Ruth Ibikunle
The Nigerian stock market last week closed on a bullish note with 1.02% growth, week on week. Year to date, the market has returned 39.50% with the All-Share Index and Market Capitalisation at 143,584.04 points and N91.135 trillion respectively.
In a stock market review with the MD/CEO of GlobalView Capital Limited, Aruna Kebira, the following were discussed:
Excerpts:
• The stock market last week closed on a positive note with 1.02% growth. What is the outlook for the new week?
The positive close of the Nigerian stock market with a 1.02% growth last week is typically driven by a combination of factors. The general and consistent drivers of positive sentiment in the Nigerian Exchange (NGX) include:
Key General Factors Driving Nigerian Stock Market Growth
Strong Corporate Earnings and Performance: Positive financial results or the anticipation of strong earnings from major companies (especially in the banking, industrial goods, and consumer goods sectors) often spur investor interest and drive-up stock prices.
Favorable Government Policies and Economic Reforms: Ongoing macroeconomic reforms, such as the liberalization of the foreign exchange market and other policy adjustments by the government and the Central Bank of Nigeria (CBN), are often credited with restoring investor confidence, both local and foreign.
The market tends to react positively to policies that are perceived to improve the operating environment for businesses.
Inflationary Hedge: In a high-inflation environment, equities can become an attractive hedge, as investors seek assets whose returns can potentially outpace inflation, leading to increased demand for stocks.
Investor Sentiment and Confidence: A general increase in investor confidence, often fueled by the reforms and corporate performance mentioned above, creates bullish momentum and higher demand for stocks.
Increased Foreign and Domestic Investment: An uptick in foreign portfolio investment (FPI) and sustained strong domestic investor activity (which currently dominates the market) provides liquidity and drives the market higher. Improved sentiment about the foreign exchange market can encourage foreign inflows.
Sector-Specific Momentum: Often, the positive close is concentrated in a few key sectors. For instance, a rally in major banking, insurance, or industrial goods stocks (the “market movers” or the SWOOT, e.g., Aradel) can heavily influence the overall index due to their large market capitalization.
Exchange Rate Dynamics (Naira Depreciation): For companies that earn a significant portion of their revenue in foreign currency (like many in the oil & gas and industrial goods sectors), a weaker Naira can translate into higher Naira-denominated profits, making their stocks more attractive to investors.
The equities market is likely to maintain a cautiously bullish tone for the new week, supported by fundamental factors, but tempered by the potential for profit-taking after the previous week’s positive close.
The market has been on a generally positive trajectory, and several factors are expected to impact its performance.
The looming Q3 earnings season is set to be a major driver. Analysts anticipate stronger results, particularly from the banking and consumer goods sectors, which could sustain the positive momentum.
Good earnings releases will likely lead to further appreciation in the stock prices of the respective companies.
The market continues to be supported by attractive valuations in some fundamentally strong stocks, and improving FX liquidity and firmer oil prices are expected to provide additional buffers for investor sentiment.
However, analysts caution that weak market breadth (fewer stocks advancing versus declining) and persistent profit-taking may keep sentiment selective. This means investors will likely favor fundamentally sound stocks.
Financial Services (Banks): This sector has been a significant driver of volume and value. A sustained upturn in the banking index, after a recent negative or flat performance, could quickly restore broader market risk appetite.
Dividend Plays (AFR Div Yield): If the African Finance Dividend Yield Index remains strong, it suggests a defensive posture by “smart money” moving towards dividend-quality stocks.
Consumer Goods & Insurance: These sectors have been strong year-to-date performers. Watch for signs of “buy-the-dip” activity (rising value on up-days) if prices ease slightly.
Investor Strategy Considerations:
- Selective Bargain Hunting: Given the expectation of profit-taking, opportunities may arise to enter fundamentally strong stocks at lower prices.
- Focus on Fundamentals: The market will likely remain selective, so investors are advised to focus on companies with strong corporate performance and solid financial health.
• What is driving the current growth in Eterna, PZ, Aradel, Fidelity Bank, and UACN?
The current growth for Eterna Plc, PZ Cussons Nigeria Plc, Aradel Holdings Plc, Fidelity Bank Plc, and UACN Plc is being driven by a combination of strategic internal initiatives, operational efficiencies, and, in several cases, a favorable shift or improved management of Nigeria’s macroeconomic pressures, particularly foreign exchange volatility.
ETERNA PLC
Eterna’s growth is driven by its strategic turnaround, market expansion, and operational efficiency in the deregulated downstream energy market.
Key Growth and Drivers
Market Expansion & Price Adjustment: The increased price of petroleum products post-deregulation has significantly boosted revenue. The company is actively working to expand its retail footprint (e.g., 15% increase in 2023) and commercial fuel sales.
Operational Efficiency & Cost Control: Supply chain optimization and operational efficiencies have driven a fourfold increase in operating profit, marking a return to profitability.
Diversified Business Model: Leveraging its presence across retail marketing, aviation fueling (Aviation Turbine Kerosene), lubricants, and LPG strengthens resilience and unlocks new revenue streams (e.g., plans to invest in LPG infrastructure).
PZ CUSSONS NIGERIA PLC (Consumer Goods)
PZ Cussons’ return to profitability and revenue growth is primarily a turnaround story driven by the easing of extreme foreign exchange losses and a focus on core brands.
Key Growth and Drivers
Dramatic Reduction in FX Losses: The single biggest factor for the return to profit. A more stable Naira (less abrupt devaluation) and improved FX management (e.g., greater use of deliverable forwards) led to an over 95% reduction in FX-related losses, reversing a massive operating loss.
Strong Top-Line Growth: 40% surge in revenue (to ₦212.6 billion in 2025) driven by pricing adjustments, resilient consumer demand for its core brands (personal care, home care, electrical appliances), and improved sales volumes.
Operational & Financial Discipline: Strategic cost discipline, improved collections (lower impairment on trade receivables), and a focus on competitive brand activation and innovation.
Segment Strength: Strong growth in segments like Electrical Appliances and sustained performance in Home and Personal Care products (Carex, Premier, Morning Fresh).
ARADEL HOLDINGS PLC (Integrated Energy/Oil & Gas)
Aradel’s revenue and profit growth are fundamentally linked to increased hydrocarbon production and improved logistics for crude evacuation.
Key Growth and Drivers
Increased Production Volumes: Significantly higher hydrocarbon production driven by volumes from newly drilled wells, the successful re-entry of wells (e.g., Well 2ST in the Omerelu Field), and overall higher crude oil lifting.
Alternative Crude Evacuation (ACE) System: The successful implementation and expansion of the ACE system have significantly reduced crude transmission losses (from 4.0% to c. 1.0%), boosting delivered export volumes and revenue.
Refinery Operations: Increased sales volumes from its refinery operations also contributed to the top-line growth, aligning with its integrated energy model.
Strategic Acquisition: The completion of the Renaissance Africa Energy Holdings acquisition (which includes the Shell Petroleum Development Company of Nigeria – SPDC) is a major driver of asset growth and future production potential.
FIDELITY BANK PLC (Banking/Financial Services)
Fidelity Bank’s record-breaking growth is propelled by its ability to capitalize on the high-yield monetary environment and its successful expansion strategy.
Key Growth and Drivers
High-Interest Rate Environment: The Central Bank of Nigeria’s (CBN) hawkish campaign (high interest rates) has boosted the bank’s Net Interest Income (NII), which accounts for a significant portion of its operating income. This is due to higher returns on both lending and investment securities.
Asset and Deposit Growth: Impressive growth in Gross Earnings (up 87.7% in FY 2024), driven by a surge in interest and similar income. Deposits and Advances also grew significantly, showing strong market trust and lending capacity.
Fee and Commission Income: Strong growth in Net Fee and Commission Income (e.g., +90.9%), moving the bank toward more stable sources of Non-Interest Revenue (NIR) away from volatile FX gains.
Successful Capital Raise: An oversubscribed capital raise (Public Offer and Rights Issue) is a testament to investor confidence and will strengthen the bank’s capital adequacy ratio (CAR) for future expansion.
UACN PLC (Conglomerate/Consumer Goods)
UACN’s performance reflects a disciplined focus on core consumer segments, margin expansion, and operational efficiency across its diverse portfolio.
Key Growth and Drivers
Gross Margin Expansion: A disciplined pricing strategy and enhanced cost management are expanding gross margins, which is a major driver of the surge in operating and underlying profit.
Strength in Packaged Food & Beverages: This segment is the primary engine of growth, driven by robust consumer demand for snacks and dairy, combined with wider distribution and improved production efficiency.
Operational Efficiency: Higher production volumes in key segments and enhanced operational efficiencies across manufacturing plants are improving operating leverage and productivity gains.
Retail Network Growth: Expansion in its core segments, notably the Paints segment, which has been boosted by retail network growth and the addition of new points of presence nationwide.
• Ellah Lakes is acquiring Agro-Allied Resources & Processing Nigeria Limited. What are the possibilities in Ellah Lakes?
The acquisition of Agro-Allied Resources & Processing Nigeria Limited (ARPN) by Ellah Lakes Plc opens up significant possibilities centered on scale, vertical integration, diversification, and accelerated earnings growth.
The core possibilities for Ellah Lakes are:
1. Massive Scale and Production Footprint Expansion
The acquisition is a transformational move that is expected to more than double Ellah Lakes’ production footprint.
- Expanded Landbank: Ellah Lakes will acquire 11,783 hectares of cultivated land, plus an additional 10,393 hectares of uncultivated land for future use.
- Increased Oil Palm Assets: The deal includes 6,280 hectares of oil palm plantations, with a favorable age profile—60% are already entering peak productivity (over four years old), ensuring immediate benefits and sustained output.
- Diversified Cultivation: The acquired land also includes 2,093 hectares of cassava plantations, which immediately adds scale to Ellah Lakes’ existing cassava operations.
2. Enhanced Vertical Integration and Processing
The consolidation of ARPN’s assets aligns perfectly with Ellah Lakes’ strategy of having a vertically integrated business model, which spans cultivation, mid-stream processing, and downstream market access.
- Optimized Supply Chain: Integrating a larger plantation base into its operations will allow Ellah Lakes to fully utilize its existing Crude Palm Oil (CPO) mill and improve overall operational efficiencies.
- New Value-Added Products: Ellah Lakes has a planned expansion for 2026, which includes the installation of a Palm Kernel Oil (PKO) mill. This will enable the company to process palm kernels in-house, monetizing the kernel streams and diversifying its product mix to include PKO and palm kernel cake, which are higher-margin products.
3. New Diversification and Long-Term Growth Initiatives
The acquisition provides the foundation for broader diversification beyond oil palm and cassava, helping to hedge against single-commodity risks.
- Crop Diversification: The existing cassava plantations provide an immediate second major crop, which can be further processed into high-quality cassava flour (HQCF) and other derivatives.
- Strategic Entry into Animal Husbandry: As part of the post-acquisition expansion plan for 2026, Ellah Lakes plans to allocate 100 hectares for livestock activities. This will introduce a new revenue stream, help absorb fixed costs, and provide organic fertilizer for the plantations, creating an integrated estate model.
4. Financial and Market Position Improvements
The scale and efficiency gains are explicitly targeted to boost the company’s financial performance and market standing.
- Accelerated Earnings Growth: The immediate consolidation of ARPN’s productive assets is expected to accelerate earnings growth and deliver immediate scale and financial benefits.
- National Champion Status: The company’s leadership stated that the acquisition is a defining step that will position Ellah Lakes as a national champion in agro-industrial production and strengthen its role in Nigeria’s food security objectives.
- Shareholder Value: The company has communicated a commitment to a shareholder-return pathway, noting that once operations become cash-flow positive, dividend distribution will become a top priority
• Is UACN a good buy at N73.7
The approval by the Federal Competition and Consumer Protection Commission (FCCPC) for UAC of Nigeria PLC (UACN) to complete the acquisition of CHI Limited (makers of Chivita and Hollandia) from The Coca-Cola Company is a significant development with wide-ranging implications for the company, the stock market, and the Nigerian Fast-Moving Consumer Goods (FMCG) sector.
The acquisition is a major strategic milestone for UACN. It instantly gives the company control over market-leading brands in the high-growth juice and value-added dairy segments (Chivita and Hollandia), significantly expanding UACN’s footprint in the FMCG sector.
UACN, as a domestic manufacturing and distribution powerhouse, can integrate CHI Limited into its existing structure. This will likely lead to synergies in manufacturing, distribution networks, and logistics, potentially reducing costs and improving market reach.
CHI Limited’s strong portfolio and brand equity are expected to provide a substantial boost to UACN’s overall revenue and profitability, which is a major motivation for the acquisition.
The news of the acquisition agreement previously caused a significant positive surge in UACN’s share price (by over 37% shortly after the announcement), and the completion with FCCPC approval cements this valuation gain and solidifies investor confidence in UACN’s growth strategy.
The deal reinforces UACN’s status as a dominant local entity, demonstrating the capacity of indigenous companies to acquire and scale up major brands in Nigeria.
Based on recent analyst forecasts and valuation metrics of the UACN price, the recommendation is mixed, but leans towards being fairly priced or having slight upside potential at the N73.70 level.
The Price-to-Earnings (P/E) Ratio of UACN is approx. 15.7x, which is higher than its peer average of 9.4x and the sector average of 12.2x, which suggests it is relatively expensive compared to its industry.
The Recent Performance and Outlook for UACN has shown strong recent growth and positive momentum:
Price Performance: The stock has experienced significant increases over the last year, with a 1-year change of over 219% and a YTD change of over 123%.
Earnings: The company reported a significant increase in underlying operating profit, which was up 780% in FY 2024.
Revenue growth was also strong at 63% over the same period.
Business Strategy: Management is focused on growth across its key segments, including Animal Feeds & Edible Oils, and Paints, which are expected to underpin future earnings.
In conclusion, N73.70 is a price point that is close to the consensus average analyst target. The argument for buying rests on the expectation that UACN’s recent strong revenue and operating profit growth, combined with its strategic business focus, will continue to drive the stock towards the higher end of the analyst price targets up to N103.44. However, if the stock corrects to align with the average price target or its P/E ratio reverts to the sector mean, there is a risk of a short-term decline.
• What are the stocks to watch?
PZ, Aradel, Ellah Lakes, FCMB, Cadbury, AIICO, Mutual Benefit, Champion, Dangsugar, BUA Cement, and a host of others.