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Afrinvest Stock Recommendation for the Week – 180917

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Monday, September 18, 2017/1:43PM/ Afrinvest

Market Last week (Our Observations)
Contrary to the bullish sentiment in the Nigerian equities market in the prior week, sentiment weakened last week as the benchmark index fell 2.6% W-o-W to close at 35,005.57 points, while YTD return fell to 30.3%.

The Oil & Gas index was the lone gainer, up 1.2% W-o-W. On the flip side, the Industrial Goods index led decliners as it shed 4.4% while the Consumer Goods index trailed, down 2.5%. Similarly, the Banking and Insurance indices lost 2.3% and 0.3% W-o-W respectively.

The top performers for the week were NEM (+17.8%) CILEASING (+12.3%) and UNILEVER (+9.9%) while NEIMETH (-15.7%), SKYEBANK (-13.3%) and PRESCO (-11.6%) led laggards.

Market This Week (Our Expectations)

The Afrinvest weekly sentiment index weakened to 2.5 points (from 2.8 points last week) as the market breadth declined.

Following losses sustained last week, we expect to see an uptrend in market performance as investors take advantage of bargain opportunities.

Our top pick for the week is UBA.

Top Pick for the Week: United Bank for Africa Plc

United Bank for Africa Plc ("UBA" or "the Group") is one of the largest banks in Nigeria offering a broad range of financial services. With a Pan-African footprint all over Nigeria and 18 Sub-Saharan African countries, the group also services the need of its 8.0m customers across the globe through its offices in the UK, USA and France.

UBA’s H1:2017 Gross Earnings expanded 34.5% Y-o-Y to N222.7bn while PBT and PAT numbers climbed higher by 65.5% and 56.2% Y-o-Y to N57.5bn and N42.3bn respectively despite a rise in impairment charges (up 38.4% Y-o-Y to N9.4bn) for the period.

The bank continued to strengthen its cost management framework as H1:2017 Cost to Income (CIR) Ratio witnessed significant improvement, moderating to 56.0% from 61.0% in prior year.

Amid sound risk management framework and improved operating network across Africa (ex-Nigeria now accounts for 32.0% of Gross earnings), outlook for UBA remains positive. At a current price of N8.85 (09/15/2017), we recommend a BUY on the stock.






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