Best Stocks H1 2018: How they Emerged, Possibilities Ahead

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MARKET SUMMARY: JANUARY – JUNE 2018:

The first half of 2018 is over. The market had been good and bad, turbulent and stable. Money had been made and lost within this period. In all, doors of the floors of the Nigerian Stock Exchange are still wide open. The Nigerian market might not have emerged best in Africa in the first half of 2018, it’s however one of the most vibrant, with lots of possibilities ahead.

There is no doubting the fact that the market is weak in response to happenings around the ecosystem within which the market operates but the sustaining ability is equally great, thus current market status is highly commendable. Technically speaking, the market is resilient. Though the bear seems having upper hands but the market is not giving in easily. These are unique features of a properly structured market with inbuilt drive for not just survival but excellence. In other words, though no market could be said to be immune to total crash in the world, the Nigerian bourse is in the class of global high profile markets with shock absorbers against storms that often collapse stock markets.

THE JOURNEY SO FAR:

Q1 2018:

  • Q1 2018 was lot better as all indicators except NSE Asem were up. Please note, NSE CG Index was introduced around the last week in February and did not partake in the January rally hence its decline of 0.49% in Q1 2018.
  • In Q1, NSE Premium was outstandingly the best with NSE Pension and NSE Industrial goods coming behind. These are clear indicators of where market’ strength was in the quarter- foreign investors and pension funds
  • Leading indexes in Q1 revealed the status of foreign institutional investors as being bullish early in the year as these indicators outperformed the general market in the period.

Q2 2018:

  • Q2 2018 saw all indexes recording varied percentages of losses. In other words, the period between April and June was turbulent for the market generally.
  • Seeing the performances of NSE premium, Industrial goods and Banking indexes, it is also glaring that in Q2, foreign investors were exiting. Please note that these indexes underperformed the general market in Q2 2018 except for NSE pension and a few others. It therefore suggests that PFAs, though could not be said to be bullish, they were not also so much dumping their positions while their foreign counterparts were so doing.

JANUARY TO JUNE 2018:

From the table above, it infers that:

  • NSE PENSION is a major force behind market sustainability.
  • Insurance stocks might be such that are often looked away from but a few of them are so attractive
  • NSE premium stocks are such that possess the capability of holding forth in the face of turbulence.

BEST STOCKS OF H1 2018:

 

  • In the half year of 2018, fifty seven equities appeared on the gainers list while seventy eight featured on the losers’ chart.
  • All equities that lost between 32% and 60% performed so in response to new 20kobo price rule of the Nigerian Stock Exchange. Notably, most of these hitherto dormant stocks suddenly became active, liquid and vibrant. After the prices of a number of them declined to the lowest level, subsequent recoveries led to a measure of profit to discerning investors.
  • Some of the decline seen within the period under review came in response to poor Q1 earnings.

 

BEST STOCKS OF H1 2018- HOW THEY EMERGED:

  1. CCNN:

Growing its price from N9.50 at close of trading session in 2017 to N24 at the close of trading on June 29, 2018, CCNN led all other stocks on the floor of the Nigerian Stock Exchange in the period under review with a growth of 152.63%. Its price even went as high as N29 in the year.

 

FACTORS FOR:

  • Of the company’s 1.2billion ordinary shares which is considered low relative to what obtains in other industries in the market, over 900million units are currently being held by preferred holders who will not sell. Consequently, the company’s float in the market is not enough to ensure volume trading. The result of such is sustainable price growth.
  • As at the time the company released a full year EPS of N2.57 for the 2017 audited report, its price was just around N18.75. The subsequent price upsurge was justified. A dividend of N1.25 was later announced.
  • Its 2018 Q1 grew to 86 kobo from 41 kobo in the previous year. If this is projected into the expected Q2, it suggests that the company might be releasing above its entire 2017 EPS at Q3 2018.
  • The Q3 outlook is positive.
  • The company last week announced a merger agreement with Kalambaina Cement, a subsidiary of BUA. Seeing that BUA is also a major investor in CCNN, the merger is sure scaling through without hassles. Going by the content of the proposed merger, though the number of shares will increase but yet, the concentration remains in same hands.
  • Nature of products and advantage of location all make the stock a good buy.

 

  1. NEM INSURENCE PLC:
  • At the start of 2018, the stock price of NEM was just N1.66. Apparently being viewed as a conventional insurance stock, many apparently shied away from the stock and consequently, the huge returns of 92.77% YtD. Despite the turbulence in June, the stock grew by 25%.
  • The stock price is still not tired as it gained 5.26% last week alone even while others were shedding prices.
  • Ordinarily, an outstanding number of shares of about 5.2bn units seem bogus; the company’s board members’ ownership of between 25% and 30% is a reflection of their confidence in the organisation. Others who got in earlier would also have seen the attributes in the stock to hold.
  • NEM is about the best listed insurance stock as at date in price performance
  • The company’s liquidity position is a key advantage.
  • Its board and management’ drive in strategic investment in subsidiaries and such is commendable.
  • The plan is in the offing for a private placement with a preferred buyer of the entire units to be offered is ongoing.
  • As at March 29, 2018 when the 2017 full year EPS was released to be 53kobo from 35kobo in the previous year, its price was N2.75. At that, its PE Ratio of 5.18 was outstandingly one of the best in the market.
  • Its 14kobo Q1 EPS suggests that the company is poised to beat its 2017 performances going forward.

 

  1. FIDSON HEALTHCARE PLC:
  • Apparently the most vibrant healthcare stock on the floor of the Nigerian Stock Exchange, current performance of Fidson tells of the fact that focus and hardwork someday shall be rewarded as the company had over the years consistently developed and strategically marketed quality health care products without any abuse or misdemeanour which is common in its industry and for which the regulator does not spare the rods.

 

  • The stock price closed in 2017 at N3.70 and touched a high of N6.24 this year before closing at N6 on June 29, 2018. So far this year, it has been a growth of 62.16%.
  • Fidson has only 1.5bn ordinary shares in issue out of which only seventy three investors among who are the top management staff of the company, institutions and other high net-worth individuals that will not quickly sell off currently hold 1.309million units of the company’s stock. This suggests that the float in the market is low. Such equities will always sustain a level of sustainable price irrespective of turbulence in the market.

 

  • Fidson has in the recent years invested in modern and WHO accredited production facilities. Capacity utilisation in n the increase despite competition.

 

  • As at March when the company’s 2017 full year was released with an EPS of 71kobo from 21kobo in the previous year, its price on the floor of the Nigerian Stock Exchange was N5.70.

 

  • The 2018 Q1 EPS of 13.5kobo is low

 

  • The company, realising the much being paid as interest to financial institution is strategically building to approach the primary market for a right at an attractive price soon.

 

  • The right which expected to be oversubscribed might be underwritten. If this is achieved and the much being paid as interest is saved, both top and bottom line are bound to increase and consequently, returns to investors.
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