Monday, July 24, 2017/11:56 PM/ GTI Research
Market Last Week (Our Observations)
The Nigerian Equities market sustained its bullish performance last week as investors remained optimistic on half year corporate earnings. Consequently, the All Share Index advanced 2.3% W-o-W to close at a month high of 34,020.37 points, while YTD gain expanded to 26.6%.
All indices trended northward W-o-W save for the Insurance index which slid 2.8% W-o-W. The Industrial Goods index led sector gainers, climbing 7.0% W-o-W followed by the Consumer Goods index which rose 3.0% W-o-W. Similarly, the Banking and Oil & Gas indices improved 2.4% and 0.4% W-o-W respectively.
The top performing stocks for the week were SKYEBANK (+19.7%), UNILEVER (+16.1%) and WAPCO (+15.4%) while MANSARD (-9.0%), AGLEVENT (-7.7%) and NAHCO (-6.0%) were the worst performers.
Market This Week (Our Expectations)
The Afrinvest weekly sentiment indicator waned to 2.9 points from 3.3 points last week as market breadth declined during the week.
As more positive H1:2017 corporate scorecards are released, we expect investor sentiment to remain largely positive.
However, we envisage some profit taking in the early trading sessions of the week in stocks that have witnessed continuous appreciation in the previous week.
Our top pick for the week is FIDELITY.
Top Pick for the Week: Fidelity Bank Plc
Fidelity Bank Plc (“Fidelity”, or “the Bank”) ranks as a leading Tier-2 bank in Nigeria based on Afrinvest’s classification and qualifies as a large bank as defined by the CBN with total assets of N1.3tn as at Q1: 2017.
Fidelity carries out its banking operations through its strategic focus on SME, Corporate and Retail banking, further buttressed by the spread of its loan book to these segments.
The Bank grew its gross earnings by 18.8% (up from N34.4bn to N40.8bn) in Q1: 2017 amid tough regulatory and operating environment driven mainly by 24.1% (up from N29.2bn to N36.2.2bn) growth recorded in interest income.
Net Interest Income (NII) improved by 2.8% Y-o-Y (Q1: 2016 – N16.1bn vs.Q1: 2017 – N16.6bn)
In Q1:2017, CIR moderated to 67.9% from Q1: 2016 level of 75.4% while PBT and PAT declined by 20.5% apiece Y-o-Y.
We have a 12-Month TP of FIDELITY to N1.55 per share, a 23.0% upside to current price of N1.26 (21/07/2017).
Technically, the stock is also attractive with a Relative Strength Index (RSI) of 52.7, in the oversold boundary.
We therefore recommend a BUY on the counter