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GTI 5 Weekly Stock Picks - 120617


Monday, June 12, 2017, 11:28 AM /GTI Research

The Nigerian equities market on Friday gained 1.03%, ending the week in the green and also extending the bull-run to three trading sessions in a row. Market breadth closed positive recording 44 gainers against 17 losers.

The All Share Index (ASI) gained 338.70 absolute points, representing a growth of 1.03% to close at 33,276.68 points. Also, Market Capitalization gained N117.09 billion, representing a growth of 1.03% to close at N11.50 trillion.

The upturn was by gains recorded in medium and large capitalized stocks, amongst which are; SEPLAT (+10.25%), FO (+10.23%), INTBREW (+10.23%), FBNH (+5.74%), PRESCO (+4.99%), WAPCO (+2.58%), UBA (+1.81%), ACCESS (+1.27%), ZENITH (+1.12%), ETI (+0.96%) and TOTAL (+0.89%).  

With exception of Tuesday, the Nigerian equities market traded in the green through the week under review. As such, the bullish run has been pushed into the third week in a row. Week-on-week, the All Share Index (ASI) gained 1,905.05 absolute points, representing a growth of 6.07% to close at 33,276.68 points. Similarly, the Market Capitalization gained N658.58 billion, representing a growth of 6.07% to close at N11.50 trillion.

Outlook for the new week begining June 12th 2017
We expect intermitent profit taking this week especially in the banking and oil and gas sectors of the market. Both sectors have enjoyed positive rallies and are ripe for some ‘’load shedding’’.  

We are still confident that the week will end on a bullish note however, as a result of the pressure on the South African economy as well as the uncertainties in the UK economy following the result of the just concluded elections which created a hung paliament. We think these events in addition to stable FX market will sustain FPI appetite for Nigerian assets.

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

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. 

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.

Watch List 

UBA, Nestle, NB, GT, Fidson, Dangote Sugar

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