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GTI 5 Weekly Stock Picks -080517


Monday, May 8, 2017, 11:58 AM /GTI Research

The Nigerian equity market on Friday ended the week in the positive position with a gain of 0.26%, extending bullish run to six days in a row. Similarly, market breadth closed positive recording 28 gainers against 8 losers.

In summary, the All Share Index (ASI) gained 68.83 absolute points, representing an increase of 0.26% to close at 26,235.63 points. Similarly, the Market Capitalization gained N23.79 billion, representing an increase of 0.26% to close at N9.07 trillion.  

The Upturn was significantly impacted by gains recorded in medium and large capitalized stocks, amongst which are; , OANDO (+4.98%), 7UP (+4.92), ZENITH (+1.57%), INTBREW (+1.03%), FBNH (+0.84%), DANGCEM (+0.31%), ACCESS (+0.15%) and ETI (+0.13%).


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.

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 


A fully integrated agro-industrial establishment. The Company specializes in the cultivation of oil palm, extraction, refining and fractionation of crude palm oil into finished products. It recently forayed into rubber plantation.

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.  


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.  


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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