13 August 2018 : The Nigerian equity market advanced its losing streak for the second week in August as the NGSE index shed 289bps to close the week at 35,446.47pts. The weak performance was steered by sell pressures in Seplat (-8.45%), Flour Mills (-8.89%), Dangote Cement (-6.55%), Dangote Sugar (-3.13%), FBNH (-4.00%) and Guaranty (-2.62%). Clearly, none of the bellwether stocks closed in the green region as Nigerian Breweries, Nestle and UBA closed flat. Dissecting the performance on a sectorial basis, all the sectors closed negative save for Brewers, with Cement (-6.26%), Oil & Gas (-1.98%), Insurance (-1.64%), Banking (-1.51%), Food (-0.93%) and Personal Care (-0.53%) leading the decliners.
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First Bank of Nigeria Holdings Plc – STRONG BUY (FVE: N12.86). We revise our FVE slightly to N12.86 from N14.40 following our revision of a higher impairment charge due to concerns on FBNH’s exposure to Atlantic Energy and also lower asset yield for 2018. Aside these, we remain strongly optimistic on FBNH on the back of sizable moderation in impairment charge. For context, we expect NPL to moderate to 18% (FY 19E: 16%) from 22.8% in FY 17.
Dangote Cement Plc. – ( DANGCEM ) STRONG BUY (FVE: N278.54). We expect Dangote Cement to sustain earnings growth over 2018, at faster pace than our earlier estimate. To be specific, we are now more positive on the write back of the tax provisions booked thus far.
Guinness Nigeria Plc – ( GUINNESS ) SELL (FVE: N88.21). Guinness is poised for further earnings recovery into 2019 underpinned by lower operating and finance expenses. However, from a valuation standpoint, we believe the stock is expensive due to the dilutive impact of the recently concluded rights issue.
Dangote Sugar Refinery Plc – ( DANGSUGAR ) NEUTRAL (FVE: N17.01). Over 2018, we expect weaker revenue for DSR owing to lower refined sugar prices and volumes with the latter driven by ongoing sugar smuggling activities within the country which has impacted on DSR’s share. Consequent to this, alongside higher operating expenses, we expect weaker earnings in 2018.
PZ Cussons Plc – ( PZ ) SELL (FVE: N16.57). Our sell rating on PZ is premised on expected slower recovery in volumes due to weak income levels. Additionally, the recent rise in Brent crude is expected to stoke pressures on petrochemical prices which would weigh on gross profit and earnings.
Seplat Petroleum Development Company Plc – ( SEPLAT ) STRONG BUY (FVE: N975.27). The case for Seplat remains higher crude oil prices and volumes, unrecognized capital allowance, reserve accretion, higher receipt from crude oil lifted in OML 55 as well as the company’s extended debt maturity profile which feeds into an improved cash position.
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Reporting for EasyKobo on Monday ,13 August 2018 in Lagos, Nigeria
Source: ARM Securities Limited
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