GTI 5 Weekly Stock Picks - 050916


Monday, September 05, 2016 2:03pm / GTI Research

Market Review
The equity market on Friday reversed previous day uptrend as investors took significant profit on Dangote Cement. Note that the stock of Dangote Cement has witnessed 5-day consecutive uptrend before today.

In summary, lead indicator, NSE-ASI shed 663.25 absolute points, representing a decline of 2.33% to close at 27,756.67 points. Meanwhile, the Market Capitalization shed N226.23 billion, representing a decline of 2.32% to close at N9.53 trillion.

Note that the marginal divergence between the above two indicators was due to the listing of 3.2 billion ordinary shares of Staco Insurance Plc on the Official List as result of recent Special Placing.

Week-on-week (w-o-w), the market gained 305.76 absolute points, representing +1.11% growth.

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

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 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 SubSaharan 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.

International Breweries: Following the acquisition of SABMiller by AB-inBev in the twilight of 2015 in a deal worth about $106billion, AB-inBev now controls 25% of the Global beer market. As a result of this acquisition International Breweries automatically becomes a subsidiary of the largest brewing company in the world.

We expect to see an improvement in operational processes and brewing capacity through technical support from AB-inBev. We expect this to boost International Breweries’ margins going forward and provide an option for cheaper source of funds for International Breweries to prosecute its expansion plans.

We expect to see new products introduced and International Breweries competing for a higher market share in Africa’s largest economy where Nigerian Breweries and Guinness currently dominates

NOTE: Presco was taken out of the Top-5 because it has achieved our estimate for 2016.  

Watch List

UBA, NB, Nestle, Dangote Sugar GTB

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