Weekly Report and Stock Recommendation

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Global Economic Roundup

Oil Prices Rise As China Eases Covid Restrictions

China announced on Friday an easing of its strict Covid measures that have weighed on the oil market in recent months, sending oil prices higher by more than 2.5% in early trade in Europe. The Chinese authorities said on Friday that quarantine times would be reduced for inbound passengers and close contacts of Covid-infected people while close contacts of close contacts would no longer be traced. The new guidelines of China’s National Health Commission mark the first significant easing of the Chinese ‘zero-Covid’ policy, which has weighed on economic activity and fuel demand in the world’s top oil importer this year and has depressed the oil market. The market cheered the easing of the Chinese Covid rules and both benchmarks jumped by more than 2% after the news broke.

UK businesses fear gloomy Christmas as cost of living soars

British businesses fear a gloomy Christmas ahead, as almost half of households plan to cut festive spending due to the soaring cost of living and sales are already falling sharply in inflation-adjusted terms. Payments processor Barclaycard said 48% of people it surveyed over Oct. 21-24 plan to spend less this Christmas, with 59% intending to buy less generous gifts and 42% cutting back on socializing. The British Retail Consortium said spending at major stores in October was 1.6% higher than a year earlier, slowing from 2.2% in September and representing a big fall in the volume of purchases once inflation was taken into account. “Christmas will come later than last year for many and there may be more gloom than glitter as families focus on making ends meet, particularly as mortgage payments rise,”

China’s trade unexpectedly shrinks as COVID curbs, global slowdown jolt demand

China’s exports and imports unexpectedly contracted in October, the first simultaneous slump since May 2020, as surging inflation and rising interest rates hammered global demand while new COVID-19 curbs at home disrupted output and consumption. The bleak October trade figures highlight the challenge for policymakers in China as exports had been one of the few bright spots for the struggling economy. Outbound shipments in October shrank 0.3 percent from a year earlier, a sharp turnaround from a 5.7 percent gain in September, official data showed on Monday, and well below analysts’ expectations for a 4.3 percent increase. It was the worst performance since May 2020. The data suggests demand remains frail overall, heaping more pressure on the country’s manufacturing sector and threatening any meaningful economic revival in the face of persistent COVID-19 curbs, protracted property weakness and global recession.

Some of our recommended stocks are mentioned below;

WAPCO PLC:

Lafarge Africa (WAPCO) Plc Q3 2022 results showed that earnings advanced by 23.11% from N219.20bn in Q3 2021 to N269.85 bn in the current period. Gross profit increased by 3199% to N134.77bn in Q3 2022 from N102.11bn in Q3 2021. In a similar tune, profit before tax advanced by 22.88% from N43.90bn recorded in Q3 2021 to N53.95 bn in the current period. Likewise, profit after tax grew by 11.15% from N40.40bn in Q3 2021 to N44.90bn in Q3 2022. Consequently, Earnings per share went up by 11.16% from N2.51 in Q3 2021 to N2.79 in Q3 2022. Lafarge Africa has a BVPS of N25.29, P/BV of 0.88x and P/E ratio of 5.98x.

ACCESSCORP PLC:

Access Holdings Plc Q3 2022 results showed that interest income advanced by 21.46% from N470.9 bn in Q3 2021 to N571.98 bn in the current period. Net interest income went up by 4.78% from N267.73 bn in Q3 2021 to N280.53 bn in Q3 2022. Profit before tax grew by 8.97% from N135.06 bn in Q3 2021 to N147.18 bn in the current period due to the 36.05% increase in net impairment charges, 17.27% rise in fees and commission expense and 11.62% rise in net foreign exchange gain. Profit after tax went up by 12.54% from N121.88bn in Q3 2021 to N137.17bn in the current period, on the back of a 22.92% fall in income tax expense. Consequently, Access recorded a 12.14% rise in earnings per share from N3.46 in Q3 2021 to N3.88 in Q3 2022. Access Holdings Plc has a BVPS of N29.11, P/BV of 0.28x and P/E ratio of 1.56x. 

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Global Economic Roundup

Oil Prices Strengthen by A Few Upticks Factors

Oil prices rose for most of the week on the weak US dollar, the hope of economic activities rebound in China and the US, the EU’s hunger for more crude oil ahead of the Russian oil embargo, and the imminent supply cut by OPEC+. However, the reversals in some trading sessions were supported by high crude inventories in the US, bearish economic data, and the Chinese dry trade data and doubling down on Covid-19 restrictions. Analysts expect oil prices to remain below US$100 per barrel, on average, for Q4 2022, barring any significant disruption. Prices of Petroleum products in Nigeria are expected to move in tandem with the trajectory of international crude oil prices.

US Trade Data support the Economy to 2.6% GDP growth

The US economy registered a 2.6% real GDP growth in Q3 2022 beating even the most optimistic forecasts. The world’s largest economy entered a technical recession in June, when it recorded a second negative quarterly GDP growth (-0.6%) in Q2 after a -1.6% print in Q1 2022. Analysts believe that the Q3 2022 recovery was supported by a stronger exports and steady consumer spending, which itself was aided by a healthy job market.  Tamped down by rising mortgage cost, Housing investment plunged by 26%.   Analysts say that the recent data shows that the H1 2022 contraction did not reflect the underlying health of the economy. Analysts say the Q3 2022 data allays fears of a global recession.

UK Faces “Deep Recession” As Inflation Hits 40-Year High

British inflation surged to a new 40-year high in July on soaring food prices, official data showed Wednesday, adding to a cost-of-living crisis as the country faces the prospect of recession. The Consumer Prices Index (CPI) accelerated to 10.1 percent last month from 9.4 percent in June, itself a four-decade high the Office for National Statistics said. The Bank of England warned earlier this month that UK inflation would climb to just above 13 percent this year, which would be the highest level since 1980. It also projected that the country would enter a recession near the end of the year that the BoE expects to last until late 2023.Official data last week showed Britain’s economy shrank in the second quarter. In a bid to bring down inflation, the Bank of England has hiked its key interest rate several times since the end of last year. The most recent increase was by 0.5% points, the biggest hike since 1995 and which leaves borrowing costs at 1.75% driving up mortgage repayments for households but boosting savers.

Some of our recommended stocks are mentioned below;

GTCO PLC:

Gtco Plc Q3 2022 results showed that interest income advanced by 19.20% from N195.03bn in Q3 2021 to N232.49 bn in the current period. Net interest income went up by 16.41% from N162.94 bn in Q3 2021 to N189.69 bn in Q3 2022. Profit before tax grew by 11.73% from N151.91bn in Q3 2021 to N169.72bn in the current period due to 18.27% rise in fees and commission income and 42.32% rise Net gains on financial instruments. Profit after tax went up by 0.73% from N129.40bn in Q3 2021 to N130.35bn in the current period. Consequently, Gtco recorded a 0.22% rise in earnings per share from N4.54 in Q3 2021 to N4.55 in Q3 2022.  Gtco Plc has a BVPS of N29.66, P/BV of 0.61x and P/E ratio of 2.97x.

DANGSUGAR PLC:

Dangote Sugar Plc Q3 2022 results showed an increase in revenue by 47.48% from N195.50bn in Q3 2021 to N288.32bn in Q3 2022. Operating profit advanced from N28.61bn in Q3 2021 to N49.87 bn in Q3 2022, reflecting an increase of 74.26%. PBT went up by 56.97% from N23.10bn in Q3 2021 to N36.27bn in the current period. PAT grew by 60.07% from N15.51bn in Q3 2021 to N24.83bn in Q3 2022. EPS rose by 59.38% to N2.04 in Q3 2022 from N1.28 in Q3 2021. Dangote Sugar Plc has a BVPS of N11.63, P/BV ratio of 1.32x and P/E ratio of 5.64x.

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Please find here our weekly market & stock recommendation.

Please find here our weekly market & stock recommendation

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Global Economic Roundup

U.S. Stocks Plunge after Jerome Powell Warns Inflation Requires ‘Restrictive’ Policy for ‘Some Time’

Stocks took a hit Friday after Federal Reserve Chair Jerome Powell in his highly awaited Jackson Hole speech doubled down on the central bank’s commitment to ease decades-high inflation with ongoing interest rate hikes, keeping in line with investor expectations but doing little to quell fears of additional hikes could tip the economy into a recession. In the speech, Powell said restoring price stability will “take some time” and requires the Fed to use its tools “forcefully” in order to bring high demand into a better balance with struggling supply. “We must keep at it until the job is done,” Powell said, adding that history shows bringing inflation down often comes with “employment costs” that increase with a delay. Stocks fell sharply after Powell’s comments, with the Dow Jones Industrial Average erasing morning gains and falling 420 points or 1.2%, the S&P 500 dipped 1.6%, and the tech-heavy Nasdaq 1.9%.

Europe Electricity Prices Soar as Tough Winter Looms

European electricity prices soared to new records on Friday, presaging a bitter winter as Russia’s invasion of Ukraine inflicts economic pain across the continent. The year-ahead contract for German electricity reached 995 euros ($995) per megawatt hours while the French equivalent surged past 1,100 euros — a more than tenfold increase in both countries from last year. In Britain, energy regulator Ofgem said it would increase the electricity and gas price cap almost twofold from October 1 to an average £3,549 ($4,197) per year. Ofgem blamed the increase on the spike in global wholesale gas prices after the lifting of Covid restrictions and Russian curbs on supplies. Energy prices have soared in Europe as Russia has slashed natural gas supplies to the continent, with fears of more drastic cuts in the winter amid tensions between Moscow and the West over the war.

Nigeria’s real GDP grows by 3.54% in Q2 2022

Nigeria’s gross domestic product (GDP) grew by 3.54% year-on-year in real terms in the second quarter of 2022, an improvement compared to the 3.11% growth recorded in the previous quarter. This is according to the recent GDP report released by the National Bureau of Statistics. The aggregate real GDP stood at N17.29 trillion in the second quarter of 2022, a marginal decline (-0.37%) when compared to N17.35 trillion recorded in Q1 2022. The growth recorded in the review quarter also indicates the seventh consecutive quarter of GDP growth in the country, since the recession recorded in Q3 2020. Meanwhile, the Agricultural sector grew by 1.2% year on year, the Services sector expanded by 6.7%, and the Industrial sector contracted by 2.3%. The oil sector dipped by 11.77% year-on-year in Q2 2022, compared to a contraction of 26.04% recorded in Q1 2022. The contraction in the sector’s GDP is following the decline in crude oil production capacity. 

Some of our recommended stocks are mentioned below;

FIDSON PLC:

Fidson Q2 2022 results showed an increase in revenue by 57.62% from N12.93bn in Q2 2021 to N20.38bn in Q2 2022. Operating profit advanced from N5.97bn in Q2 2021 to N9.86bn in Q2 2022, reflecting an increase of 65.23%. Profit before tax went up by 128.85% from N1.75bn in Q2 2021 to N4.01bn in the current period. Profit after tax grew by 127.16% from N1.19bn in Q2 2021 to N2.7bn in Q2 2022. EPS grew by 128% to N1.30 in Q2 2022 from N0.57 in Q2 2021. Fidson has a BVPS of N7.89, P/BV of 1.15x, and P/E ratio of 3.50x.

WAPCO PLC:

Lafarge Africa (WAPCO) Plc Q2 2022 results showed that earnings advanced by 28.67% from N145.02bn in Q2 2021 to N186.59bn in the current period. Gross profit increased by 32.55% to N96.07bn in Q2 2022 from N72.48bn in Q2 2021. In a similar tune, profit before tax advanced by 27.57% from N36.75bn recorded in Q2 2021 to N46.88bn in the current period. Likewise, profit after tax grew by 32.09% from N28.32bn in Q2 2021 to N37.41bn in Q2 2022. Consequently, Earnings per share went up by 31.82% from N1.76 in Q2 2021 to N2.32 in Q2 2022. Lafarge Africa has a BVPS of N24.82, P/BV of 0.96x and P/E ratio of 5.15x.

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

Please find here our weekly market & stock recommendation

Please find here our weekly market & stock recommendation

Please find here our weekly stocks recommendation

Dear Client/Reader,

Some of our recommended stocks are mentioned below;

ZENITH BANK

Zenith Plc’s Q1 2022 results showed that gross earnings advanced by 21.75% to ₦191.52bn in Q1 2022 from ₦157.31bn in Q1 2021. Net interest income grew by 20.89% from ₦83.17bn in Q1 2021 to ₦100.54bn in Q1 2022, supported by a 24.91% rise in interest income. Profit before tax advanced by 11.42% from ₦61.02bn recorded in Q1 2021 to ₦67.99bn in the current period. This is attributable to the 159.23% increase in trading income and 16.71% increase in net fees and commission income. Profit after tax went up by 9.68% from ₦53.06bn in Q1 2021 to ₦58.20bn in Q1 2022 after a 9.68% increase in income tax expenses. Earnings per share advanced by 9.47% from ₦1.69 in Q1 2021 to ₦1.85 in the current period. Consequently, Zenith has a BVPS of ₦42.37, P/BV of 0.57x and P/E ratio of 3.26x.

ACCESS BANK

Access Holdings Plc Q1 2022 results showed that Interest income advanced by 20.79% from ₦143.8bn in Q1 2021 to ₦173.69bn in the current period. Net interest income decreased by 7.02% to ₦87.36bn in Q1 2022 from ₦93.96bn in Q1 2021. Profit before tax advanced by 8.47% from ₦60.05bn recorded in Q1 2021 to ₦65.13bn in the current period. Likewise, profit after tax grew by 8.47% from ₦52.55bn in Q1 2021 to ₦57.4bn in Q1 2022. Consequently, earnings per share went up by 9.40% from ₦1.49 in Q1 2021 to ₦1.63 in Q1 2022. Access has a BVPS of ₦30.84, P/BV of 0.32x and P/E ratio of 1.51x.

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