Monday, April 24, 2017 10:28 AM /GTI Research
The Nigerian equity market closed on Friday in the negative territory, shedding 0.39% and extending yesterday's downtrend. Market breadth closed negative recording 15 gainers against 18 losers.
In summary, the All Share Index (ASI) shed 98.74 absolute points, representing a decline of 0.39% to close at 25,189.37points. Similarly, the Market Capitalization shed N34.17 billion, representing a decline of 0.39% to close at N8.72 trillion.
The downturn was significantly impacted by losses recorded in medium and large capitalized stocks, amongst which are; 7UP (-9.47%), FBNH (-5.54%), UBN (-5.00%) ETI (-3.79%), NB (-3.14%), GTB (-0.36%), Access (-0.16%) and Zenith (-0.07%).
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 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.
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
GT Bank despite the sector wide challenges, GT Bank makes the list 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.
This is to serve the purpose of diversifying its operations and protecting the company from exposure to global commodity crisis. It has commenced investment on 14,000 hectares of land for rubber and oil palm plantations expected to be additional income generator by the end of this decade.
The Company’s products are mostly sold directly to wholesalers, industrial users and consumers. The industrial users are; Nestle Nigeria, Friesland Food (WAMCO) Nigeria, Kraft Foods (Cadbury), Kentucky Fried Chicken (KFC), Golden Pasta Company Ltd, Fan Milk Plc and Dangote Group.
Our estimates show that the total local palm oil processing capacity is significantly below the total demand. This gives a lot of room for growth to meet demands.
UBA, Julius Berger, Nestle, Dangote Sugar.