GTI 5 Weekly Stock Picks - 030717


Monday, July 01, 2017, 1:32 PM /GTI Research

The equity market on Friday shed 0.64% closing the week in the red and bringing to a halt prior two days bull-run. Similarly, market breadth closed negative recording 17 gainers against 33 losers.

In summary, the All Share Index (ASI) shed 152.36 absolute points, representing a decline of 0.46% to close at 33,117.48 points. Similarly, the Market Capitalization shed N52.69 billion, representing a decline of 0.46% to close at N11.45 trillion.

The downturn was impacted by losses recorded in medium and large capitalized stocks, amongst which are; UNILEVER (-9.74%), UBA (-7.50%), 7UP (-5.00%), JBERGER (-4.99%), FO (-4.99%), FLOURMILLS (-3.54%), OANDO (-3.05%), ACCESS (-2.62%), GTB (-2.46%), NESTLE (-0.99%) and ZENITH (-0.05%).

The acquisition of 414MW Geregu Power Plant has started to contribute significantly to the Company’s topline. Power generation contribution to revenue increased by 118.61% YoY accounting for 19.79% of total revenue in Q1 2017 compared to 8.39% of total revenue in Q1 2016.  

This trend is expected to continue with the power generation business further boosting revenue growth especially with the present drive by the government to ensure that power generation in the country increases.  

FO also has the capacity to push higher fuel and lubricants volume sales through its recent retail outlet expansion financed through its issued bonds. 

Julius Berger
The company has a huge public sector portfolio which includes: Permanent Site of the National Institute for Legislative Studies, Abuja, New Residences for Presiding Officers of the National Assembly, Abuja, Rehabilitation & Extension of Airport Expressway, Abuja, Rehabilitation of Badia Roads,Lagos, Lagos– Badagry Expressway,Lagos, Lagos–Ibadan Dual Carriageway, Section 1, Lagos–Shagamu, and many more. (these are all on-going).  

We expect that with the focus of the government on infrastructure development a lot of the alloted N1.8trillion (30% of the total budget for 2016) will go to ongoing projects across the country. This will boost JB’s revenue base and profitability for the 2016 fiscal year.  

In addition to the on-going projects, the company has also won new projects: Asokoro Conference Centre, Abuja, Dangote Jetty Apapa, Lagos, Uyo–Etinan Road, Akwa Ibom, Upgrade of NLNG MOF Jetty, Bonny Island,Dualisation Oil Mill Elelenwo Akpajo Road, Port Harcourt, No Potholes Programme, Port Harcourt.  

These in addtion to the company’s other business arms will ensure sustainability in revenue base going forward. 

Zenith Bank
Despite the challenges in the Nigerian financial services sector, with rising loan loss provisions as a result of their exposure to the oil and gas sector as well as the potentially toxic power sector, doubts about asset quality and weakening CAR, we still see opportunities in the tier one banks.  

Zenith bank has one of the strongest CAR’s in the sector and continues to leverage on its stringent risk assessment framework to mitigate capital erosion.  

The Bank’s balance sheet size is a major incentive for us at this time because we believe that its size/liquidity is a competitive edge in an economy awash with opportunities like the Nigerian economy. The bank also has strong brand acceptability and a wide branch spread. 

Total Nigeria
Total Nigeria is one of the foremost oil and gas companies in the Nigerian oil sector. The company is one of the largest in terms of retail outlets across the country and leverages on these outlets to push sales volume.  

The company has also benefitted from the deregulation of the downstream sector where it operates as a result of its retail presence in the volume driven oil marketing space.  

The company pays consistent dividend and is a firm pick with PFA’s and FPI’s .The Company has declared a final dividend of N7.00 bringing total dividend for 2016 to N17.00 

Dangote Cement 
Dangote Cement is Africa's leading cement producer with three plants in Nigeria and plans to expand into 13 other African countries. The Group is a fully integrated quarry-to-customer producer with production capacity of 29 million tonnes in Nigeria and new operations set to begin across the rest of Sub-Saharan Africa.  

The Group plans to have 42 million tonnes capacity by the end of 2016 and 50-60 million tonnes of production, grinding and import capacity in Sub-Saharan Africa by 2016. Dangote Cement's Obajana plant in Kogi State, Nigeria, is the largest in Africa with 13 million tonnes capacity across four lines.  

The Ibese plant in Ogun State has four cement lines with a combined installed capacity of 12 million tonnes. The Gboko plant in Benue State has 4 million tonnes capacity. Over time, Dangote Cement has eliminated Nigeria's dependence on imported cement and is transforming the nation into an exporter of the product serving neighboring countries.

Watch List 
UBA, Nestle, NB, GT, Fidson, Dangote Sugar, Stanbic.

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