Stock Forecast: Stocks to Watch Out in the Next 3 months



Thursday, September 04, 2014 10.18 PM / The Analyst

The Nigerian Stock Market:
By the end of CY 2013, the NSE had witnessed improvements in its market capitalization and stock performances.

The equity market recorded a 47% return during 2013, on the back of strong macro-economic indicators. Overall we believe that the Nigerian stock market will move up further over Q4 2014 on the back of a positive trend in key indicators such as increasing GDP, exports, currency stability, growing investment in infrastructure and power/electricity, etc.

We suggest the following few stocks to watch out for in the next three months:

AIICO Insurance Plc:
This Nigerian based company is the largest life insurance company in Nigeria, and is the second largest insurance company in the country. AIICO Insurance is rated as one amongst the top three players in the general insurance business in the country and the travel insurance unit of the company is the market leader in Nigeria.

Although the CY13 profit margin of the company recorded a fall due to a one-time write off coupled with an impairment loss due to a change in NAICOM's regulatory requirements - the 2014 Q2 performance however showed good recovery, and the company posted a positive profit margin.

The company P/E of 6.2 is less than the industry P/E of 12.39, and we believe that the company is likely to do well in the coming quarter.  AIICO has recently proposed a dividend of NGN 0.08 per share.


FBN Holding Plc:
The company is the largest financial service provider in Nigeria. FBN carries out its business operations vide four major groups viz, Commercial banking services, Investment banking & asset management, and Insurance & other financial services; and has reported a strong financial performance over the years.

During February 2014, Oasis Insurance became a subsidiary of FBN life, and in May 2014 another FBN subsidiary - First Bank Plc completed its acquisition of ICB West Africa. We expect the company with its latest acquisitions to grow incrementally along regional contributions, and improve profit margins going forward.



Guaranty Trust Bank Plc:
The bank operates its business under three major operational segments viz: Retail banking, Corporate banking and Commercial banking. The bank acquired 70% interest in Fina Bank of Kenya with subsidiaries in Uganda and Rwanda in December 2013.

The bank has an asset base of over NGN 2 trillion and has recorded a strong growth over the past few years. The company currently trades at a P/E (TTM) of 9.2x, and in our view this is a good mid-long term buy.



Nigerian Aviation Handling Company Plc (NAHCO):
NAHCO is one of the largest aviation handling companies in Nigeria, with a 70% market share. It has diversified operations across aviation cargo, aircraft handling, passenger facilitation, crew transportation, fueling services and aviation training. A global credit rating company has affirmed NAHCO's rating to be A- (NG) for long term and A2 (NG) for short term.


In our view, NAHCO is expected to grow over the next years as there is an improvement in the government reforms and spurt in economic growth which is likely to favor the firm's growth. The company currently trades at a P/E (TTM) of 8.99x. We believe that this stock is likely to do well in the mid to long term.

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