Bank stocks show best potentials as market broods in waiting for a catalyst

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From Monday to Friday of the week ended February 09, 2018, the Nigerian bourse was down. The unusual five straight sessions of losses saw the All Share Index of the Nigerian Stock Exchange down 3.39% to close at 43,127.92 from the week open of 44,639.99. Such straight sessions of losses was last witnessed in the market around August 24, 2017.

GAINERS AND LOSERS

Penny stocks still largely dominated on both the gainers’ and losers’ chart. This infers that the market, though weak is more or less in a brooding state, waiting for a major catalyst.

Profit taking and sell off are observed in a number of low cap stocks that had earlier in the year enjoyed massive patronage and high level price performance. Some of them with no fundamental are bound to decline further until the expected catalyst hits.

WHAT TO DO:

  • Price shed of equities are no strange occurrences in the stock market as this only offers another chance to invest in missed opportunities.
  • Equities with no quality earnings on the rise should be avoided. If you are in, except if there is hope of positive earnings, bail out.
  • Equities with quality earnings but on the decline offer great buy opportunities at about the equilibrium price
  • If you are in stocks with quality earnings and you see the prices down, please do not panic. Such is a better period to invest more.
  • In case you have invested in stocks in quality earnings and the prices are stagnant, be wary in take a loss. Make the hold a long term adventure.
  • Equities with brilliant Q4 earnings’ outlook with possible above average dividend to back remain your best bet.
  • Let your Stockbrokers continue to offer your moribund stocks in the reality of current price rule to see if any could be sold.

POSSIBILITIES THIS WEEK

  • The market is still not looking sharp. In weakness however, a few days of green performances are possible.
  • Closing bid and offer sizes Friday were not sharp. That suggests a likely weak open Monday.

STOCKS TO WATCH:

  • ACCESS BANK PLC

With a closing excess offer of 1,018,000 units out of which 200,000 units were being bided for, Monday stands to open weak. With the kind of volume the bank stock often commands, the excess offer could be wiped off in minutes at market open hence, Access stock remains a BUY rating.On the daily charts, the its price is dwelling at oversold level which suggests that any further decline makes the stock even cheaper. At that, a turnaround is expected between Monday and Tuesday at the latest. As per prospect, Access is worth the waiting with Q4 earnings conservatively expected to be around N2.50, the sock should not sell below N20 all things being equal.

  • AFRICAN PRUDENTIAL PLC

The float is little and shareholdings concentration in the hands of individuals and institutions that will not be in hurry to sell. Its long term outlook is very bright. In other words, investment in the stock should be done with long term in view more so with the company’s renewed vigour of product development and marketing with diversification into other areas beyond share registration business. Closing last week with 111,224 units bid size against about 99,000 offer sizes is indicative of a mild positive open Monday. With a marginal 1.1% price growth last week, possible mild growth this week is being expected. Afriprud had as at Q3 2017 with an EPS of 65kobo surpassed the 51kobo it declared in the Q4 of 2016. Achieving an EPS of between 75kobo and 90 kobo in Q4 2017 will make the price fly instantly all things being equal. Cash dividend of 30kobo was declared in 2017 against its 2016 audited accounts. Cash dividend between 35-45kobo is being expected against the 2017 audited account.

  • DIAMOND BANK PLC

The stock was down 9.5% last week with three green and two red days. Closing with 310,000 bids against 100,000 offer sizes on a Friday when the stock price moved higher by 6.5% suggests a positive Monday open. Technically, price is still largely within the range where appreciation is substantially possible. In other words, possibilities of recovering a portion of immediate past losses are high though it stands to shed point for the week irrespective of an expected few days of gains. The bank’s Q3 of 25kobo against 40kobo in the Q2 led to sharp price decline. It is hoped that the Q4 will bring in better earnings to justify immediate past rally. Before the result is however released, price vacillation will subsist.

  • FBNH

It was a 13.4% loss last week. Indicators are yet showing possibility of further decline even this week.This is the more corroborated by the closing status on Friday with 820,000 offer against just 2000 bid size. Though one or two days in the week might close in the green, Monday stands to start low. FBNH’ current price is just appropriate for Q3 earnings of N1.28. any price lower makes the stock cheap. Portions of the bad debts already provided for are beginning to come back in and all efforts geared toward reduction of bad loan incidences, 2017 Q4 earnings are expected to be better. Being what the stock is, it is suitable for all season and all portfolio types.

 

  • GUARANTY TRUST BANK PLC:

Last week was a little turbulent for GTB but that is not a big deal and really does not also signify weakness but rather a slow down. Should the price decline one more trading session, it becomes buyable with low risk. 2.166 million units excess offer against 10,000 bid sizes were recorded at closing session Friday. Monday sure stands to start weak this week. If that happens, Tuesday is bound to come sharp for the stock. With N4.44 Q3 earnings, Q4 is not expected to come below N5.50. if this is achieved, current price becomes cheap.

  • ZENITH BANK PLC

Zenith is sure within a buy range if you are not the touch and go kind of investor. Closing last Friday with over 1.5million units offer and a loss of 3.45 suggests a measure of pressure which most likely might stress till Monday. Such units however, when compared with volumes that the stock often commands is no big deal as this might be wiped off easily when equilibrium price is reached. With N4.11 2017 Q3 and Q4 for 2017 earnings expectation in the region of N5.20, Zenith at current price of N30.90 is a bargain.

OTHER STOCKS TO WATCH:

  • TRANSCORP
  • LAW UNION AND ROCK
  • NAHCO
  • OANDO
  • SKYE
  • STERLING
  • G LEVENTIS
  • LEARN AFRICA
  • HONEYWELL
  • WEMA

 

 

 

 

 

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