to N2.48 in Q2 2021. Access has a BVPS of N21.82, P/BV of 0.42x and P/E ratio of 1.86x.

UCAP PLC:

United Capital Plc Q2 2021 results showed that revenue grew by 54% from N4.45bn in Q2 2020 to N6.85bn in Q2 2021. Net operating income rose by 57% from N4.35bn in Q2 2020 to N6.81bn in Q2 2021. Gross profit increased by 65% to N3.74bn in Q2 2021 from N2.26bn in Q2 2020. Profit after tax grew by 64.2% from N1.91bn in Q2 2020 to N3.14bn in Q2 2021, despite a 68.95% increase in income tax expense. Consequently, EPS rose by 64.06% from N0.64 in Q2 2020 to N1.05 in Q2 2021. UCAP has a BVPS of N3.93, P/BV of 1.87x and a P/E ratio of 3.50x.

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

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Global Economic Roundup

OPEC+ sees no need to meet U.S. call for more supply.

OPEC and its allies, including Russia, believe oil markets do not need more oil than they plan to release in the coming months, despite U.S. pressure to add supplies to check an oil price rise. The price of international benchmark Brent crude has risen 35% this year towards $70 a barrel, driven by economic recovery from the pandemic and supply restraint by the Organization of the Petroleum Exporting Countries and its partners in the alliance known as OPEC+. The latest data from OPEC and from the West’s energy watchdog – the International Energy Agency (IEA) – also indicated there was no need for extra oil.

Stocks Suffer Worst Drop in a Month; Dollar Climbs: Markets Wrap

Stocks posted their biggest decline in a month amid concern that the global economic recovery will lose momentum with further shutdowns to contain coronavirus resurgence. Traders watched closely Federal Reserve Chair Jerome Powell’s remarks during a town hall with educators and students, where he noted the central bank’s “powerful tools” have limitations. Powell also said that Covid-19 will likely stay “for a while,” and we’re not going back to a pre-pandemic economy. Policy makers will gather next week for the Jackson Hole symposium, the Fed’s most-prominent annual conference.

President Muhammadu Buhari has signed the Petroleum Industry Bill 2021 into law.

The Petroleum Industry Act aims to improve transparency in the petroleum sector, calls for 30% of the Nigerian National Petroleum Corporation’s (NNPC) profit from petroleum sharing contracts to be spent on frontier exploration and proposes a 3% share of oil revenues to be distributed to oil-producing communities. The Senate had passed the bill on July 15, 2021, while the House of Representatives did the same on July 16, thus ending a long wait since the early 2000s. Some activists from civil society organisations have condemned the bill for failing to address critical issues in the oil and gas sector, especially as they concern oil-rich communities.

Some of our recommended stocks are mentioned below;

DANGSUGAR PLC:

Dangsugar Plc’s result for Q2’2021 showed that revenue increased from N103.23bn in Q2  2020 to N131.95bn in Q2 2021 by 28%. Operating profit also increased by 35% from N17.39bn in Q2’2020 to N23.48bn in Q2 2021. Profit before tax rose by 10% from N17 bn in Q2’2020 to N18.75bn in the current period. Profit after tax increased by 9% to N12.6bn in Q2 2021 from N11.5bn in Q2 2020. EPS increased by 7% from N0.97 in Q2’2020 to N1.04 in the current period. Dangsugar Plc has a BVPS of N9.80, P/BV of 1.82x and P/E ratio of 8.58x.

MTNN PLC:

MTNN’s Q2 2021 results showed an increase in revenue by 24% from N638bn in Q2’2020 to N791.26bn in Q2’2021. Operating profit advanced from N204bn in Q2’2020 to N273.7bn in Q2’2021, reflecting an increase of 34%. Profit before tax went up by 54% from N139.57bn in Q2’2020 to N215bn in the current period, due to an 11.41% decrease in finance cost. Profit after tax grew by 49% from N95bn in Q2’2020 to N141.83 bn in Q2’2021, despite a 64% surge in taxes. EPS grew by 49% to N6.97 in Q2’2021 from N4.66 in Q2’2020. MTNN has a BVPS of N9.83, P/BV of 17.50x and P/E ratio of 12.34x.

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

Dear Client/Reader,

Global Economic Roundup

Oil price falls below $70 per barrel, as OPEC urged to increase output

Oil fell below $70 a barrel as the United States urged the Organisation of Petroleum Exporting Countries, OPEC, and its oil-producing partners to boost output, saying current production was not enough and could threaten the global economic recovery. Brent Crude traded at $69.83, a decline of 0.80 cent, while the United States West Texas Intermediate (WTI) crude dropped $0.62, or 0.92 per cent, to $67.69 a barrel. Nigeria’s grade of crude oil Bonny Light traded at $69.79 per barrel. The OPEC and non-OPEC producers, at a joint meeting last month agreed to boost output by 400,000 barrels a day starting in August until the rest of their output cuts are phased out. Eurozone business activity soars to 15-year high in July.

Senate Passes $1 Trillion Infrastructure Bill, Handing Biden a Bipartisan Win

The Senate gave overwhelming bipartisan approval on Tuesday to a $1 trillion infrastructure bill to rebuild the nation’s deteriorating roads and bridges and fund new climate resilience and broadband initiatives, delivering a key component of President Biden’s agenda. With $550 billion in new federal spending, the measure would provide $65 billion to expand high-speed internet access; $110 billion for roads, bridges and other projects; $25 billion for airports; and the most funding for Amtrak since the passenger rail service was founded in 1971. It would also renew and revamp existing infrastructure and transportation programs set to expire at the end of September.

World Bank donates $15m to FCT for economic recovery

The Federal Capital Territory Administration FCTA has received $15m from the World Bank support through the Federal Government to cushion the effects of the COVID-19 pandemic on the territory, especially its impact on lives and livelihoods of the poor and vulnerable. The federal government World Bank-assisted economic recovery fund is put at $750 million for Nigeria’s 36 states and the FCT. The FCTA is especially eager to support the acceleration and expansion of this recovery to help businesses regain markets, income, and confidence.

Some of our recommended stocks are mentioned below;

HONYFLOUR PLC:

Honyflour Q1 2021 results showed that revenue grew by 25.23% from N26.39bn in Q1 2020 to N33.06bn in Q1 2021. Similarly, gross profit decreased by 12.18% to N3.67bn in Q1 2021 from N4.18 bn in Q1 2020. Profit after tax grew by 233% from N21 million in Q1 2020 to N70 million in Q1 2021, along with an 18% decrease in Sales and Administrative Expenses. Consequently, EPS rose by 231.58% from N0.06 in Q1 2020 to N0.19 in Q1 2021. Honyflour has a BVPS of N7.33, P/BV of 0.28x and a P/E ratio of 3.59x.

MAYBAKER PLC:

Maybaker Q2 2021 results showed an increase in revenue by 35.67% from N4.07bn in Q2 2020 to N5.52 bn in Q2 2021. PBT went up by 26.52% from N645 million in Q2 2020 to N816 million in the current period, despite a 103.98% increase in Administrative Expenses. PAT grew by 26.52% from N438 million in Q2 2020 to N555 million in Q2 2021, despite a 26% surge in taxes. EPS grew by 26%  to N0.32 in Q2 2021 from N0.25 in Q2 2020. Maybaker has a BVPS of N3.93, P/BV ratio of 1.12x and P/E ratio of 13.75x.

Please find attached.

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

Dear Client/Reader,

Global Economic Roundup

Oil falls in biggest weekly decline in months on demand worries

Oil prices fell about 1% lower on Friday, posting to their steepest weekly losses in months, on worries that travel restrictions to curb the spread of the Delta variant of COVID-19 will derail the global recovery in energy demand. Crude futures also came under pressure as the dollar strengthened after monthly U.S. job growth came in higher than expected. A stronger dollar makes greenback-denominated oil more expensive for buyers in other currencies. Brent crude oil futures settled down 59 cents, or 0.8%, at $70.70, while U.S. West Texas Intermediate (WTI) crude futures fell 81, or 1.2%, to settle at $68.28 a barrel. For the week, global benchmark Brent shed more than 6%, its largest week of losses in four months, and WTI tumbled nearly 7% in its biggest weekly decline in nine months.

Eurozone business activity soars to 15-year high in July

The eurozone business activity soared in July, expanding at its fastest pace in 15 years, as the rapid rollout of COVID-19 vaccines across Europe is encouraging consumers to spend more, according to a closely watched survey released on Wednesday. Europe’s service sector is springing back into life. Easing virus restrictions and further vaccination progress are boosting demand for a wide variety of activities, especially in the tourism, travel and hospitality sector.

DPR moves to check smuggling, gives filling stations ultimatum to migrate to DRMS Platform

The Department of Petroleum Resources (DPR) has given owners of the registered 33,000 petroleum products retail outlets a December 31 ultimatum to migrate their operations to the Downstream Remote Monitoring System (DRMS). The DRMS platform, also known as e-station, is to help check cross border smuggling, capture diversion of petroleum products, check overloading, under-dispensing as it helps to track product levels across retail outlets and depots.

Some of our recommended stocks are mentioned below;

UCAP PLC:

UCAP Q2 2021 results showed that revenue grew by 54% from N4.45bn in Q2 2020 to N6.85bn in Q2 2021. Net operating income rose by 57% from N4.35bn in Q2 2020 to N6.81bn in Q2 2021. Gross profit increased by 65% to N3.74bn in Q2 2021 from N2.26bn in Q2 2020. Profit after tax grew by 64.2% from N1.91bn in Q2 2020 to N3.14bn in Q2 2021, despite a 68.95% increase in income tax expense. Consequently, EPS rose from N0.64 in Q2 2020 to N1.05 in Q2 2021 by 64.06%. UCAP has a BVPS of N3.61, P/BV of 1.71x and a P/E ratio of  6.38x

FLOURMILL PLC:

Flour Mill Plc’s results showed that revenue expanded from N154.57bn in Q1 2020 to N233.70bn in Q1 2021 by 51.18%. Gross earnings also increased by 0.60% from N25.55bn in Q1 2020 to N25.70bn in Q1 2021. Finance cost dropped by 6.44% from N4.86bn in Q1 2020 to N4.55bn in Q1 2021. Profit before tax increased by 12.50% from N6.46 bn in Q1 2020 to N7.26bn in the current period. Profit after tax expanded by 9.57% to N5.45bn in the current period from N4.97bn in Q1 2020. Consequently, Earnings per share increased by 9.35% from N1.07 in Q1 2020 to N1.17 in the current period. Flour Mill Plc has a BVPS of N43.91, P/BV of 0.69x and P/E ratio of 8.68x.

Please find attached.

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