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Afrinvest Stock Recommendation for the Week - 131117

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Monday, November 13, 2017/12:39PM/ Afrinvest Research

 

Market Last Week (Our Observations)

Market performance was largely positive last week as the All Share Index added 0.5% W-o-W while YTD return expanded to 38.1%.

 

Three of five major indices closed the week in green. Gainers chart was led by the Oil & Gas index, up 0.8% W-o-W. Likewise, the Banking and Industrial indices followed, adding 0.5% and 0.4% W-o-W respectively. The week’s losers were the Insurance and Consumer Goods indices, which declined 1.1% and 0.1% respectively.

 

The top advancers last week were CAVERTON (+30.2%), CADBURY (+22.1%) and FORTE OIL (+10.3%), while the top decliners were CHAMPION (-14.3%), LINKASSURE (-12.8%) and LAWUNION (-9.9%).

 

Market This Week (Our Expectations)

The Afrinvest weekly sentiment indicator weakened to 2.4 points from 3.6 points recorded in prior week due to a decline in market breadth.

 

We expect the ongoing rally in oil prices to continue to feed into the market via increased buying interest in Nigerian assets.

 

Hence, we maintain our positive outlook on Nigerian stocks for the week.

 

Out top pick for the week is NIGERIAN BREWERIES

 

Top Pick for the Week: Nigerian Breweries Plc

Nigerian Breweries is the largest brewing company in Nigeria by capacity and turnover. The company owns and operates 11 breweries and exports to the U.S, U.K. as well as other parts of Europe, Middle East, Asia and Africa.

 

With a total market capitalization of N1.1tn, it is the third most capitalized stock on the Nigerian bourse as well as the most capitalized stock in the Consumer Goods sector.

 

The company has consistently paid dividends since 2005 and still proposed an interim dividend of N1.00 per share payable on 23rd November 2017.

 

In Q3:2017, the company recorded a top line growth of  14.4% Y-o-Y to N254.7bn from N222.7bn, while EBIT increased 11.4% on account of a 404.8% rise in non-core income to N2.0bn. Additionally, improved management of finance costs which lowered 22.6% Y-o-Y to N7.9bn boosted the bottom line up 19.4% to N24.0bn from N20.1bn.

 

The stock currently has a market price of N143.90 (10/11/2017) representing a YTD return of -2.7%, . At a 14-day RSI of 20.1, we observe an opportunity for bargain hunting in the blue chip stock. Hence, recommend a BUY on the stock for the week.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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