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Afrinvest Stock Recommendation for the Week - 041217


Monday, Nov 20, 2017 4:23PM/ Afrinvest Research


Market Last Week (Our Observations)

The All Share Index (ASI) appreciated 1.5% W-o-W last week to close at a 3-month high of 37,944.60 points with the index gaining 3.4% in November M-o-M while YTD returns advanced to 41.2%. Market’s performance was largely driven by gains in market bellwethers – DANGCEM (+2.1%), GUARANTY (+2.4%) and NB (+1.2%).


Performance across sectors was largely bullish in the week as all the indices under our coverage advanced W-o-W. The Insurance index led the gainers’ chart, up 1.5% W-o-W while the Banking and Oil & Gas indices trailed, rising 1.4% apiece. Similarly, the Consumer Goods and Industrial Goods Indices added 1.3% and 1.1% respectively. 


The top performing stocks this week were FIDELITY (+21.2%), FORTE (+15.0%) and LAWUNION (+14.8%) while MOBIL (-6.1%), UPL (-5.5%) and NEIMETH (-4.9%) were the worst performers.


Market This Week (Our Expectations)

The Afrinvest weekly sentiment indicator advanced to 4.1 points from 3.3 points recorded last week due to improvement in market breadth. 


Although we anticipate a slight pullback in early trades this week, due to profit-taking, we re-iterate our positive near term outlook for the market as fund managers continue to rebalance portfolios ahead of fiscal yearend. Our medium term outlook remains bullish as improving macroeconomic indicators feed into investor appetite for Nigerian assets.


Our top pick for the week is ACCESS BANK PLC.


Top Pick for the Week: 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 9M:2017 and also qualifies as a Systemically Important Bank (SIB) based on the CBN s taxonomy.


Access  has a customer base of about 7 million people which it services through 371 branches, 9,098 POS terminals, 1,437 ATMs and 3.2m ATM cards.


In Its 9M:2017 result, the Bank’s trailing nine month performance was generally impressive with Gross Earnings growing 33.0% Y-o-Y to N365.1bn 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.


However, 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. As a result, PAT improved marginally, up 4.3% Y-o-Y to N56.4bn.


The stock has a 14-day RSI of 56.4, P/BV of 0.6 and is currently trading at a current price of N9.99 (30/11/2017) beneath our target price of N10.57. This implies a relative undervaluation of the stock with more upside for capital gain

Proshare Nigeria Pvt. Ltd.

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