Market Review for week ended October 27th, 2017
The Nigerian Equities market posted a weak performance in the week under review to extend the bearish run to the second consecutive week as at Friday, last week. The local bourse plunged by 0.38% week-on-week (wow) at the close of the bell on Friday to close at 36,462.26 in contrast to last week’s close of 36,587.31.
NSEASI opened this week’s trading session trending southwards with a 0.48% decline, the trend which it reversed in the second and third trading sessions as the index gained 0.33% and 0.25%. The bourse however regressed back into the red zone on the fourth and fifth trading days recording -0.29% and -0.34% daily changes respectively.
Outlook for the new week ending November 3rd, 2017
We expect existing volatility to continue amidst better than anticipated Q3 earnings, especially from Consumer and Industrial Goods space. This is expected considering that investors are exploiting this season to recoup profit after a pleasant rally in recent past. However, we are confident that the week will end on a bullish note. Our optimism is driven by positive macroeconomic numbers and expectation of further strong Q3 numbers as the earnings season start winding up
GTI TOP-5 STOCK PICKS – 30/10/2017 – 03/11/2017
- UBA Plc has emerged one of most reputable banks in Nigeria business landscape.
- Its improved branch networks within the country and developed presence in prominent Africa Countries has positioned the Pan African bank with improved income sources.
- The bank has a good Capital Adequacy Ratio (CAR) in the sector and continues to leverage on its stringent risk assessment framework to mitigate capital erosion.
- In a recent Q3 2017 results, the Company grew gross and net income by 25.8% and 23.04% respectively.
- It has a current book value of 13.99x and P/BV of 0.66x. In terms of meeting short-term obligations, the Bank is firm with acid test ratio at 0.75%.
|United Bank for Africa Plc|
|Shares Outstanding (Mn)||36,280|
|Expected Return/52Week High/52Week Low||13.64%/N10.49 /N4.13|
- Transcorp Group is a diversified conglomerate with interests in four major business sectors: Power, Oil & Gas, Hospitality, and Agriculture.
- The Q3 2017 result was impressive with a 35.4% topline improvement and a healthy 141% expansion in bottom-line.
- The FX stability also aided the strong bottom-line performance of the company due to its FX loan exposure.
- The effort of the federal government to stabilize the power sector will boost the company’s performance going forward and sustain the current earnings momentum.
- We place a BUY rating on Transcorp as a result of its long-term prospects which may crystallize in the short to medium term due to the market resurgence.
|Shares Outstanding (Mn)||40,657|
|Expected Return 52Week High 52Week Low||78.57%
Dangote Flour Mills Plc
- In the Company’s recent unaudited Q3 2017 results, both sales revenue and net income grew by 101.2% and 393.7% respectively.
- A streak of improved business operations lately supports positive outlook going forward.
- It continues to leverage the parent company’s potent distribution network which we think would boost more sales going forward.
- Q3 EPS now at 261 kobo and represents 357.9% growth against comparable period of 2016.
- Book value is currently at N7.08 and closest to its market price.
- Improved return on equity (ROE) at 37.0% compared to 2016 17.0% points gradual accretion on shareholders’ funds and an improved tendency for dividend payment soon.
- Our target price is 24.3% above the current market price and 52-week high respectively.
|Dangote Flour Mills Plc|
|Shares Outst. (Mn)||5,000|
|Expected Return 52Week High 52Week Low||24.3%
Zenith Bank Int’l Plc
- Zenith Bank has emerged one of most reputable banks in Nigeria business landscape.
- Its improved branch networks within the country have positioned it for improved income sources.
- The bank has one of the strongest Capital Adequacy Ratio (CAR) at 21% and provides ample buffer above the regulatory minimum of 15%.
- Its balance sheet size is a major incentive for us at this time considering that it has a book value per share of N24.33 resulting into a price to book ratio 1.07x relative to its closest peer of 1.58x.
- The liquidity ratio of the group as at Q3 ‘17 was 55%, thus above the regulatory minimum of 30%.
- Upside potential to our target price and 52-Week high is 18.76% and 17.05% respectively.
|Zenith Bank Int’l Plc|
|Shares Outst (Mn)||31,396|
|Expected Return 52Week High
Dangote Sugar & Refinery Plc
- Dangote Sugar Plc is a subsidiary of Dangote group.
- It refines raw sugar into edible sugar
- It controls over 60% of the sugar market in Nigeria.
- Its backward integration strategy has helped to bring down its input cost considerably in recent years.
- Her extensive, fast and reliable distribution network covers over 80% of the country.
- The company has outperformed its full-year 2016 net income as at half-year 2017 by 18.79%.
- It grew its revenue and net income in Q3 ‘17 by 41.5% and 156.2% against comparable period of 2016.
- We expect the firm to continue to post this streak of decent performances going forward.
- It has resumed payment of interim dividend, indicating management confidence about the future performance.
- The Company is an income and growth stock. Final dividend for FY 2017 is highly anticipated.
|Dangote Sugar & Refinery Plc|
|Shares Outst (Mn)||12,000|
|Expected Return 52Week High
Unilever, UCAP, Fidson, NASCON, DangCem.