Monday, July 31, 2017/12:16 PM/ Afrinvest Research
Market Last Week (Our Observations)
The benchmark index rose to a 31-month high of 37,245.17points following a 16-day bullish streak before the positive trend was bucked on Friday. Consequently, the ASI advanced 8.4% W-o-W to settle at 36,864.71points while YTD performance improved to 37.2%.
All indices closed in the green. The Banking index led sector gainers, expanding 9.5% W-o-W followed by the Consumer Goods index which rose 7.5% W-o-W. In the same vein, the Industrial Goods and Oil & Gas indices improved 5.9% and 3.1% W-o-W while the Insurance index advanced 2.0% W-o-W.
The top gainers were CONOIL (+21.4%), PRESCO (+20.0%) and DANGSUGAR (+19.3%) while CADBURY (-18.2%), MORISON (-17.6%) and LIVESTOCK (-13.3%) were the worst performers for the week.
Market This Week (Our Expectations)
The Afrinvest weekly sentiment indicator strengthened to 3.7 points from 2.9 points last week due to improved market breadth.
Although today is the official deadline for filing of H1:2017 earnings reports, we expect to see earnings releases all through the week and we believe market performance will be largely driven by reactions towards the corporate releases.
However, there is a likelihood of some profit taking in early trades this week as witnessed on the last trading day of the previous week
Our top pick for the week is ACCESS.
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 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.
The Bank continued its impressive performance in Q1:2017 with Gross Earnings growing 38.8% Y-o-Y to N115.9bn whilst PAT rose 34.0% Y-o-Y to N26.0bn. Interest income also increased 43.1% to N79.3bn in the period.
The Bank’s Capital Adequacy Ratio (CAR) remained high at 21.0% in Q1: 2017, well above regulatory threshold of 15.0% for international banks.
The stock currently trades at N10.11(28/07/2017) and has a P/E and P/BV of 3.6x and 0.6x which is at a discount to Industry average of 7.4x and 0.9x respectively. Hence we see an opportunity for capital appreciation in the stock.
The stock has an RSI of 58.2