Stock Recommendations for the week of 24 Sep 2018   

24 September 2018 : Last week, the Nigerian equity market reversed the loss recorded in the previous trading week with the NSE ASI expanding slightly by 0.66% WoW to close at 32,540 pts. The positive performance largely reflected gains in ACCESS (+4.5%), FBNH (+5.5%), UBA (+8.1%), ZENITHBANK (+3.7%), WAPCO (+13.5%), DANGSUGAR (+5.8%), NESTLE (+2.2%) and SEPLAT (+2.5%). An overview of the sectorial performance showed that Banking (+2.4%), Food (+2.4%), Oil & Gas (+2.6%), Brewers (+0.03%) and Real Estate (+0.37%) sectors closed in the positive territory while Cement (-1.8%), Insurance (-2.3%) and Personal Care (-0.3%) closed in the red.

All opinions and recommendations on below stocks are from analysts at ARM Securities limited. Easykobo does not endorse or oppose any recommendations expressed in this article.

Zenith Bank Plc – ( ZENITHBANK ) STRONG BUY (FVE: N35.25). Zenith Bank now looks very attractive following sell-off across the equity market. Zenith trades at a P/B of 0.7x, a discount to peer average of 0.9x. Strong valuation for zenith is premised on substantial decline in funding cost and improved asset quality.

  First City Monument Bank Plc – ( FCMB ) BUY (FVE: N2.34). We revise our FVE lower to N2.34 (previously: N3.38) following our expectation of negative loan growth, higher Non-Performing Loan, higher OPEX and a slightly lower Non-Interest Revenue (NIR) in 2018. That said, the key drivers for 2018 earnings remain strong NIR, lower funding cost and loan-loss provision.

  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.

  Okomu Oil Plc – ( OKOMUOIL ) NEUTRAL (FVE: N102.33). Okomu is our most preferred pick in the Palm oil sector, as 2018 presents opportunities for stronger growth in volumes, better operating efficiency, and lower finance cost which guides to improved earnings in 2018.

  Forte Oil Plc – BUY (FVE: N34.55). Our BUY rating on FO is premised on improvement in margins beyond 2018, hinged on expected upward adjustment in domestic PMS Price. Accordingly, we forecast gross margin to average 13.1% over our forecast horizon (vs 5-year historical average of 10.2%). Also, the finance cost is expected to drop significantly as the company was able to pay down over 50% of its long-term borrowing this year.

Seplat Petroleum Development Company Plc – 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.

Corporate Benefit Tracker

Last week

• The NSE suspended trading on shares of Skye Bank effective today, following the revocation of the company’s license by CBN on Friday. Click here to read more.

• Resort Savings & Loans Plc announced it has executed a binding agreement of $10 mn with Messers Milost Global Incorporation, in re-capitalizing the bank. In addition, the agreement contains a provision for immediate release of $1 mn. Click here to read more.

• Mutual Benefits Assurance Plc has obtained the approval of the SEC to extend the closure date of its Rights Issue of 4 billion ordinary shares to 28th September, 2018. Click here to read more

This Week

Closure of Register: Guinness Nigeria Plc, PZ Cussons Nigeria Plc.

Annual General Meeting: University Press Plc, Fidson Healthcare Plc.

Dividend Payment: Aluminium Extrusion Industries Plc, University Press Plc, Stanbic IBTC Holdings Plc, Fidson Healthcare

Reporting for EasyKobo on Monday , 24 September 2018 in Lagos, Nigeria

Source: ARM Securities Limited


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