Afrinvest Stock Recommendation for the week - 120617


Monday, June 12, 2017, 06:48 PM /Afrinvest

Market Last Week
The Nigerian equities market appreciated 6.1% W-o-W to close at 33, 276.68 points while YTD gain improved to +23.8%.

Performance across sectors was largely bullish as all indices appreciated W-o-W save for the Insurance sector which closed flat. The Oil & Gas index led gainers, appreciating 17.1% W-o-W while the Industrial Goods index trailed, up 8.0% W-o-W. Likewise, the Banking and Consumer Goods indices rose 4.9% and 3.9% W-o-W respectively.

The top performing stocks for the week were MAYBAKER (+58.7%), CADBURY (+43.9%) and FORTE OIL (+39.8%) while UPL (-9.7%), THOMASAWYER (-7.4%) and UNILEVER (-5.2%) were the worst.

Market This Week

The Afrinvest weekly sentiment indicator improved to 5.2 points (from 4.3 points last week) as investor sentiment strengthened in the week.

As positive developments in the economy continue to bolster investor appetite for equities, we believe that the bullish run will be sustained in the week.

Nevertheless, we do not rule out the possibility of some marginal profit taking in early trades this week although we believe the impact will be offset by appreciation in other trading counters.

Our top pick for the week is TOTAL

Top Pick For The Week TOTAL Nigeria Plc

Total Nigeria Plc (“TOTAL” or “the Company”) is one of the major players in the downstream Oil & Gas sector with a broad distribution network of over 500 service stations nationwide and a wide range of top quality energy products and services.

The Company operates 5 Liquefied Petroleum Gas (LPG) bottling plants across the country, in addition to 3 lubricant blending plants. Total is also strategically placed as one of the major suppliers of aviation fuel in the industry.

As at FY:2016, top line and bottom line grew 39.9% and 265.6% to N291.0 and N14.8bn respectively. While in the corresponding period in Q1:2017 Total recorded a 34.8% growth to N80.5bn while PAT declined 5.4% to N2.7bn.

In Q1:2017, TOTAL recorded a positive performance as Gross Revenue grew 34.8% Y-o-Y to N80.5bn from N59.7bn in Q1:2016 while PBT rose 13.2% to 4.3bn from 3.8bn in Q1:2016.

We believe the company will continue to benefit from developments in the downstream Oil & Gas sector and we expect the dividend payment trend to continue.

The stock has an RSI of 58.5 and a currently trades at N262.0 (09/06/2017), which reflects an upside of 18.7% when compared to our target price of N311.10. Hence, we recommend a BUY on the stock.

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