Afrinvest Stock Recommendation for the Week - 220118


Monday, January 22, 2018 /01:28PM /Afrinvest Research 

Market Last Week (Our Observation)

  • Performance of the local bourse was largely positive last week as the All Share Index (ASI) gained 5.1% W-o-W to settle at a 9-year high of 45,092.83 points while YTD return advanced to 17.9%.

  • Across sectors, performance was largely positive as 4 of 5 indices closed in the green. Topping the gainers’ chart was the Banking index, rising 8.5% W-o-W. The Insurance index followed, up 3.8% while the Oil & Gas index closed the week 1.9% northwards. Similarly, the Industrial Goods Index was propelled to close 1.1% higher. On the other hand, the Consumer Goods index performed negatively, shedding 1.3% W-o-W.

  • The best performing stocks for the week were SKYE (+53.6%), UNITY (+48.8%) and WEMA (+41.8%) while NASCON (-13.6%), VITAFOAM (-13.3%) and AGLEVENT (-12.0%) led laggards. 

Market this Week (Our Expectation)

  • The Afrinvest Weekly sentiment closed at 1.9x following a decline in market breadth.

  • Although the market has sustained a 3-week long bullish momentum on the back of increased investor participation following the uptrend in global oil prices and an expectation of improved earnings at the commencement of fourth quarter earnings season, we expect some slight profit taking in the coming week.

  • Our top pick this week is ACCESS. 

Access Bank Plc 

  • Access Bank Plc "Access" or "the Group" or "the Bank" ranks as a Tier-1 bank based on Afrinvest classification with total assets of N3.5tn as at FY:2016 and also qualifies as a Systemically Important Bank (SIB) based on the CBN's taxonomy.

  • Access has its footprints across Sub-Saharan Africa, China, Lebanon, UAE and the UK. The Groups presence in Africa cuts across Ghana, Rwanda, Zambia, the Gambia, Sierra Leone and R.D. Congo with 33, 7, 6, 6, 4 and 2 branches respectively.

  • In its recent 9M:2017 result, the bank’s trailing nine-month performance was generally impressive. Gross earnings grew 33.0% Y-o-Y to N365.1bn in 9M: 2017 on the back of an impressive growth in Interest and Non-Interest Income which rose 35.7% and 27.8% Y-o-Y to N365.1bn and N119.2bn respectively.

  • The impressive revenue performance was offset by funding and operating cost pressures as Interest Expense surged 66.2% Y-o-Y to N124.4bn due to the high interest rate environment while Operating Expenses also rose 31.0% Y-o-Y to N154.6bn.

  • PBT and PAT improved marginally, up 5.7% and 4.3% Y-o-Y to N72.9bn and N56.4bn respectively in 9M:2017.

The stock currently has a P/BV of 0.7x against industry average of 1.1x which suggests the stock is undervalued relative to peers. Based on our positive outlook towards earnings for the company, we envisage potential for upside in the counter. Hence, we recommend a BUY for the stock. 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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