GTI 5 Weekly Stock Picks - 281116


Monday, November 28, 2016/8:48 AM /GTI Research

Market Review
The Nigerian equity market on Friday shed 0.62% to close the week in negative region.

In summary, lead indicator, the All-Share Index (ASI) shed 157.31 absolute points, representing a decline of 0.62% to close at 25,333.39 points. Similarly, the Market Capitalization shed N54.15 billion, representing a dip of 0.62% to close at N8.72 trillion.

The downturn was largely boosted by value depreciation recorded in some medium and large capitalized stocks, amongst which are; Okomu OilPalm (-9.68%), Forte Oil (-8.99%), UACN (- 4.28%), Stanbic-IBTC (-3.62%), Lafarge Africa (-3.17%), Julius Berger (-3.05%), Zenith Bank (- 1.13%) and Dangote Cement (-0.93%).

Week-on-week, the market shed 204.15 absolute points, representing a dip of 0.80% to close above ASI stated position.

The market is currently on a 6-week bearish streak.

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.

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.

Okomu OilPalm: Currently stands as one of the lead quoted firm operating in the agricultural sector. Its operations primarily covers oil palm and rubber production, extraction and processing.

With the increasing efforts by the government to boost activities in the agricultural sector in order to provide effective diversification of the economy from oil, the company is well positioned to benefit from this.

Towards this goal, it recently acquired 11,400 hectares of land with a plan to establish 10,000 hectares of oil palm plantation on it within the next 3 years. This is expected to lead to a doubling of its Crude Palm Oil (CPO) output.

The Company’s refinery capacity has also been increased to 100 metric tonnes per day, while its fractionation plant capacity and refined products capacity have both increased to 60 tonnes per day. Okomu refining and oil mill expansion initiatives will enable the company alleviate the local palm oil production shortage and in turn acquire a greater share of the Nigeria market

GT Bank: Despite the sector wide challenges, GT Banks makes our recommendation for its astute cost management strategy and proactive balance-sheet deployment and optimization.

The bank is also known for pushing new frontiers in bank service delivery through effective use of ICT. This gives the bank an edge in a competitive homogeneous market and gives it wider reach and a large share of the millennial population.

The Bank also has a healthy balance sheet size and liquidity to take advantage of the opportunities arising from the unfolding Nigerian economy and in addition to this, the rich dividend history makes the bank a top pick when FPI’s and local PFA’s decide to re-enter the market.

Watch List
UBA, Presco, Nestle, Dangote Sugar,Total

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