Outlook: Market to sustain positive trajectory in August

  • Impressive Q2 earnings and interim dividend expectation to drive growth
  • Stocks to Watch

The stock market in the month of July closed on a positive note as the All Share Index and Market Capitalisation returned 1.69% and 1.64% respectively.

The growth was largely driven by the impressive Q2 earnings released to the market. Most listed companies in the last two weeks of July released their results to the market. It is understandable that the rush and the bombarding of the market with results, most especially towards the last 3 days of July was in order to avoid regulatory sanctions. Except for audited reports, most especially banks that requires CBN’s approval, majority of the half year reports have been published. Audited reports of banks should hit the market at least in the second week of August. 

Commenting on the market performance, the MD/CEO of Global View Capital Limited, Aruna Kebira asserted that the positive vibration in the market is due to the quality of Q2 earnings released so far.

“There was expectation of Q2 results which has actually not disappointed. More so, the Monetary Policy Committee of CBN retained key lending rates which was expected anyway.  If not for the recent shock that CBN banned forex sales to Bureau de Change, the market would have gained throughout last week. I understand that they are retuning their deposit to them which means that they are returning their licenses”.

The quality of the results make the market to gain on Friday to reverse the losses of Wednesday and Thursday.

To a very large extent, the positive vibration in the market is because of the because of the expectation of Q2 results.

“We can see what Total Plc did in tits Q2 earnings and its contribution to the growth of the All Share Index. We saw what MTN and Dangote Cement released fantastic result to the market. At that, what is largely responsible for the good performance in July is the Q2 results”.

“The results released so far are very solid. Champion Breweries result was fantastic. Presco and Okomu had excellent performance. Okomu moved its earnings per share (EPS) from N4.20 to N10; that was massive”.

Outlook for August

Based on the quality of results released so far, we are going to see a better market this week and in the month of August.

Qualification dates for most of the interim dividends are in August. So there will be a lot of people clamouring to participate in the interim dividend. So we are definitely going to see a better market in August than last month.

Stocks to Watch

  • Investors should look at the results released so far and pitch their tents in stocks with quality earnings.
  • Stocks in the Agricultural sector should be on the watch list which are Okomu and Presco.
  • Presco has just acquired Okitipupa Oil Palm Plc. The market is already rewarding Presco for its impressive Q2 earnings.
  • Okomu: The market has not even started with Okomu on the strength of its impressive Q2 result. There is every tendency of 20% growth in the price of Okomu.
  • Champions Breweries: Their Q2 result was fantastic, though the earnings yield is low. The stock is worth considering at N2.25. Remember that it traded over N4 before.
  • Total Plc’s share price moved significantly from N145 to N203.2 in July based on the impressive Q2 results and also declared interim dividend of N4. Total is among the top 5 gainers for the month of July with 40.14% growth.
  • Access Bank is expected to pay interim dividend of at least 25 kobo. Their Q2 result is expected to surpass their previous performance.
  • Zenith Bank: It is very sure that Zenith Bank with pay at least 30 kobo interim dividend. Their Q2 result is projected to be good. A position is Zenith Bank gives opportunity to partake in the dividend and also enjoy price appreciation.
  • GTCO has announced approval of results and interim dividend, they are only waiting for approval by CBN. An interim dividend of 30 kobo, is expected from Guaranty Trust Holding Company. Though their Q2 result will largely reflect the performance of their banking subsidiary, their Q2 earnings is expected to grow.
  • UBA is expected to pay at least an interim dividend of 17 kobo that was paid last year. Their Q2 earnings expected to be good as they did very well in their Q1 result.

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