GTI 5 Weekly Stock Picks - 150816


Monday, August 15, 2016 9:05am /GTI Research

Market Review
Equity market sheds 0.12% & 0.65% on Friday & W-o-W respectively The equity market on Friday shed additional points, thereby, deepening in the bearish territory. In summary, the NSE-ASI shed 34.07 absolute points, representing 0.12% decline to close at 27,246.88 points.

Similarly, the Market Capitalization shed N11.71 billion, representing 0.12% decline to close at N9.36 trillion. Week-on-week (w-o-w), the market shed 178.98 absolute point, representing a decline of 0.65%.

Zenith Bank: Despite the challenges in the Nigerian financial services sector, with rising loan loss provisions as a result of their exposure to the oil and gas sector as well as the potentially toxic power sector, doubts about asset quality and weakening CAR, we still see opportunities in the tier one banks.

Zenith bank has one of the strongest CAR’s in the sector and continues to leverage on its stringent risk assessment framework to mitigate capital erosion. The Bank’s balance sheet size is a major incentive for us at this time because we believe that its size/liquidity is a competitive edge in an economy awash with opportunities like the Nigerian economy. The bank also has strong brand acceptability and a wide branch spread.

Julius Berger : The company has a huge public sector portfolio which includes: Permanent Site of the National Institute for Legislative Studies, Abuja, New Residences for Presiding Officers of the National Assembly, Abuja, Rehabilitation & Extension of Airport Expressway, Abuja, Rehabilitation of Badia Roads,Lagos, Lagos–Badagry Expressway,Lagos, Lagos–Ibadan Dual Carriageway, Section 1, Lagos–Shagamu, and many more. (these are all on-going).

We expect that with the focus of the government on infrastructure development a lot of the alloted N1.8trillion (30% of the total budget for 2016) will go to ongoing projects across the country. This will boost JB’s revenue base and profitability for the 2016 fiscal year.

In addition to the ongoing projects, the company has also won new projects: Asokoro Conference Centre, Abuja, Dangote Jetty Apapa, Lagos, Uyo–Etinan Road, Akwa Ibom, Upgrade of NLNG MOF Jetty, Bonny Island,Dualisation Oil Mill Elelenwo Akpajo Road, Port Harcourt, No Potholes Programme, Port Harcourt. These in addtion to the company’s other business arms will ensure sustainability in revenue base going forward.

Dangote Cement: Dangote Cement is Africa's leading cement producer with three plants in Nigeria and plans to expand into 13 other African countries. The Group is a fully integrated quarry-to-customer producer with production capacity of 29 million tonnes in Nigeria and new operations set to begin across the rest of Sub-Saharan Africa.

The Group plans to have 42 million tonnes capacity by the end of 2016 and 50-60 million tonnes of production, grinding and import capacity in SubSaharan Africa by 2016. Dangote Cement's Obajana plant in Kogi State, Nigeria, is the largest in Africa with 13 million tonnes capacity across four lines.

The Ibese plant in Ogun State has four cement lines with a combined installed capacity of 12 million tonnes. The Gboko plant in Benue State has 4 million tonnes capacity. Over time, Dangote Cement has eliminated Nigeria's dependence on imported cement and is transforming the nation into an exporter of the product serving neighboring countries.

Total Nigeria: Total Nigeria is one of the foremost oil and gas companies in the Nigerian oil sector. The company is one of the largest in terms of retail outlets across the country and leverages on these outlets to push sales volume.

The company has also benefitted from the deregulation of the downstream sector where it operates as a result of its retail presence in the volume driven oil marketing space. The company pays consistent dividend and is a firm pick with PFA’s and FPI’s .

The strong growth in its H1-2016 revenue and PAT has heightened expectation for a strong dividend payment when FY 2016 numbers are released.

Presco: A fully-integrated agro-industrial establishment: It specializes in the cultivation of oil palm, extraction, refining and fractionation of crude palm oil into finished products. Its fractionation plant is the first of its kind in West Africa. It recently forayed into rubber plantation.

This is to serve the purpose of diversifying its operations and protecting the company from exposure to global commodity crisis. The company has commenced investment on 14,000 hectares of land for rubber and oil palm plantations expected to be additional income generator by the end of this decade.

The strong revenue and PAT growth of 71% and 232% recorded in H1 2016 is an indication that the company’s expansion is beginning to contribute to overall growth.

Watch List

UBA, NB, Nestle, Dangote Sugar

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