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GTI 5 Weekly Stock Picks - 300517

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Tuesday, May 30, 2017, 9:15 AM /GTI Research

The Nigerian equity market on Friday ended the week experiencing massive trading activity. The ASI gained 2.10% and further extended bull-run to four days in a row causing the market cap to surpass the 10 trillion mark. Similarly, market breadth closed positive recording 33 gainers against 20 losers.

In summary, the All Share Index (ASI) gained 596.91 absolute points, representing a growth of 2.10% to close at 29,046.52 points. Similarly, the Market Capitalization gained N206.35 billion, representing a growth of 2.10% to close at N10.05 trillion.

The upturn was impacted by gains recorded in medium and large capitalized stocks, amongst which are; FBNH (+10.41%), OANDO (+7.66%), GTB (+5.00%), ETI (+5.00%), ZENITH (+4.99%), FLOURMILLS (+4.98%), ACCESS (+3.97%), STANBIC (+3.61%), UBA (+2.74%),DANGCEM (+2.33%), PRESCO (+2.10%).

 

 


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.

 

 

 

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

 

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 Sugar
Dangote Sugar Refinery (DSR) Plc plans to invest N106 billion in the expansion of operations in the next six years and as it targets to produce 1.5 million tonnes of refined sugar from locally grown sugarcane during that period.  

The Company reported better than expected Q1 -2017 numbers driven mainly by price increases rather than volume sales.  

However, despite this situation, the higher output from Savanah was a welcomed development and helped reduced the effect of high Forex on input cost.  

Our FY 2017 annualized profit projection of N5.20 is achievable and our target price of N7.80 will see the company trading at a full year P/E of 1.5 which in our opinion is realistic.

 


 

UBA
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.  

UBA reported impressive Q1 -2017 numbers and even though loan loss provisions were high, in absolute terms, the figure is not alarming and was adequately compensated by the N27.6billion rise in gross earnings, amounting to a 37% YoY expansion.

Our expectation for FY 2017 is conservative and makes provision for a further rise in loan loss provision and yet, our price target is reasonable.

 

  


Watch List 
Julius Berger, Nestle, NB, GT

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