Weekly Report and 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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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.

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

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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.

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

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.

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