02 October 2018 : Last week, the Nigerian equity market extended gains for the second consecutive week with the NSEASI gaining 70bps WoW to close at 32,766 pts. The positive performance largely mirrored gains in banking stocks - STANBIC (+9.52%), GUARANTY (+5.33%), UBA (+5%) and ZENITHBANK (+3.37%). An overview of the sectorial performance showed that Banking (+3.65%), Personal Care (+1.81%) and Real Estate (+0.7%) sectors closed in the positive region while Oil & Gas (-2.69%), Construction (-2.64%), Brewers (-1.95%), Food (- 0.56%), and Cement (-0.14%) sectors closed in the red.
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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 0.94x, a premium to peer average of 0.92x. 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). Analysts revise their FVE lower to N2.34 (previously: N3.38) following their 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). Analysts expect Dangote Cement to sustain earnings growth over 2018, at faster pace than their earlier estimate. To be specific, analysts are now more positive on the write back of the tax provisions booked thus far.
Okomu Oil Plc – ( OKOMUOIL ) OVERWEIGHT (FVE: N102.33). Okomu is analyst's 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 – ( FO ) BUY (FVE: N34.55). Analyst's BUY rating on FO is premised on improvement in margins beyond 2018, hinged on expected upward adjustment in domestic PMS Price. Accordingly, analysts forecast gross margin to average 13.1% over their 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 – ( 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.
Corporate Benefit Tracker
Last week
C&I Leasing announced the acquisition of two new tug boats which will be deployed for a long-term contract with Nigerian Liquefied Natural Gas Company (NLNG).
Wema Bank Plc is set to issue a N20 billion local bond as part of its N50 billion debt issuance programme.
Stanbic IBTC Holdings Plc announced the CBN has confirmed that its banking subsidiary will not be debited for $2.632 billion, being the portion of the remittances, the Bank had made on the basis of the Certificates of Capital Importation with respect to MTN Nigeria. The CBN had previously suggested that the Bank should also be prepared to refund.
Reporting for EasyKobo on Tuesday , 02 Octber 2018 in Lagos, Nigeria
Source: ARM Securities Limited
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