- Investors’ optimism rise as market returns 30.53% YtD
- Institutional and Foreign investors pitch tent with fundamentally sound stocks
Ordinarily, the market was not expected to perform well this year considering the realities of economic disruption. First it was Covid-19 pandemic that ravaged the economic system of the world; and it was predicted that second quarter performance of quoted companies would be woeful, yet the market survived it.
Second, there was another major disruption via #EndSARS protest that left many public and private businesses wrecked causing humongous loss of properties and income. Amidst these major disasters, the market as returned 30.53% year to date. If compared with 2019 performance, a year that could be adjured relatively peaceful; this would translate to massively outstanding outing.
We could say that there is no convergence between the performance of the macro-economic indicators and market performance. For instance, there is sharp increase in the prices of staple commodities which has driven the country’s inflation digit to about 13.71% not to talk of other economic parameters which include Naira depreciation, insecurity among others.
All what any discerning investor would seek to know is the drive behind the current boom, how one can profit from the bullish run and what exactly should be the exit strategy.
The major reason for the current boom cannot be far from the entrance of smart money into equity space in search of higher returns; and this has paid off for the Nigerian equity market as bullish sentiments persist. Year to date the market has returned 30.53% as All Share Index closed at 35,037.46 points as against 26,842.07 points in December 31, 2019. Quarter to date, the market is up by 14.76%, Month to date, the market is up by 14.76%, and week to date, the market is up by 12.97%.This fantastic market performance is also premised on impressive Q3 earnings of quoted companies.
Commenting on the market performance, Mallam Garba Kurfi, Managing Director of APT Securities and Funds Limited said that he anticipated double digit return for the equity market. Good enough, the market has returned 30.53% year to date.
According to Mallam Kurfi, from all indication the bull is likely to continue up to the end of the year.
“The market is rising on the fundamentally sound stocks and not on mediocre stocks. The stocks that are gaining have good fundamentals and they are trading within the fair value. At that, they can justify their price. We still have penny stocks that are trading at N0.20 and they did not gain. The investors are wiser and that show you the impact of Institutional Investors and Foreign Investors who have selected stocks to go for; and it is obvious that they go for stocks with good fundamentals and that brought about the rising of the market.
Stocks with sound fundamentals can justify their prices. For stocks with good fundamentals, the sky is their limit. Most of the stocks are trading within their fair value and there is no cause for alarm.
The beauty of the current bull is that the stocks that can justify their prices are moving while the mediocre stocks for now are still down.
The Chief Dealer of Global View Capital Limited, Aruna Kebira, pointed out that the current bullish trend is expected as long as smart money is still coming into the market. According to him: “all the monies from the money market are looking for alternatives and the only place to go to is the capital market. As far as I’m concerned, the unprecedented growth in the market was expected.
Should we expect sharp decline as we are seen this sharp rise?
There must be profit taking. You can’t run away from that. As the market is rising, people will be taking their profit. It will get to a level that it will climax. We have seen the index at over 35,000 points; by the time it gets to 40,000 points, the market gets to rest. The highest I have seen in the market is 55,000 around 2004/2005. What we are seeing here has happened in 2015, so there will be profit taking along the line. There is a level the price can go even when people wants to buy and it will no longer be bullish. Some people are bullish now; they want to buy at the highest price with the hope that the price will rise tomorrow. It get to a time that people will no longer be bullish; they want to buy but at a lower rate.
Neimeth International Pharmaceuticals grew its share price by 330.65% to N2.67 from N0.62 year to date. The current bull extends to other firms in the pharmaceutical space including Fidson, May& Baker, Glaxosmith. A new 52 weeks high of N2.67 was achieved by Neimeth at the close of trade on Friday.
It is obvious that pharmaceutical companies are benefiting from government intervention. Covid-19 vaccine is out and when the government will bring it in they will have to go through the pharmaceutical firms.
On the technical chart, a strong BUY recommendation is indicated for Neimeth International Pharmaceuticals.
BUA Cement is one of the heavy weight stocks on NSE with market capitalization of N1.2 trillion. It emerged after a merger of BUA Group’s two Cement subsidiaries – CCNN and Obu Cement. The share price of BUA Cement appreciated by 187.29% to N52 from N18.10 at the beginning of the year. The share price of BUA Cement in the last 52 weeks has touched a high of N56 and a low of N27.65. It is currently trading 7.14% away from its 52 weeks high of N56, hence it has uptrend potential. On the technical chart a strong BUY is recommended for BUA Cement.
Airtel Africa has a market capitalization of N1.84 trillion on NSE and of course it’s among the four heavy weight stocks that determines the direction of the market. Year to date, the share price of Airtel appreciated by 63.90% to N489.9 from N298.9. Airtel on Friday achieved a new 52 weeks high of N489.9. On the technical chart, a strong BUY recommendation is indicated for Airtel Africa.
Lafarge (WAPCO) is currently trading at N24.1. Year to date, the share price appreciated by 57.52% from N15.30. Two years back, WAPCO has traded at N52 and that shows that it has not reached anywhere. A strong BUY recommendation is indicated for WAPCO on the technical chart.
MTN Nigeria is the second most capitalized stock on NSE with a market capitalization of N3.15 trillion. Year to date, the share price of MTN has grown by 47.62% to N155 from N105 at the beginning of the year. In the past 52 weeks, the share price of the telco giant has touched a high of N162 and a low of N90. It is currently trading at 4.32% away from its year high of N162 which suggest an uptrend potential of 4.32%. On the technical chart, Relative Strength Index (RSI) and STOCHASTIC both indicated a SELL signal for MTN. On the other hand Williams %R indicated that the stock is oversold while MACD indicated a BUY signal for MTN.
Year to date, the share price of Zenith Bank has grown by 45.97% to N27.15 from N18.60.
With the earnings per share (EPS) of N6.65, Zenith bank has a low P.E ratio of 4.08x. This suggest that Zenith Bank is considered cheap at the current price and has further growth potential. On the technical chart, a strong BUY is recommended for Zenith Bank.
Dangote Cement has the highest capitalization on NSE with a market capitalization of N3.41 trillion. Year to date, the share price of the manufacturing giant 40.85% to N200 from N142. Dangote Cement is just 0.94% away from its 52 weeks high of N201.90. At that, there is no doubt that Dangote Cement will surpass its current price going forward.
On the technical chart, a strong BUY is recommended for Dangote Cement.
FIRST BANK OF NIGERIA HOLDINGS
The share price of the big elephant has performed over the years and the stock is very resilient. Year to date, the share price of the big elephant grew by 34.15% to N8.25 from N6.15. The effort the management of the bank have put into cleaning their book of non-performing loan is very credible.
With earnings per share of N2.05, a low P.E ratio of 4.02 suggest that the share price of FBNH is cheap at the current price.
On the technical chart, a strong BUY is recommended for FBN Holdings.
Year to date, the share price of United Bank for Africa has grown by 28.67% to N9.20 from 7.15. In the past 52 weeks, the share price of UBA has touched a high of N9.80 and a low of 4.4. It is trading 6.12% away from its year high of N9.8, hence UBA has uptrend potential. On the technical chart, a buy recommendation is indicated for UBA.
GUARANTY TRUST BANK
Guaranty Trust Bank is currently trading at N36.40 which represent a growth of 22.56% year to date from N29.7. The financial giant on Thursday touched N38.2, which is very close to its 52 weeks high of N38.45 but eventually closed at N36.40 on Friday. On the technical chart, a strong BUY is recommended for Guaranty Trust Bank.
Over the past 26 years, Access Bank has evolved from an obscure Nigerian Bank into a world-class African financial institution. Herbert Wigwe’s name is a household name as far as banking is concerned. He is taught to be intelligent and he is a good manager.
The share price of Access Bank on Friday closed at N9.15 which represent a decline of 8.50% year to date.
In the past 52 weeks, the share price of the bank has touched a high of N12 and a low of 5.30. Relative to the current share price of N9.15, Access Bank is trading 23.75% away from its year high of N12. At that Access Bank has an uptrend potential.
On the technical chart, MACD indicates a BUY recommendation for Access Bank.