Stock Recommendations

Weekly Market Review & Stock Recommendations – March 21, 2022

Dear Client/Reader,

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;

MAYBAKER PLC:

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:

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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Weekly Market Review & Stock Recommendations – March 14, 2022

Dear Client/Reader,

Global Economic Roundup

UAE Wants OPEC to Increase Production

The oil market has been stretched incredibly thin, with few producers willing — or able — to replace Russian barrels banned by the United States and shunned by others. Enter the United Arab Emirates, which suggested it may be coming to the rescue. The UAE’s ambassador to Washington, Yousef Al Otaiba, told CNN Wednesday that the country wants to increase oil production and will encourage the Organization of the Petroleum Exporting Countries (OPEC) cartel to ramp up supply. The comments sent oil prices dropping on Wednesday. US oil fell 12% to less than $109 a barrel. Brent crude, the global benchmark, fell 13% to $111 a barrel. It marked their steepest one-day decline in nearly two years.

US Inflation Hits Fresh 40-Year High of 7.9%

U.S. consumer price gains accelerated in February to a fresh 40-year high on rising gasoline, food and housing costs, with inflation poised to rise even further following Russia’s invasion of Ukraine. The consumer price index jumped 7.9% from a year earlier following a 7.5% annual gain in January, Labor Department data showed Thursday. The widely followed inflation gauge rose 0.8% in February from a month earlier. The February report showed that gasoline prices rose 6.6% from the prior month and accounted for almost a third of the monthly increase in the CPI. The Biden administration on Tuesday banned Russian oil imports into the U.S., a move that will add to energy price pressures.

Fuel Shortages Disrupt Domestic Flight Schedules in Nigeria

Fuel shortages in Nigeria, Africa’s largest oil producer, have caused two of its largest domestic airlines to cancel some internal flights and delay others this week. Several airlines including Air Peace, Arik, Dana Air, Ibom Air and United Airlines, released statements about facing challenges in sourcing jet fuel. Despite being Africa’s largest producer, Nigeria imports nearly all its jet fuel, which has nearly doubled to as high as 625 naira ($1.50) a litre since December, Arik Air said. Global jet fuel prices have hit a near-14-year peak as Russia’s invasion of Ukraine triggered a surge in the crude oil market, hitting airlines and passengers with steep cost increases.

Some of our recommended stocks are mentioned below;

WAPCO PLC:

Wapco Plc FY 2021 results showed that revenue grew by 27.11% from N230.57bn in FY 2020 to N293.09bn in FY 2021. Similarly, gross profit went up by 30.98% to N142.58bn in FY 2021 from N108.86bn in FY 2020. Profit from operations rose by 42.55% from N45.67bn in FY 2020 to N65.11bn in FY 2021. Profit before tax grew by 65.69% to N37.57bn in FY 2021 from N62.25bn in FY 2020, on the back of a 45.66% decline in finance cost. Profit after tax rose by  65.37% from N30.84bn in FY 2020 to N51bn in FY 2021. Consequently, Earnings per share increased by 66%, from N1.91 in FY 2020 to N3.17 in FY 2021. Wapco has a BVPS of N23.50, P/BV of 1.00x and P/E ratio of 7.41x.

MTNN PLC:

MTNN’s FY 2021 results showed an increase in revenue by 22.87% from N1.35trn in FY 2020 to N1.65trn in FY 2021. Operating profit advanced from N426.71bn in FY 2020 to N584.75bn in FY 2021, reflecting an increase of 37.04%. Profit before tax  went up by 46.11% from N298.87bn in FY 2020 to N436.69bn in the current period. Profit after tax grew by 45.53% from N205.21bn in FY 2020 to N298.65bn in FY 2021, despite a 45.53% surge in taxes. EPS grew by 45.54% to N14.67 in FY 2021 from N10.08 in FY 2020. MTNN has a BVPS of N13.02, P/BV of 15.82x and P/E ratio of 14.04x.

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Weekly Market Review & Stock Recommendations – January 10, 2022

Dear Client/Reader,

Global Economic Roundup

Oil Price Slips, but Gains 5% in the Week on Kazakh, Libyan Concerns

Oil prices settled lower on Friday, as the market weighed supply concerns from the unrest in Kazakhstan and outages in Libya against a U.S. jobs report that missed expectations and its potential impact on Federal Reserve policy. Brent crude settled down 24 cents, or 0.3%, to $81.75 a barrel, while U.S. West Texas Intermediate (WTI) crude was down 56 cents, or 0.7%, at $78.90 a barrel.

US Job Growth Underwhelms in December; Unemployment Rate Dives to 3.9%

U.S. employment increased far less than expected in December amid worker shortages, and job gains could remain moderate in the near term as spiralling COVID-19 cases disrupt economic activity. The job market is rapidly tightening, with the Labor Department’s closely watched employment report on Friday showing the unemployment rate tumbled to a 22-month low of 3.9% from 4.2% in November. The second straight big monthly decline in the jobless rate occurred even as more people entered the labour force.

FG Spent $1.68bn on Food Imports in Nine Months

The Federal Government spent $1.68bn on food importation from January to September last year. According to the CBN, the government spent $163.60m, $197.73m, and $171.05m in January, February and March, respectively, while $156.30m, $135.72m and $213.58m were spent in April May and June, respectively. The report revealed that $184.69m, 188.88m and 271.59m were spent in July, August and September, respectively. The Central Bank Governor said that Nigeria could produce enough to feed its citizens and everything needs to be done to move away from a situation where everything is imported.

Some of our recommended stocks are mentioned below;

UBA PLC:

UBA Plc is projected to have a FY 2021 interest income of N450.96bn, up by 5.40% from N427.86bn in FY 2020. PAT is estimated to increase from N113.77bn in FY 2020 to N119.19bn in FY 2021, bringing the EPS up to N3.51.

UBA Plc Q3 2021 result showed that Interest income advanced by 8.38% from N317 bn in Q3 2020 to N343bn in the current period. Net interest income increased by 23.25% to N229bn in Q3 2021 from N186bn in Q3 2020. Operating income increased by 16.28% from N282bn in Q3 2020 to N328bn in the current period. Likewise, profit after tax advanced by 36.35% from N77bn in Q3 2020 to N104bn in Q3 2021 despite a 41.67% increase in tax expense. Consequently, earnings per share went up by 36.11% from N2.16 in Q3 2020 to N2.94 in Q3 2021. UBA has a BVPS of N23.34, P/BV of 0.34x and P/E ratio of 2.04x.

MAY & BAKER PLC:

May & Baker Plc is projected to have a FY 2021 revenue of N12.79bn, up by 36.23% from N9.39bn in FY 2020. PAT is estimated to increase from N964.56 million in FY 2020 to N1.31bn in FY 2021, bringing the EPS up to N0.76.

May & Baker Q3 2021 results showed an increase in revenue by 25.26% from N6.44bn in Q3 2020 to N8.06 bn in Q3 2021. Operating profit advanced from N1.14 billion in Q3 2020 to N1.49 billion in Q3 2021, reflecting an increase of 30.80%. Finance cost increased by 43.29% to N187 million in Q3 2021 from N131 million while Interest income increased by 106.58% from N10 million in Q3 2020 to N20.66 million in Q3 2021. PBT went up by 29.44% from N1 billion in Q3 2020 to N1.30 billion in the current period, despite a 24% increase in Administrative Expenses. PAT grew by 29.44% from N681.73 million in Q3 2020 to N882.43 million in Q3 2021, despite a 29% surge in taxes. EPS grew by 31% to N0.51 in Q3 2021 from N0.39 in Q3 2020. May & Baker has a BVPS of N4.12, P/BV ratio of 1.02x and P/E ratio of 6.18x.

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Weekly Market Review & Stock Recommendations – December 20, 2021

Dear Client/Reader,

Global Economic Roundup

Oil Prices Rose on Record U.S. Oil Demand

The increase in demand for petroleum products inspired fresh optimism in the market, as uncertainty in the markets faded after the Federal Reserve’s tapering announcement. The price of a barrel of WTI rose to $72.04, up $1.17 on the day. The price of a Brent barrel also increased despite measures taken to thwart the new Omicron variant, rising to $74.76, up $0.88 on the day. Oil prices are now at a three-week high. The price moves come just days after Saudi Arabia’s energy minister warned traders not to short oil as they did over Thanksgiving.

Fed to taper faster, and sees three rate rises in 2022

The US Federal Reserve has decided to end its pandemic stimulus programme more quickly, as it reacts to the surge in inflation. America’s central bank will taper its asset-purchase scheme by $30bn per month from January. That would wrap up the bond purchases, which had run at $120bn/month, by next March. Federal Reserve officials also now expect to raise interest rates by 25 basis points three times next year. In new economic projections released following the end of a two-day policy meeting, Fed officials also forecast that inflation would run at 2.6% next year, compared to the 2.2% projected as of September, and the unemployment rate would fall to 3.5%.

World Bank Approves $700 Million Credit for Nigeria’s Agro-Climatic Resilience Project

The World Bank has announced that it has approved $700 million from its International Development Association (IDA) for the Nigeria Agro-Climatic Resilience in Semi-Arid Landscapes (ACReSAL) Project. The scheme is expected to boost Nigeria’s implementation of sustainable landscape management practices in northern Nigeria and strengthen the country’s long-term enabling environment for integrated climate-resilient landscape management. It also added that due to low productivity of cash crops in Nigeria, the fund would be beneficial to deal with climate issues including water shortages in the North leading to desertification and habitat loss.

Some of our recommended stocks are mentioned below;

ACCESS BANK PLC:

Access Plc is projected to have a FY 2021 interest income of N593.78bn, up by 21.37% from N489.21bn in FY 2020. PAT is estimated to increase from N106.01bn in FY 2020 to N128.67bn in FY 2021, bringing the EPS up to N3.62.

Access Plc Q3 2021 showed that interest income advanced by 25.48% from N375.28bn in Q3 2020 to N470.91bn in the current period. Net interest income went up 36.41% from N196.27bn in Q3 2020 to N267.73bn in Q3 2021. Profit before tax advanced by 15.82% from N116.62bn in Q3 2020 to N135.07bn in the current period. Profit after tax went up by 19.15% from N102.30bn in Q3 2020 to N121.89bn in the current period. Consequently, Access recorded a 19.31% rise in earnings per share from N2.90 in Q3 2020 to N3.46 in Q3 2021. Access has a BVPS of N22.49, P/BV of 0.40x and P/E ratio of 1.96x.

MTNN PLC:

MTNN Plc is projected to have a FY 2021 revenue of N1.55trn, up by 15.41% from N1.35trn in FY 2020. PAT is estimated to increase from N205.21bn in FY 2020 to N236.84bn in FY 2021, bringing the EPS up to N11.64.

MTNN’s Q3 ‘2021 results showed an increase in revenue by 23.62% from N975.76bn in Q3’ 2020 to N1.21trn in Q3 ‘2021. Operating profit advanced from N306.95bn in

Q3’2020 to N418.35bn in Q3’2021, reflecting an increase of 36.29%. Profit before tax went up by 51.92% from N211.53bn in Q3’2020 to N321.35bn in the current period. Profit after tax grew by 52.81% from N144.78bn in Q3’2020 to N220.31bn in Q3’2021, despite a 50% surge in taxes. EPS grew by 52.61% to N10.82 in Q3’2021 from N7.09 in Q3’2020. MTNN has a BVPS of N9.14, P/BV of 20.46x and P/E ratio of 12.96x.

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Weekly Market Review & Stock Recommendations – December 13, 2021

Dear Client/Reader,

Global Economic Roundup

Oil Rises After Saudi Price Hike Signals Confidence in Demand

Oil prices rose after Saudi Arabia boosted the prices of its crude, signalling confidence in the demand outlook despite the spread of the omicron variant of the coronavirus. Futures in New York advanced 2.9% to trade near $68 a barrel. The kingdom increased its oil prices for customers in Asia and the U.S. for January, just days after the OPEC+ alliance agreed to boost output for the same month. Prices for its high-sulphur barrels in Asia were the highest since at least 2000.

U.S. Consumer Prices Climb at Fastest Annual Rate Since 1982

U.S. consumer prices rose last month at the fastest annual pace in nearly 40 years, magnifying how rapid and persistent inflation is eroding paychecks and increasing pressure on the Federal Reserve to tighten monetary policy. The consumer price index climbed 6.8% from November 2020, according to Labour Department data released Friday. The widely followed inflation gauge rose 0.8% from October 2021, exceeding forecasts and extending a trend of sizable increases that began earlier this year. The S&P 500 gained 0.5% and Nasdaq 100 added 0.4% as the headline CPI rate came in at 6.8%, as expected.

Access Bank Announces Restructure into Non-Operating Financial Holding Company

The Chairman of Access Bank Plc has issued a letter to all shareholders of Access Bank informing them about the restructuring of the Bank’s Group into a non-operating financial holding company structure. The holding structure is expected to hold the banking group that is, Access Bank and its banking subsidiaries. According to the Chairman, the Board expects that the restructured group will have greater flexibility to adapt to future business opportunities, market and regulatory changes than is currently the case. Also confirming receipt of the requisite Approval-In-Principle from the CBN and SEC in respect of the Scheme, the chairman added that the Scheme will be presented to shareholders for consideration and approval at a Court-Ordered Meeting to be held at Access Bank Plc Head Office on December 16, 2021.

Some of our recommended stocks are mentioned below;

UBA PLC:

UBA Plc is projected to have a FY 2021 interest income of N450.96bn, up by 5.40% from N427.86bn in FY 2020. PAT is estimated to increase from N113.77bn in FY 2020 to N119.19bn in FY 2021, bringing the EPS up to N3.51. UBA Plc Q3 2021 result showed that Interest income advanced by 8.38% from N317 bn in Q3 2020 to N343bn in the current period. Net interest income increased by 23.25% to N229bn in Q3 2021 from N186bn in Q3 2020. Likewise, profit after tax advanced by 36.35% from N77bn in Q3 2020 to N104bn in Q3 2021 despite a 41.67% increase in tax expense. Consequently, earnings per share went up by 36.11% from N2.16 in Q3 2020 to N2.94 in Q3 2021. UBA has a BVPS of N23.34, P/BV of 0.34x and P/E ratio of 2.05x.

FIDELITY PLC:

Fidelity Plc is projected to have a FY 2021 interest income of N223.24bn, up by 8.80% from N205.18bn in FY 2020. PAT is estimated to increase from N28.03bn in FY 2020 to N30.5bn in FY 2021, bringing the EPS up to N1.05.

Fidelity Bank Q3 2021 results showed that interest income advanced by 3.73% from N132.47 bn in Q3 2020 to N137.41 bn in the current period. Net interest income decreased by 13.39% to N64.96bn in Q3 2021 from N75bn in Q3 2020. Profit before tax increased by 31.40% from N21.35bn recorded in Q3 2020 to N28.05bn in the current period. Profit after tax increased by 29.93% from N20.41bn in Q3 2020 to N26.51bn in Q3 2021, despite a 63% surge in income tax expense. Earnings per share increased by 31.43% from N0.70 in Q3 2020 to N0.92 in the current period. Fidelity Bank has a BVPS of N9.76, P/BV of 0.26x and P/E ratio of 2.07x. 

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Weekly Market Review & Stock Recommendations – December 06, 2021

Dear Client/Reader,

Global Economic Roundup

OPEC+ Agrees to Proceed With January Oil-Production Hike

OPEC and its allies agreed to proceed with their next oil-production hike, while signaling they could revisit the decision at any moment as the risk to demand from the omicron variant of Covid-19 becomes clearer. The group will add 400,000 barrels a day of crude to global markets in January, as previously scheduled. However, it also left the door open to adjusting the plan at short notice if the market changes, an unusual step that underscores the uncertain outlook due to a resurgent pandemic and a U.S.-led release of emergency stockpiles. Global oil prices have lost more than $10 a barrel since last Thursday, on the back of the news of Omicron new strain, which caused investors to panic sell.

U.S. Fed Seen on Track for Faster Bond Tapering Despite Jobs Numbers

Federal Reserve policy makers are likely to follow through with a faster tapering of asset purchases despite mixed readings on the labour-market recovery. U.S. job growth registered its smallest gain this year while the unemployment rate fell by more than forecast to 4.2%, offering a mixed picture that may nevertheless push the Federal Reserve to quicken the wind-down of pandemic stimulus. Nonfarm payrolls climbed 210,000 in November after upward revisions to each of the prior two months. The labor force participation rate edged up to 61.8%.

Nigeria’s external reserve dips $633 million in November as CBN intensifies FX intervention

Nigeria’s foreign reserve dipped by $633.47 million in the month of November 2021 to close the month at $41.19 billion as of 30th November 2021,  representing a 1.51% decline in the foreign reserve level from October 2021. The decline in the country’s external reserve level in the month of November can be attributed to the continuous effort by the apex bank to maintain exchange rate stability by intervening in the supply of FX in the official market. Nigeria’s official exchange rate averaged N414.92/$1, an appreciation compared to N415.1/$1 recorded in the previous month. This is in line with the CBN’s effort to ensure liquidity in the market despite continuous current account deficit, huge international trade gap and a lower-than-expected remittance.

Some of our recommended stocks are mentioned below;

WAPCO PLC:

Wapco Plc Q3 2021 results showed that revenue grew by 21.86% from N179bn in Q3’2020 to N219bn in Q3’2021. Similarly, gross profit went up by 13.53% to N63bn in Q3’2021 from N56bn in Q3’2020. Profit from operations rose by 17.09% from N41 bn in Q3’2020 to N48bn in Q3’2021. Profit before tax grew by 28.02% to N43 bn in Q3’2021 from N34bn in Q3’2020. Profit after tax rose by 43.26% from N28bn in Q3’2020 to N40.39bn in Q3’2021. Consequently, Earnings per share increased by 43.43%, from N1.75 in Q3’2020 to N2.51 in Q3’2021. Wapco has a BVPS of N23.83, P/BV of 1.03x and P/E ratio of 7.36x.

TRANSCORP PLC:

Transcorp Plc Q3 2021 results showed that revenue grew by 57.39% from N54.38bn in Q3’2020 to N85.59bn in Q3’2021. Profit from operations rose by 77.15% from N15.54bn in Q3’2020 to N27.53bn in Q3’2021. Profit before tax grew by 600% to N14.13bn in Q3’2021 from N2.02bn in Q3’2020. Profit after tax rose by  671% from N1.75bn in Q3’2020 to N13.47bn in Q3’2021. Consequently, Earnings per share increased by 152.94%, from –N0.34 in Q3’2020 to N0.18 in Q3’2021. Transcorp has a BVPS of N3.12, P/BV of 0.31x and P/E ratio of 4.08x.

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Weekly Market Review & Stock Recommendations – November 22, 2021

Dear Client/Reader,

Global Economic Roundup

Oil at Six-Week Low as US, China Expected to Release Crude Oil Reserve

The price of oil has shot up in recent times, boosting profits for major producers but hurting the wallets of drivers who need to fill up their tanks. This week, however, some of the pressure has started to lift. West Texas Intermediate futures, the US benchmark for oil prices, and Brent futures, the global benchmark, are now trading at their lowest levels in six weeks on signals that supply constraints could begin to ease soon. US President Joe Biden and Chinese President Xi Jinping discussed the “importance of taking measures to address global energy supplies” during their virtual summit this week. That sparked chatter about a coordinated move initiated by the White House to put millions of barrels of oil on the market.

U.K. Inflation Surges to Highest in a Decade on Energy Costs

U.K. inflation climbed faster than expected to the highest in a decade, heaping pressure on the Bank of England to raise interest rates and tightening a squeeze on living standards for households. The cost of living has surged at its fastest pace in almost 10 years, hitting 4.2% in the year to October. It is mainly due to higher fuel and energy prices but the cost of second-hand cars and eating out also rose, the Office for National Statistics said. Inflation has been up sharply since Covid restrictions ended this year and the economy reopened. The Bank of England says it may have to raise interest rates in the “coming months” to tackle rising prices.

Lagos State Government to launch its Bond Issuance of N125 billion

The Lagos State Government is about to launch its Series IV Bonds of up to N125 billion under the State’s N500 billion Bond Issuance Programme. This was disclosed by the Joint Issuing House, Comercio Partners Capital Limited. The offer date and prices of the bonds are yet to be made known as the information will be made available after the launch. The proceeds from the issuance are to be directed at executing priority projects and refinancing bridge facilities and will enable Lagos State to further accelerate the development of physical and social infrastructure in the State in line with the State’s THEME Agenda.

Some of our recommended stocks are mentioned below;

FIDELITY BANK PLC:

Fidelity Bank Q3 2021 results showed that interest income advanced by 3.73% from N132.47 bn in Q3 2020 to N137.41 bn in the current period. Net interest income decreased by 13.39% to N64.96bn in Q3 2021 from N75bn in Q3 2020; this is attributable to the 26.07% increase in interest expense. Profit before tax increased by 31.40% from N21.35bn recorded in Q3 2020 to N28.05bn in the current period. Profit after tax increased by 29.93% from N20.41bn in Q3 2020 to N26.51bn in Q3 2021, despite a 63% surge in income tax expense. Earnings per share increased by 31.43% from N0.70 in Q3 2020 to N0.92 in the current period. Fidelity Bank has a BVPS of N9.76, P/BV of 0.27x and P/E ratio of 2.79x.

UBA PLC:

UBA Plc Q3 2021 result showed that Interest income advanced by 8.38% from N317 bn in Q3 2020 to N343bn in the current period. Net interest income increased by 23.25% to N229 bn in Q3 2021 from N186  bn in Q3 2020. The increase in net interest income was driven by the rise in interest income and a 12.75% drop in the interest expense. In a similar tune, operating income increased by 16.28% from N282 bn in Q3 2020 to N328 bn in the current period. Likewise, profit after tax advanced by 36.35% from N77 bn in Q3 2020 to N104 bn in Q3 2021 despite a 41.67% increase in tax expense. Consequently, earnings per share went up by 36.11% from N2.16 in Q3 2020 to N2.94 in Q3 2021. UBA has a BVPS of N23.34, P/BV of 0.36x and P/E ratio of 2.79x.

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Weekly Market Review & Stock Recommendations – November 8, 2021

Dear Client/Reader,

Global Economic Roundup

US Federal Reserve winding down Covid stimulus

The US Federal Reserve has announced it is winding down the massive stimulus programme it put in place at the onset of the Covid-19 pandemic amid fears that the central bank may have to raise rates soon to control rising inflation. Fed officials have been debating for months over whether and when to taper the stimulus programmes that it set up to head off the economic headwinds caused by the pandemic. They announced on Wednesday that they would begin cutting that stimulus by $15bn a month but left interest rates unchanged.

Oil gains as supply concerns re-emerge after OPEC+ output plan

Brent crude was up $2.14, or 2.7%, at $82.68 per barrel. West Texas Intermediate crude (WTI) gained $2.47, or 3% to $81.28. The Organization of the Petroleum Exporting Countries and allies including Russia, collectively known as OPEC+, agreed on Thursday to stick to their plan to raise oil output by 400,000 barrels per day (bpd) from December. U.S. President Joe Biden had called for extra output to cool rising prices. OPEC’s decision to stay the course and the Biden administration’s lack of a substantial response has the oil rally continuing.  Only a coordinated effort, with China and others involved, would address the lack of barrels in the market. After the OPEC+ meeting, the White House said it would consider all tools at its disposal to guarantee affordable energy, including the possibility of releasing oil from strategic petroleum reserves (SPR).Pension funds invested in banks rise to N2.05tn

Nigeria owes China $3 billion as of 2020

The World Bank says Nigeria has so far borrowed $3.121 billion from China as at March 2020, an amount which represents only 3.94 per cent of Nigeria’s total public debt of $79.21 billion as of September 2021.Similarly, in terms of external sources of funds, loans from China accounted for 11.28 per cent of the External Debt Stock of USD27.67 billion as of the same date. According to the World Bank, the total borrowing from China of USD 3.121 billion as of March 31, 2020, are concessional loans with interest rates of 2.50 per cent per annum with a tenor of 20 years and a grace period (moratorium) of seven years.

Some of our recommended stocks are mentioned below;

ZENITH PLC:

Zenith Plc Q3’2021 results showed that gross earnings advanced by 1.91% to N518.67bn from N508.97bn in Q3’2020. Interest income declined by 3.13% from N318.82bn in Q3’2020 to N308.84bn. Profit before tax advanced by 1.43% from N177.28bn recorded in Q3’2020 to N179.81bn in the current period. Profit after tax went up by 0.80% from N159.31bn in Q2’2020 to N160.59bn in Q3’2021 after a 6.95% increase in income tax expenses. Earnings per share advanced by 0.79% from N5.07 in Q3’2020 to N5.11 in the current period. Zenith Bank has a BVPS of N37.81, P/BV of 0.66x and P/E ratio of 2.45x.

AFRIPRUD PLC:

Afriprud Plc’s result for Q3’2021 showed that Gross Earnings declined from N2.63bn in Q3 2020 to N2.44bn in Q3 2021 by 7.03%. Interest income dropped by 9.16% from N1.77 bn in Q3’2020 to N1.60bn in Q3’2021. Profit before tax went down by 14.25% from N1.56 bn in Q3’2020 to N1.34 bn in the current period. Profit after tax declined by 18.27% to N1.15 bn in the current period from N1.40 bn in Q3’2020. Consequently, Earnings per share went down by 18.31% from N0.71 in Q3’2020 to N0..58 in the current period. Afriprud has a BVPS of N4.25, P/BV of 1.49x and P/E ratio of 5.47x.

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Weekly Market Review & Stock Recommendations – November 1, 2021

Dear Client/Reader,

Global Economic Roundup

US growth slows to just 2% as Delta hits economy

US economic growth slowed sharply in the third quarter of the year, as the fast-spreading Delta variant of coronavirus dampened consumer spending.The economy expanded at an annualised rate of just 2% in the three months to September – down from 6.7% in the previous quarter. It came as the US faced supply chain issues, rising inflation and new Covid restrictions in some places.But infection rates are falling and some experts think growth will pick up.On a non-annualised basis, the growth figure was 0.5%.

South Korea’s Q3 GDP grows at slower pace, misses forecast

South Korea’s economy grew at a slower pace in the third quarter, as robust exports were offset by weak domestic demand and construction and facility investments, data from the Bank of Korea showed on Tuesday. South Korea’s Q3 GDP grows at slower pace, misses forecast. Gross domestic product (GDP) grew a seasonally adjusted 0.3% in the third quarter, , the slowest in five quarters and following a 0.8% rise in the preceding three months. It also fell short of the 0.6% growth

Pension funds invested in banks rise to N2.05tn

The total amount of pension funds invested in banks by Pension Fund Administrators rose to N2.05tn at the end of July from N1.48tn in January. The National Pension Commission disclosed this in its report, titled ‘Unaudited report on pension funds industry portfolio for the period ended 31 July 2021’. It said total assets under the Contributory Pension Scheme stood at N12.78tn as of the period under review.

Some of our recommended stocks are mentioned below;

UBA PLC:

UBA Plc Q3 2021 result showed that Interest income advanced by 8.38% from N317 bn in Q3 2020 to N343bn in the current period. Net interest income increased by 23.25% to N229 bn in Q3 2021 from N186  bn in Q3 2020. The increase in net interest income was driven by the rise in interest income and a 12.75% drop in the interest expense. In a similar tune, operating income increased by 16.28% from N282 bn in Q3 2020 to N328 bn in the current period. Likewise, profit after tax advanced by 36.35% from N77 bn in Q3 2020 to N104 bn in Q3 2021 despite a 41.67% increase in tax expense. Consequently, earnings per share went up by 36.11% from N2.16 in Q3 2020 to N2.94 in Q3 2021. UBA has a BVPS of N23.34, P/BV of 0.36x and P/E ratio of 1.45x.

WAPCO PLC:

Wapco Plc Q3 2021 results showed that revenue grew by 21.86% from N179bn in Q3’2020 to N219bn in Q3’2021. Similarly, gross profit went up by 13.53% to N63bn in Q3’2021 from N56 bn in Q3’2020. Profit from operations rose by 17.09% from N41 bn in Q3’2020 to N48  bn in Q3’2021. Profit before tax grew by 28.02% to N43 bn in Q3’2021 from N34 bn in Q3’2020, on the back of a 25.30% decline in finance cost. Profit after tax rose by  43.26% from N28 bn in Q3’2020 to N40.39 bn in Q3’2021. Consequently, Earnings per share increased by 43.43%, from N1.75 in Q3’2020 to N2.51 in Q3’2021. Wapco has a BVPS of N23.83, P/BV of 1.01x and P/E ratio of 5.37x. 

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Weekly Market Review & Stock Recommendations – October 18, 2021

Dear Client/Reader,

Global Economic Roundup

Oil Edges Higher With Energy Shortages Boosting Winter Demand

Crude is holding above $80 a barrel as shortages of coal and natural gas heading into the Northern Hemisphere winter are expected to keep demand high. These shortages have prompted some switching fuels such as diesel and fuel oil in the power sector. The latest pressure on energy supplies comes from record thermal coal prices in China as key mining regions are hit by flooding. It seems there is not a lot policy makers and politicians in consumer countries can do beyond asking OPEC to please pump more oil.

IMF and Goldman Sachs Slash US Growth Forecast

The IMF on Tuesday slashed its 2021 growth forecast for the United States by one full percentage point to 6%, the biggest reduction suffered by any G7 economy in its latest World Economic Outlook. The cut reflects disruptions to supply chains and softening consumption in the third quarter, the IMF said. The revision comes days after Goldman Sachs cut its growth forecasts for the US economy this year and next, citing weaker consumer spending and the winding down of the government’s Covid-19 relief programs. Goldman Sachs now expects the economy to expand by 5.6% this year, compared to a previous estimate of 5.7%. In 2022, growth is projected to expand by 4%, down from 4.4%.

Nigeria’s Foreign Reserve Records $2.76 Billion Boost in September 2021

Nigeria’s foreign reserve received a boost of $2.76 billion in the month of September 2021 to close at $36.78 billion as of the end of the month. This is according to data from the Central Bank of Nigeria (CBN). This gain represents the highest monthly gain recorded since May 2020, when the reserve gained $3.07 billion in a single month. Notably, Nigeria’s foreign reserve increased by 8.13% from $34.02 billion recorded as of August 2021 to $36.78 billion in the review month. It is worth noting that an increased foreign reserve comes as good news to the economy as it means the apex bank has more foreign exchange at its disposal to intervene in the forex market which in essence reduces the pressure on the country’s exchange rate.

Some of our recommended stocks are mentioned below;

ZENITHBANK PLC:

Zenith Plc is projected to have a Q3 2021 interest income of N382.58bn, up by 20% from N318.82bn in Q3 2020. PAT is estimated to increase by 5.41% from N159.32bn in Q3 2020 to N169.93bn in Q3 2021, bringing the EPS up by 6.76% to N5.41 in Q3 2021. Zenith Plc Q2’2021 results showed that gross earnings advanced by 1.61% to N159.94bn from N157.4bn in Q2’2020. Interest income declined by 6.00% from N216.95bn in Q2’2020 to N203.93bn. Profit before tax advanced by 2.57% from N114.12bn recorded in Q2’2020 to N117bn in the current period. Profit after tax went up by 2.21% from N103.83bn in Q2’2020 to N106.12bn in Q2’2021. Earnings per share advanced by 2.42% from N3.30 in Q2’2020 to N3.38 in the current period. Zenith Bank has a BVPS of N36.42, P/BV of 0.68x and P/E ratio of 3.65x.

FLOURMILL PLC:

Flourmill Plc is projected to have a Q2 2021 revenue of N424.75bn, up by 7.30% from N355.11bn in Q2 2020. PAT is estimated to increase by 19.61% from N9.93bn in Q2 2020 to N11.88bn in Q2 2021, bringing the EPS up to N2.90. Flour Mill Plc’s result for Q1 2021 showed that revenue increased from N154.57bn in Q1 2020 to N233.70bn in Q1 2021 by 51.18%. Gross profit 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 went up 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 0.67x and P/E ratio of 8.35x. 

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