Short term volatility likely to persist amidst buy interest in undervalued blue-chip stocks

Ruth Ibikunle

Transactions on the floor of the Nigerian Exchange last week closed on a negative note, shedding 0.97% week on week. Year to date, the stock market has returned 49.74% with the All-Share Index and Market Capitalisation at 154,126.45 points and N97.829 trillion respectively.

In a stock market reveiew with Mr. Gilbert Ayoola, a seasoned capital market analyst, the following were discussed:

The stock market last week closed on a negative note, shedding 0.97% week on week. What is the outlook for the week?

The Nigerian stock market closed last week on a negative note, as the NGX All-Share Index (ASI) declined by 0.97% week-on-week, reflecting renewed selling pressure across key sectors. The downturn was largely driven by profit-taking in banking, consumer goods, and industrial stocks, as investors reacted to rising yields in the fixed-income market and lingering macroeconomic concerns, including inflationary pressures and foreign exchange volatility.

Market sentiment was broadly cautious, with many investors preferring short-term instruments amid uncertainty about monetary policy direction. Trading activity also softened, indicating a wait-and-see approach ahead of the next Central Bank policy signals.

This week, the market is expected to trade mixed with a bearish sentiment, as investors continue to rebalance portfolios between equities and fixed income. However, bargain hunting in fundamentally strong stocks may offer mild support, especially as improved Q3 corporate earnings spur renewed interest.

Overall, short-term volatility is likely to persist, but medium-term investors may find selective buying opportunities in undervalued blue-chip stocks.

How would you rate performance of earnings released in the course of last week?

Earnings released for Q3 2025 on the Nigerian Exchange painted a mixed but resilient corporate performance across key sectors. While overall market sentiment remained cautious, the fundamentals reflect moderate business recovery amid challenging macroeconomic conditions.

The banking sector largely sustained earnings growth, supported by higher interest income and effective cost management, though rising impairment charges and regulatory costs moderated profitability in some tier-one lenders. The consumer goods sector showed divergent results, leading manufacturing reported revenue expansion on price adjustments and stronger distribution, but high input costs and FX volatility pressured margins.

The industrial sector, particularly cement and building materials, recorded steady topline growth, yet energy and logistics costs limited bottom-line improvement.

In the oil and gas space, upstream players benefited from higher crude prices and improved production volumes, while downstream firms faced tight margins due to import cost pressures. The telecoms sector maintained stable performance, anchored by data revenue growth and digital service expansion.

Corporate results for Q3 2025 were better than market expectations in some bellwethers, suggesting operational resilience despite macro headwinds. However, the mixed earnings picture and persistent inflationary pressures kept investor sentiment restrained.

What is driving the growth in Julius Berger and Oando?

Some of the factors adduced to these company’s, growth and performance trajectory are:

For Julius Berger, as performance trajectory continues to strengthen, it reflects the company’s strategic positioning within Nigeria’s expanding infrastructure landscape. The nine months ended September 2025, the construction giant delivered robust top-line growth, with revenue climbing sharply to N540.8 billion from N405.0 billion in 2024, a clear testament to higher project execution, backlog expansion, and strong demand across key infrastructure segments.

Profitability metrics have also advanced in tandem. Profit After Tax (PAT) rose to N18.25 billion from N12.31 billion in the prior year, while pre-tax profit improved to N29.89 billion, underscoring both earnings resilience and ongoing cost optimisation efforts. This reflects management’s tighter operational discipline and focus on margin recovery despite a still-challenging macroeconomic environment.

The company’s growth is being propelled by a favourable infrastructure cycle, increased federal and sub-national capital spending, and a robust pipeline of civil engineering and building projects. Julius Berger’s strong asset base and execution capacity continue to anchor its market leadership and reinforce investor confidence in its long-term growth outlook.

For Oando’s remarkable growth, trajectory underscores the success of its ongoing transformation agenda, anchored on upstream expansion and operational efficiency. The company’s acquisition and seamless integration of NAOC’s assets have significantly bolstered its production base, translating into stronger performance metrics across the board.

Key drivers behind this growth include strategic asset scale-up, enhanced operational control, and disciplined cost optimisation pillars that have collectively improved production uptime to 82%. This operational uplift has fueled a 59% year-on-year surge in crude oil and gas output, averaging 38,121 barrels of oil equivalent per day (boepd) in Q3 2025. Such production resilience has positioned Oando as a revitalised upstream contender within Nigeria’s energy landscape.

Financially, the company’s turnaround is equally compelling. Oando reported a sharp increase in Income Tax Credit to N181.85 billion, underpinning robust earnings growth, with Earnings Per Share (EPS) soaring to N16.00 from N6.00 in the previous year, a clear indicator of renewed shareholder value creation.

At a market price of N48.05, Oando’s stock appears to be progressively pricing in the company’s strategic recovery and balance sheet de-risking efforts. The confluence of stronger asset performance, fiscal prudence, and a focused growth strategy suggests that Oando’s transformation drive is not only sustainable but also poised to deliver long-term value within Nigeria’s evolving energy sector.

Why are the following trending down: AXA Mansard, Cadbury and Chams?

The recent downtrend in AXA Mansard, Cadbury, and Chams reflects a mix of profit-taking activity and shifting investor sentiment following earlier market rallies. After a period of sustained gains, investors are locking in profits amid broader market consolidation and cautious positioning ahead of year-end adjustments.

AXA Mansard – Come under selling pressure due to weaker Q3 2025 earnings performance despite top-line growth. The insurer recorded a notable drop in both Profit Before Tax (PBT) and Profit After Tax (PAT), weighed by higher finance costs, which jumped to N1.03 billion from N889.8 million year-on-year, and elevated operating expenses of N8.29 billion. This erosion in earnings quality has dampened

investor confidence in the near term.

Cadbury – Maintained a relatively stable operational outlook and also saw its share price retreat as investors booked profits amid broader market volatility. The pullback appears more sentiment-driven than fundamentally weak, as traders recalibrate positions following recent gains in the consumer goods space.

Chams – Experienced a price correction following a strong run-up in previous weeks. The decline largely reflects short-term sentiment and profit-taking rather than structural weakness, as investors rotate into other sectors after substantial capital appreciation.

The trio’s decline is largely technical and sentiment-driven, illustrating a broader phase of portfolio rebalancing across the Nigerian equities market rather than a fundamental deterioration in their long-term prospects.

How attractive are the following banking stocks: Access, Zenith, GTCO, UBA, and First Holdco?

Access, Zenith, GTCO, UBA, and First HoldCo known as the “FUGAZ” have continue to anchor investor confidence in the equities market, offering a blend of earnings resilience, dividend strength, and long-term value creation. Despite macroeconomic headwinds, these institutions have demonstrated strong fundamentals, robust capital buffers, and adaptive business models that position them attractively for sustained growth.

Access – Stands out for its aggressive expansion and diversification strategy, both locally and across Africa. Its focus on digital banking and regional integration continues to unlock scale efficiency, though near-term profitability remains moderated by acquisition costs and integration expenses. The medium-term outlook is positive as synergies from its enlarged footprint begin to crystallise.

Zenith – Remains a benchmark for stability and consistent profitability. Its disciplined cost management, solid asset quality, and one of the strongest capital adequacy ratios in the sector underpin its status as a reliable dividend payer. The bank’s focus on digital transformation and treasury efficiency supports its defensive appeal amid interest rate volatility.

GTCO – Retains a premium valuation

Driven by superior return on equity, lean operations, and an evolving group structure that extends into payments, asset management, and pension businesses. While short-term earnings face compression from funding cost pressures, GTCO’s diversified income streams and innovation-led model reinforce its long-term growth trajectory.

UBA – leverages its Pan-African presence, with growing contributions from regional subsidiaries cushioning domestic macro risks. Its balance sheet strength, rising non-interest income, and expanding digital footprint support its competitive positioning as a transcontinental franchise with strong earnings momentum.

First HoldCo – Solid turnaround reflected in improved governance, stronger capital position, and revitalised profitability. The bank’s deep retail base, digital evolution, and enhanced risk management structure position it for sustained earnings growth and a re-rating potential over the medium term.

What are the stocks to watch?

Here are the stocks to keep a close eye watch on this week. They include MTN, Oando, Berger, NGXGROUP, Access, BUACEMENT, GTCO, Transcorp, UBA, and many others.