- Equity market currently offers best Return on Investment compared to money market
- Stocks to watch
Sterling performance by listed companies on the Nigerian Exchange in their Q3 2021 results triggered positive vibrations in the market. At that, the share prices of many stocks grew and some established new 52 weeks high.
As expected, profit taking by investors brought down the share prices of most stocks last week, creating another entry opportunity for discerning investors. Week to date, the market returned -0.06%. Year to date the equity market has returned 4.33%.
Could the party be over? Has the market finished rewarding these fantastic Q3 earnings? What are the possibilities for the market for November and the year end?
Commenting on the market performance, the MD/CEO of APT Securities and Funds Limited, Mallam Garba Kurfi stated thus:
“The reason the market was down last week was due to profit taking. About three-quarter of all the companies that released their results to the market did well. Some of them have gained substantially and people are taking profit. For Instance NGX Group went has far as N25.58; then people started taking profit, it closed on Friday at N17.75. Fidson Healthcare grew to over N7, profit taking has brought it down to N6.54.
The decline of 0.06% is nothing to worry about, it is simply occasioned by profit taking. Generally, the Q3 2021 results released to the market really surprised the market has most of them have done very well.
I see more participation in the equity market. If you look at it critically, why should you invest in the money market where your investment will give you a negative return? Today, bond and money market are offering between 13% to 14% interest; compared to inflation which is above 16%. Nobody wants to invest and earn a negative return. When your return is below inflation, you are investing with a negative return. So the only alternative is the equity market. With the equity market, you can gain 20% within a short period.
For instance First Bank, traded N7.50 early September, now it is N11. From N7.50 to N11 is almost 50% gain. Lafarge Africa (WAPCO) moved from N23 to as high as N28.8; now it’s trading at N25.5. People are moving into the equity market in order to avoid negative return currently in the money market when compared with inflation figures. We expect more rise in stock prices in November.”
STOCKS TO WATCH
Fundamentally sound stocks should always be investors’ consideration for profitable investment. To mention a few among many others, the following stocks are worth watching:
ACCESS BANK
Access Bank achieved year on year growth in its top line and bottom line figures for the nine months period ended 30 September 2021.
The financial giant achieved Gross Earnings of N693.373 billion for the nine period, up by 16.97% from N592.787 billion achieved the previous year. Profit after tax grew year on year by 19.15% to N121.89 billion from N102.3 billion reported in Q3 2020. Access Bank achieved a profit margin of 17.58% for the nine months period.
Earnings per share of the Bank for the nine months period grew to N3.43 from the EPS of N2.88 achieved in Q3 2021. At the share price of N9.50, the P.E ratio of Access Bank stands 2.77x with earnings yield of 36.10%.
With the Book Value of N22.49, relative to the current share price of N9.50, Access Bank is considered under-priced with great uptrend potential.
FIRST BANK OF NIGERIA HOLDINGS
First Bank of Nigeria Holdings notified the NGX that they will release their result by the end of November. The Big Elephant is currently very attractive as all eyes are on it as institutional investors and High net worth individuals are acquiring it. Last week it traded as low as N10, but eventually closed the week at N11.10.
FBNH has a Book Value of N21.51, relative to its current share price of N11.10, FBNH is considered very cheap with growth prospect embedded in it.
LAFARGE AFRICA (WAPCO)
Lafarge Africa Plc (WAPCO) declared an interim dividend of N1 to its shareholders for the period ended 30 September 2021. The Cement manufacturer achieved year on year growth in its top line and bottom line figures for the period under review.
A turnover of N219.198 billion was reported for the nine months period, up by 21.86% from N179.877 billion reported the previous year. Profit after tax grew year on year by 43.26% to N40.395 billion from N28.196 billion declared in Q3 2020. Earnings per share of the group increased to N2.51 from the EPS of N1.75 declared in Q3 2020. At the current share price of N25.5, the PE. Ratio of Lafarge Africa stands at 10.16x with earnings yield of 9.84%.
A position in Lafarge Africa (WAPCO) has an uptrend potential of 19.05% relative to its year high of N31.
UBA
United Bank for Africa reported an impressive Q3 results with growth in its top line and bottom line figures.
Gross Earnings of N489.192 billion was achieved for the nine months period, up by 7.83% from N453.673 billion recorded the previous year.
Profit after tax grew year on year by 35.61% to N104.597 billion from N77.132 billion reported in Q3 2021. Earnings per share of UBA for the period under review stands at N3.06, up by 35.61% from the EPS of N2.26 achieved the previous year. At the share price of N8.45, the PE ratio of UBA stands at 2.76x with earnings yield of 36.21%.
With the Book Value of N23.34, relative to its current share price of N8.45, UBA is considered very cheap with uptrend potential.
FIDSON HEALTHCARE
Fidson Healthcare published a fantastic Q3 results with significant growth in its turnover and profit after tax. A turnover of N21.753 billion was reported for the nine months period, up by 59.39% from N13.647 billion reported in Q3 2020. Profit after tax grew by 138.09% to N2.235 billion from N976 million reported the previous year.
Earnings per share of the company grew by 138.09% to N1.11 from the EPS of 47 kobo achieved the previous year. At the share price of N6.54, the PE ratio of Fidson Healthcare stands at 5.89x with earnings yield of 16.97%.