Stock recommendations for week of 29 October 2018   

29 October 2018 : The Nigeria equity market closed positive for the second consecutive week with the NSE ASI increasing by 0.20% WoW. Most of the gains was seen in the last trading day as the market gained 1.1% on Friday alone. Pertinently, the bullish performance reflected gains in DANGCEM (+0.48%), SEPLAT (+4.86%), TOTAL (+8.2%), STANBIC (+2.2%) and ZENITHBANK (+4.8%). DIAMOND (+20%), FIDELITY (+10.58%) and ROYALEX (+10.0%) were the highest gainers of the week. On a sectoral basis, the Banking (+1.07%), Construction (+5.63%), Insurance (+1.34%), Oil & Gas (+3.19%), Real Estate (+0.37%) and Construction (+0.02%) sectors closed positive while the Brewers (-1.17%), Personal Care (-3.23%) and Food (-0.04%) sectors closed negative.

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.

First City Monument Bank – ( FCMB ) BUY (FVE: N2.34). Analysts revise their FVE lower to N2.34 (previously: N3.38) following expectation of negative loan growth, higher non-performing loan, higher OPEX and a downward revision to non-interest revenue (NIR) in 2018. That said, despite the revision to NIR, analysts believe it will remain a key driver for earnings in 2018, alongside a lower funding cost and loan-loss provision.

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.

Unilever Nigeria Plc – ( UNILEVER ) OVERWEIGHT (FVE: N50.98). Unilever is analyst's top pick in the consumer space with FY 18E EPS expectation of N2.13 (+19.7% YoY), based on revenue growth (+13.1% YoY) and significant moderation in interest expense (- 91% YoY) – following the sizeable deleveraging of its balance sheet. On analyst's numbers, Unilever trades at a FY 18E and FY 19F P/E of  20.2x and 18.7x relative to 5-year historical average of 33.5x.

Okomu Oil Palm Plc – ( OKOMUOIL ) OVERWEIGHT (FVE: N92.45). Although analysts expect PAT to be lower over FY 18 due to lower revenue and higher costs, analysts have an OVERWEIGHT rating on Okomu based on their FVE of N92.45, as analysts believe current pricing presents an attractive entry point.

Total Nigeria Plc – ( TOTAL ) STRONG BUY (FVE: N244.28). Analysts upgrade their FVE on Total Nigeria Plc to N244.28, as analysts now model a 24% hike in domestic petrol price to N180 per litre and increase in finance income in 2019 - following robust subsidy receivables as at H1 18.

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

 DiamondBankPlcannouncedtheresignationoffourofitsdirectorsbasedonvariedpersonalreasonsgivenbythedirectors.Shortly, after this announcement, Diamond Bank released a press release stating the resignation of the directors was not linked to any imminent injection of capital from new investors.

The Rights Issue of May & Baker Nigeria Plc of N980 million ordinary shares opened last week Monday, October 22 and will close on Wednesday, November 22, 2018. The Rights Issue is at an offer price of N2.50, a premium to the last trading price of N2.35.

Reporting for EasyKobo on Monday ,29 October 2018 in Lagos, Nigeria

Source: ARM Securities Limited


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