Weekly Report and Stock Recommendation

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.

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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.

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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.

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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

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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. 

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Weekly Market Review & Stock Recommendations – October 5, 2020

Dear Client/Reader,

Global Economic Roundup

Oil prices drop as Trump test positive for coronavirus

  • Oil prices fell 3% on Friday after U.S. President Donald Trump tested positive for COVID-19, roiling risky assets, and as rising global crude output threatens to overwhelm the market’s weak recovery. International benchmark Brent crude futures were down 2.42% to $39.94 per barrel. U.S. crude futures also shed 2.43% to $37.78 per barrel.

President Trump and First lady test positive for coronavirus

  • President Donald Trump tested positive for coronavirus on Friday, plunging the United States into further upheaval and uncertainty just over a month away from Election Day. Shortly after Trump’s tweet, U.S. stock futures moved sharply lower with Dow futures falling more than 500 points at one point, while stock markets in Asia backtracked sharply.

Domestic Economic Roundup

P&ID: London Court orders release of $200m to Nigeria

  • Nigeria’s Foreign Exchange Reserves boosted by over $200Million when the London Commercial Court ordered the release of the $200Million guarantee put in place as security in respect of the execution of the P&ID $10 Billion Arbitral Claim. The CBN also disclosed that the court awarded £70,000 cost in favour of Nigeria in addition to an earlier award of £1.5 million.

Income of Nigerians households decline – NBS

  • The NBS has reported that the total income of over 67% of households declined in August, when compared to the same period in August 2019. Across the three main income-generating activities (wages, agriculture, and non-farm enterprises), there was a significant decrease in income compared to last year. A decline in income was highest for non-farm family business activities at 65% of households, compared to 58% for agriculture (household farming, livestock or fishing); and 43% for wage employment.

Equities Market

The Nigerian Bourse closed bullish last week as the ASI improved by 2.53% week-on-week to close at 26,985.77 points, while year-to-date returns closed at 0.54%.

The current low prices of stocks still provide good buying opportunities in the market. Some of our recommended stocks are mentioned below;

DANGOTE Dangote Cement Plc. results for HY’2020 showed that revenue increased by 1.95% from N467.73 billion in HY’2019 to N476.85 billion in HY’2020. Gross profit dipped marginally by 0.05% from N274.56 billion in HY’2019 to N274.43 billion in HY’2020, due to a 4.79% increase in cost of sales. Operating profit advanced from N170.50 billion in HY’2019 to N173.48 billion in HY’2020, reflecting a growth of 1.75%. The growth recorded in operating profit can be attributed to a 123.13% increase and 3.32% decline, recorded in other income and selling and distribution expenses, respectively. Profit before tax also rose by 4.74% from N155.49 billion in HY’2019 to N162.85 billion in HY’2020, due to a 121.77% increase in finance income. Profit after tax advanced by 5.79% from N119.24 billion in HY’2019 to N126.14 billion in HY’2020. Consequently, EPS grew by 6.28% to N7.45 in HY’2020 from N7.01 in HY’2019. Dangcem has a BVPS of N43.39, P/BV of 3.32x and P/E ratio of 9.66x.

While Dangote operates in the construction sector for which we maintain a negative growth outlook, the company however is well insulated from the existing recessionary drivers that are expected to blight the industry. During the lockdown Dangote was able to continue operations in their single largest cement production plant in Obajana, Kogi, and was also able to sustain their distribution channels. Furthermore, to compensate for an expected decline in demand, cement producers have implemented an organized increase in their cement prices. Hence, we expect the 2020 PAT to increase marginally to N206 billion, while the EPS should move to N12.

WAPCO – Lafarge Africa Plc. HY’2020 results showed that revenue grew by 2.25% from N117.89 bn in HY’2019 to N120.54 bn in HY’2020. Similarly, gross profit went up by 5.70% to N41.71 bn in HY’2020 from N39.46 bn in HY’2019. The growth in gross profit was driven by the growth in revenue. Profit from operations rose by 17.81% from N27.85 bn in HY’2019 to N32.81 bn in HY’2020, due to an 30.64% and 9.93% decline in administrative expenses and selling and distribution expense, respectively. Profit before tax grew by 86.09% to N28.76 bn in HY’2020 from N15.45 bn in HY’2019, on the back of a 66.77% decline in finance cost. Profit after tax rose by 47.29% from N15.84 bn in HY’2019 to N23.33 bn in HY’2020, despite a 1,506% increase in taxes. Consequently, earnings per share increased by 158.93%, from N0.56 in HY’2019 to N1.45 in HY’2020. Wapco has a BVPS of N21.91 P/BV of 0.69x and P/E ratio of 5.22x.

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 half of the year. Accordingly, we expect to see the PAT cross N28.00 billion, hence, taking the EPS above N10.00.

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Weekly Market Review & Stock Recommendations – September 28, 2020

Dear Client/Reader,

Global Economic Roundup

Oil declines owing to demand concerns globally

  • Oil slipped on Friday and was on track for a more than 2% weekly decline due to mounting worries about resurgent coronavirus infections crushing fuel demand and as Libyan crude exports resume.

Weekly jobless claims (US) rise unexpectedly as stimulus boost fades

  • The Labor Department reported that initial jobless claims for the week ending Sept. 19 were at 870,000. Economists polled by Dow Jones expected first-time claims to come in at 850,000, down slightly from the 860,000 claims reported for the previous week.

Domestic Economic Roundup

CBN reduces MPR from 12.5% to 11.5%

  • The Monetary Policy Committee reduced the MPR from 12.5% to 11.5%. They adjusted the asymmetric corridor, from +200/-500 to +100/-700 basis points around the MPR. The committee retained CRR at 27.5%, stating that the recent inflationary pressures is not driven by monetary policies, rather as a result of structural policies

Petrol supply drops by over 23% due to decline in consumption

  • The total volume of petrol supplied in Nigeria declined by 23.88% in July, when it fell from 1.34 billion litres in June 2020 to 1.02 billion litres. Experts in Agusto & Co, in a report, have noted that the impact of the COVID-19 pandemic on economic activities in the country resulted in a decline in the consumption of petroleum products.

Equities Market

The Nigerian Stock Exchange closed bullish last week as the ASI improved by 2.92% week-on-week to close at 26,319.34 points.

The current low prices of stocks still provide good buying opportunities in the market. Some of our recommended stocks are mentioned below;

ZENITH – The HY’2020 result of Zenith Plc showed that Interest income advanced by 1.10% from N214.60 bn in HY’2019 to N216.95 bn in the current period. Net interest income increased by 10.45% to N157.41 bn in HY’2020 from N142.52 bn in HY’2019. The increase in net interest income was driven by the rise in interest income and a 17.40% drop in the interest expense. Likewise, profit before tax advanced by 2.19% from N111.68 bn recorded in HY’2019 to N114.12 bn in the current period. The growth in profit was driven by a 174.01% and 30.45% increase in other operating income and trading income, respectively, but subdued by a 74.18% hike in impairment charge and a 39.97% fall in net fees and commission income. Profit after tax grew by 16.81% from N88.88 bn in HY’2019 to N103.83 bn in HY’2020, due to a 54.82% decline in income tax expense. Consequently, earnings per share went up by 16.61% from N2.83 in HY’2019 to N3.30 in HY’2020. The company proposed an interim dividend of N0.30. Zenith has a BVPS of 31.50, P/BV of 0.55x and P/E ratio of 2.62x.

Zenith remains the leading tier-1 lender based on the size of their tier-1 capital; hence, they are well equipped to sit through a recession, and stage a post-covid recovery. The company is expected to grow tepidly this year, as the strength of their balance sheet should withstand headwinds that derive from the Covid-19 pandemic. Accordingly, the company is expected to maintain its PAT above N200 billion and maintain their dividend payment at the same level from last year’s.

FIDELITY – Fidelity Bank’s HY’2020 showed that interest income advanced by 2.09% from N85.83 bn in HY’2019 to N87.62 bn in the current period. Net interest income went up by 30.95% from N36.90 bn in HY’2019 to N48.32 bn in HY’2020. The increase in the net interest income was driven by the rise in interest income, and by a 19.68% decline in interest expense. Profit before tax advanced by 21.92% from N9.81 bn in HY’2019 to N11.96 bn in the current period. The growth in profit before tax is attributable to a 2,191% and 80.78% increase seen in the net gains from financial assets and other operating income, respectively. Increments in the revenue line items offset a 27.04% fall in fees and commission income, and a 15.12% and 8.28% hike in the fees and commission expense and operating expense, respectively. Profit after tax went up by 33.01% from N8.50 bn in HY’2019 to N11.30 bn in the current period, on the back of a 49.77% decline in income tax expense. Consequently, Fidelity recorded a 34.48% growth in earnings per share from N0.29 in HY’2019 to N0.39 in HY’2020. Fidelity has a BVPS of N8.65, P/BV of 0.22x and P/E ratio of 2.44x.

Fidelity Bank was able to deploy some cost reduction strategies to compliment the growth seen in their interest income, which helped the company improve all growth margins. The company’s effort to improve the volume of transactions on its electronic channels and also restructure and grow their loan book, yielded positive results, as the company was able to sustain their service delivery during the lockdown, and maintain their asset quality. Accordingly, we expect the 2020 PAT to reach N34.00 billion, taking the EPS near N1.18.

Regards.

Thank you.

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Weekly Market Review & Stock Recommendations – September 21, 2020

Dear Client/Reader,

Global Economic Roundup

OPEC+ urges full conformity with production cuts.

·         Crude oil was under pressure on Friday and in a position to close lower for a second consecutive week on growing demand worries and an unexpected rise in U.S. stockpiles that raised new concerns about oversupply.

Fed holds rates steady near zero; indicates it will stay there for years.

•       Fed said short-term rates would remain targeted at 0%-0.25%. They equally changed their economic forecasts to reflect a smaller decline in GDP and a lower unemployment rate in 2020. They now see a full-year GDP decline of 3.7%, considerably better than the 6.5% drop forecast in June.

Domestic Economic Roundup

Nigeria’s inflation rate hits 13.22% in August 2020, highest in 29 months.

•       Nigeria’s inflation rate rose to 13.22% in August 2020, highest recorded in 29 months, since March 2018 (13.24%). This was due to an increase in prices of Passenger transport by air, Hospital services, bread and cereals, potatoes amongst others.

CBN to increase loans to agricultural sector to 10% of total bank credit.

•       The CBN said the country needs to increase its bank credit to the agricultural sector by over 50% within the next 4 years to boost food production. This is expected to drive the allocation to the sector to 10% of the entire credit in the banking sector from the current 4%.

Equities Market

The Nigerian Stock Exchange closed bearish last week as the ASI declined by 0.08% week-on-week to close at 25,572.57 points.

The current low prices of stocks still provide good buying opportunities in the market. Some of our recommended stocks are mentioned below;

DANGSUGAR – Dangote Sugar Plc. HY’2020 results showed that revenue grew by 28.46% from N80.36 bn in HY’2019 to N103.23 bn in HY’2020. However, gross profit went down by 1.38% to N20.82 bn in HY’2020 from N21.12 bn in HY’2019. The decline in gross profit was driven by a 39.09% hike in cost of sales. Profit from operations advanced by 0.68% from N17.28 bn in HY’2019 to N17.40 bn in HY’2020, due to a 434.33% increase in other income and a 15.93% decline in selling and distribution expenses. Profit before tax inched up marginally by 0.07% to N17.05 bn in HY’2020 from N17.03 bn in HY’2019. Profit after tax grew by 5.51% from N10.98 bn in HY’2019 to N11.58 bn in HY’2020, on the back of a 9.79% decline in income tax expenses. Consequently, earnings per share rose by 5.43%, from N0.92 in HY’2019 to N0.97 in HY’2020. Dangote Sugar has a BVPS of N9.98, P/BV of 1.20x and P/E ratio of 6.19x.

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. We saw their revenue from the retail and industrial sale of sugar increase by 30 percent and 69 percent, respectively in the first half of the year, hence supporting a bottom-line growth. While the manufacturing industry in general is projected to contract by 5.10% in 2020, following the 8.78% contraction in Q2, it has been observed that the demand for sugar has remained high, hence, allowing Dangote Sugar to grow their revenue by maneuvering around the distribution limitations during the lockdown. Hence, we expect their 2020 PAT to move past N23.00 billion, taking the EPS above N2.00.     

UCAP – United Capital’s result for HY’2020 showed that gross earnings increased by 37.26% from N3.24 bn in HY’2019 to N4.45 bn in HY’2020. Net operating income rose by 45.40% from N2.82 bn in HY’2019 to N4.10 bn in HY’2020, due to a 347.65%, 85.03% and 77.15% increase in net interest margin, net trading income and fees and commission income, respectively. Profit before tax rose by 14.10% from N1.99 bn in HY’2019 to N2.27 bn in the current period, despite the surge in key expenditure line items, such as the personnel expenses which rose by 7.86%, and the other operating expense which increased by 87.73%.  Profit after tax increased by 15.98% to N1.91 bn in the current period from N1.65 bn in HY’2019. Consequently, Earnings per share went up by 14.29% from N0.28 in HY’2019 to N0.32 in the current period. UCAP has a BVPS of N3.02, P/BV of 1.04x and P/E ratio of 4.92x

The financial services sector grew by 28.41% in Q2, and is projected to grow by 20.50 percent this year, supported by the performance of highly digitized firms such as United Capital. The company has been able to digitize their products, with various online and mobile platforms for service delivery. This in turn serves them, as the Covid induced restrictions on movement has minimally disrupted some aspects of their business. Hence, we should see the PAT climb above N5.4 billion, while the EPS is projected above N0.90. Please find attached our Weekly Market Review & Stock Recommendations for this week.

Thank you.

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Weekly Market Review & Stock Recommendations – September 14, 2020

Dear Client/Reader,

Global Economic Roundup

Oil Markets Face Bearish Blowback   

·         Crude oil was under pressure on Friday and in a position to close lower for a second consecutive week on growing demand worries and an unexpected rise in U.S. stockpiles that raised new concerns about oversupply.

Used cars drive U.S. consumer prices higher in August

·         U.S. consumer prices rose solidly in August, with the cost of used cars and trucks increasing by the most in more than 51 years likely as Americans shunned public transportation because of fears of contracting COVID-19.

Domestic Economic Roundup

Inflation rate will hit 14.15% as deficit financing rises — CBN

·         The country’s inflation rate which stood at 12.82 per cent in July may rise up to 14.15 per cent by the end of December 2020 as the Federal Government’s deficit rises due to current economic challenges in the country.

Oil marketers now free to fix prices, says PPPRA

·         The Federal Government is no more going to be releasing guiding price bands for the sale of petrol at filling stations; hence, oil marketers are now free to fix prices.

Equities Market

The Nigerian Stock Exchange closed bullish last week as the ASI declined by 0.05% week-on-week to close at 25,591.95 points.

The current low prices of stocks still provide good buying opportunities in the market. Some of our recommended stocks are mentioned below;

WAPCO – Lafarge Africa Plc. HY’2020 results showed that revenue grew by 2.25% from N117.89 bn in HY’2019 to N120.54 bn in HY’2020. Similarly, gross profit went up by 5.70% to N41.71 bn in HY’2020 from N39.46 bn in HY’2019. The growth in gross profit was driven by the growth in revenue. Profit from operations rose by 17.81% from N27.85 bn in HY’2019 to N32.81 bn in HY’2020, due to an 30.64% and 9.93% decline in administrative expenses and selling and distribution expense, respectively. Profit before tax grew by 86.09% to N28.76 bn in HY’2020 from N15.45 bn in HY’2019, on the back of a 66.77% decline in finance cost. Profit after tax rose by 47.29% from N15.84 bn in HY’2019 to N23.33 bn in HY’2020, despite a 1,506% increase in taxes. Consequently, earnings per share increased by 158.93%, from N0.56 in HY’2019 to N1.45 in HY’2020. Wapco has a BVPS of N21.86, P/BV of 0.59x and P/E ratio of 4.41x.  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 half of the year. Accordingly, we expect to see the PAT cross N28.00 billion, hence, taking the EPS above N10.00.      

PRESCO – Presco’s results for HY’2020 revealed that revenue increased by 29.35% from N10.41 bn in HY’2019 to N13.46 bn in the current period. Similarly, gross profit went up by 32.10% to N9.04 bn in HY’2020 from N6.85 bn in HY’2019, despite a 24.06% surge in cost of sales. In the same vein, operating profit increased by 51.73% from N4.35 bn in HY’2019 to N6.60 bn in the current period. The growth recorded in the operating profit was supported by reductions in key expenditure line items, such as; the administrative expenses and selling and distribution expenses, which both declined by 21.01% and 18.00%, respectively. Profit before tax rose by 67.71% to N5.77 bn in HY’2020 from N3.44 bn in HY’2019, supported by an 8.64% decline in finance cost. Profit after tax advanced by 70.51% from N2.58 bn in HY’2019 to N4.39 bn in HY’2020. Consequently, earnings per share grew by 70.82%, from N2.57 in HY’2019 to N4.39 in HY’2020. Presco has a BVPS of N32.28, P/BV of 1.52x and a P/E ratio of 5.58x. Presco has been able to take advantage of greater government support and increased investor sentiment to sustain their growth through the recent economic crises. This was evidenced in their half year results, which stood in line with our earlier projections. The 2020 growth outlook for the agricultural sector remains positive at 4.20 percent, buoyed by the performance of key public companies, such as Presco, which are able to leverage the increased relevance of agriculture, during times of economic hardship that have been sponsored in part or in whole by crude oil shocks. Accordingly, see the 2020 PAT crossing N7.00 bn, taking the EPS past N7.00.

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

Thank you.

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