Wole Olajide
The Nigerian stock market started the year 2024 on a bullish note with several stocks hitting new 52 weeks high. Every sector including Banking, Oil & Gas, Insurance and Manufacturing sector benefited significantly from the rally. It is an established fact that during bullish season, even bad stocks will also rally.
As at February 16, 2024, the All Share Index hit an all-time high of 105,722.78 points. However, prices of stocks started dropping, occasioned by profit taking by smart investors. The drop in prices of these stocks has obviously created new entry opportunities for discerning investors.
Inflation rate at 29.9% and rising dollar rate versus stock market:
The fact that the supply side of the economy is deficient, and the dollar rate is trending up, rising inflation is inevitable. Every associated cost in the value chain has been shifted to the final consumer in the form of a higher price.
Despite this, investors in the last rally got returns far above the inflation rate. Some stocks returned over 50% within 2 months. For instance Access Holdings Plc gained 67.6% from N17.9 to N30 in less than 3 months (between November 1, 2023 and January 19, 2024).
We can therefore establish that the stock market is a safe haven for investors even amidst rising inflation.
SELECTED STOCKS WITH UPTREND POTENTIALS
The recent profit taking action by investors has brought down the prices of a number of stocks, creating new entry opportunities for discerning investors. Using the Premium Board on NGX as a case study, the following stocks can be considered for strategic positioning.
ACCESS HOLDINGS
The share price of Access Holdings is currently trading at N20.15. It has touched a high of N30.7 and a low of N8.4 in the last 52 weeks. It is trading 52.36% away from its 52 weeks high of N30.70. This implies that Access Holdings has an uptrend potential of 52.36% relative to its year high. It can still bounce back to touch N30.
The Company is yet to release its Audited Reports for FY 2023.
Based on its Q3 2023 financial statement, the Book Value of Access Holdings Plc stands at N46.15. Compared to the current market of N20.15, the share price of Access is underpriced, hence loaded with uptrend potential.
FBN HOLDINGS
The new leadership structure in FBNH has charted a new course in the pricing of the stock. The share price of FBNH has not look backward since Femi Otedola became the Board Chairman.
The Big Elephant is currently trading at N32.4 with a 52 weeks high of N35 and a low of N10.30.
Looking at its Q4 2023 result, the P/E ratio of 3.75x and Earnings Yield of 26.65% makes FBNH attractive.
With the Book Value of N47.35 relative to its current share price, FBNH is underpriced. A position in FBNH is loaded with growth potentials.
ZENITH BANK
Zenith Bank is currently trading at N34 and has touched a year high of N47.35 and a low of N21.70.
It is trading 28.19% away from its 52 weeks high of N47.35, implying an uptrend potential of about 28% for Zenith Bank.
The Bank is yet to release its Audited Report for FY 2023. Based on the Bank’s Q3 2023, its Book Value stands at N61.15. Zenith Bank at N34 is underpriced relative to its Book Value of N61.15.
UBA
United Bank for Africa is currently trading at N21.9 with a 52 weeks high of N34 and a low of N7.7. It is trading 35.59% away from its 52 weeks high of N34, which implies there is growth potential of about 36% for UBA relative to its year high.
The Book value of UBA stands at N51.99. This suggests the current price of the stock at N21.9 is grossly undervalued relative to its Book Value. A position is UBA is embedded with significant price appreciation.
MTN
MTN Nigeria Communication is currently trading at N221.4. In the past 52 weeks, the share price of the Telecom giant has touched a high of N319.8 and a low of N175.
It is trading 44.44% away from its 52 weeks high of N319.8. This suggests that there is growth potential of about 44% for MTN, relative to its 52 weeks high.
Though, the Company declared a loss after tax of N137 billion for FY 2023, which is largely responsible for the recent sell-off, this current price is another opportunity for discerning investors to enter at a low price.
LAFARGE AFRICA (WAPCO)
The share price of Lafarge Africa is currently trading at N34. In the past 52 weeks, the price has touched a high of N51 and a low of N23.
It is trading 33.33% away from its 52 weeks high. This implies that there is a growth potential of about 33% for WAPCO relative to its 52 weeks high.
Though there is a mild decline in the Company’s bottom line figure by 4.67% year on year, the Company still declared a final dividend of N1.90 to shareholders for FY 2023; though lower than the previous year’s dividend by 10 kobo (N2 dividend was declared in FY 2022).
Lafarge Africa is more attractive when compared to other cement manufacturing stocks on NGX in terms of earnings yield.