GTBank, Dangote Cement, Zenith Bank, make ARM’s hot stocks list

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The stocks of Dangote Cement Plc, Zenith Bank Plc, Nestle Plc, Nigerian Breweries Plc, and Seplat Plc are shares of fortune, a report from ARM securities disclosed.

Though, the Nigerian Stock Exchange closed on a negative for the first time in 2020 with the NSE All-share Index (ASI) declining by 2.65% from 29,628.84 last week Monday to 28, 843.53 index points by close of trading on Friday, the stockbroking firm is optimistic that the stocks would give their investors expected returns on investment (ROI).

Meanwhile, gains were seen across the Brewers (4.89%), Construction (2.64%) and Insurance (0.54%) sectors.

Where they stand:

Dangote Cement (DANGCEM) is a leading cement manufacturer in Nigeria and it made ARM’s ‘STRONG BUY’ list.

Dangote Cement (Dangcem) with a Fair Value Estimate (FVE) of N240.87 – DANGCEM’s FY 19 earnings is expected to be pressured (EPS: N14, vs N22 in 2018) owing to lower volumes in Nigeria business (due to increased competition from BUA Cement) and some of its Pan Africa business, as well as high base of tax credits from 2018. However, “DANGCEM currently trades at FY 19E Price Earning (P/E) of 11x on our estimates, which is cheap compared to WAPCO and CCNN of 17.7x and 16.8x, respectively. We believe current valuation is unjustified given the superior Return on Equity (ROE) of 24%.

Zenith Bank Plc (FVE: N31.50) also made the Strong buy list: The stockbroking firm was forced to adjust its expectations for the bank’s FY 2019 following some surprises in its Q2 numbers. In specifics, “we revised net interest income lower due to compressed yields on its loans and treasury asset (H1 18:10.6%, H1 19 9.1%) amidst contraction in funding cost,” it stated. Elsewhere, we adjusted Nominal Interest Rate (NIR) higher due to upward review of electronic fee income and trading book. Thus, we now forecast Profit Before Tax (PBT) of N218 billion (-5.5% YoY), while we cut our FVE to N31.57/share (previously: N33.71/share).

STRONG BUY, Nigerian Breweries Plc – (FVE: N75.82): Intense competition from International Breweries (IB) and graduated excise duty (+17% YoY) that kicked-off in Jan-19, revenue growth is expected to be slow even as we expect higher finance cost (+38% YoY) to be another pressure point to earnings this year. However, given our case for a slight improvement in volumes and decline in cost of sales (-1.1% YoY) which translates to gross (+120bps YoY) and Earning Before Interest and Taxes (EBIT) (+101bps YoY) margin expansion, the misery seems moderated. Overall, the net impact of all our adjustments translates to PBT of N29.9 billion and Earning Per Share (EPS) of N2.58 (+6.3% YoY) over 2019.

STRONG BUY, Seplat Plc – (FVE: N828.90): Seplat’s total production declined in Q3 19, as the drop in gas production offset improvement in the oil segment. That said, we remain positive on growth in production going into the final quarter of the year (especially in oil) and into 2020 as Seplat increases capex. Cashflows remain healthy. Upsides reside in the ANOH Gas project and acquisition of Eland Oil & Gas Limited.

However, losses were observed in the Banking (-6.13%), Cement (-0.90%), Telecom (-2.96%), Personal Care (-13.72%), Food (-0.50%), Oil & Gas (-2.58), and Real Estate (-0.14%) sectors, last week.

Major drivers for the week’s decline were stocks such as FBNH (-10.27% WoW), STANBIC (-10% WoW), BUACEMENT (-2.12% WoW) and MTNN (-4.32% WoW).

Meanwhile, Nairametrics had reported that the week ended January 31, 2020, was not a fruitful one for some investors in the Nigerian Stock Exchange, as the market delved below N15 trillion when investors lost N403.02 billion.

Nairametrics found that the market capitalisation dropped from N15.27 trillion on Friday, January 24, 2020, to N14.87 trillion last Friday. Experts attributed the development to the sell-offs witnessed in MTN Nigeria Communications Plc, Guaranty Trust Bank Plc, and Access Bank Plc.

Premium board decliners
The summary of the stock market performance for the week showed that no stock recorded positive growth last week. There were only decliners and retainers.

Lafarge Africa lost the most with a 12.86% decline to close the week at N15.25 followed by First Bank Holdings, which dipped 10.27% to close at N6.55. UBA recorded 6.43% loss to close at N8 with Zenith Bank closing at N20.85 indicating 5% loss while MTN rounded off the list with 4.32% loss to close at N119.6.

Mainboard gainers
Despite the negative performance of the stock market in the week, some company stocks recorded a slight increase in the value of their stocks.

Linkage Assurance gained the most on the bourse with an 18.75% increase to close at N0.57. Neimeth Pharmaceuticals followed with 17.02% gain to close at N0.55 from an initial N0.47. Vitafoam Nigeria also recorded a 10% gain to close at N5.5 as NPF Microfinance Bank grew by 9.73%, from N1.13 to N1.24 while Cornerstone Insurance rounded off the list with 9.26% gain to close at N0.59.

– NairaMetrics

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