Ruth Ibikunle
The stock market last week closed on a positive note with 0.33% growth. Year to date, the market has returned 31% with the All Share Index and Market Capitalisation at 67,136.58 points and N36.885% respectively.
In a chat with the MD/CEO of Global View Capital Limited, Mr Aruna Kebira, on the market outlook for the new week.
The following were discussed,
• The market closed last week on a positive note with 0.33% growth. What is the outlook for the new week?
Last week’s market was fraught with news and information that serves as the required stimuli both exogenously and endogenously to impact the market positively.
First, the quality of the Q3 earnings releases acted as a good signal of what to expect from the other listed companies and the declaration of interim dividends by quoted companies, which is fast becoming a fad and a norm in the market added the needed fervor.
The affirmation of the Supreme Court judgment over the challenge of the opposing parties to the incumbent president’s election victory was another good news that filtered into the market during the course of last week.
It is believed that no matter the rough course the present government is taking, there is no disruption perceived at the end of the day and that the government will run its full four-year course.
• How would you rate the performance of Q3 2023 earnings results released so far?
The quality of the earnings released into the market last week beat the market’s expectations. To cap it all, some came with interim dividends.
The most attractive part of them is that even at their current prices, which most market operators are considering high, the earnings yields of some stocks are still in excess of 40%, signifying that there are still upward potentials for a further price increase.
• How attractive are the following stocks based on their Q3 2023 results: GTCO, Access Holdings, Nigerian Breweries, Dangote Cement, Presco, Unilever, FBNH, Nestle, UAC
GTCO grew its EPS from 455k to N1,298k representing a growth of 185.27%. Even at the seemingly perceived current high price of N35.35, its P/E Ratio and earnings yield are 2.7x and 36%
Access on the other hand grew its EPS by 78.8% from 387k to 692k and at the current price of N16.85, its earnings yield and P/E ratio are 41.1% and 2.4x respectively.
Nigerian Brewery which is a net borrower from the bank, especially loan facilities dominated in foreign currencies was hit by the current floating of the Naira and the unification of exchange rate which has made the dollar against the Naira soar above N1000.
Consequently, their EPS suffered a setback of -116k in 2023 as against 182k in 2022 representing -163.7%. The only growth they recorded in their metrics was in turnover which was occasioned by their recent increase in the prices of their products.
Dangote Cement grew its EPS by 29.5% from 1,241k to 1,608k at the current price of N300.10 its P/E ratio is 18.7X while its earnings yield is 5.4%. This is very much of a high-cap stock
Presco grew its EPS from 1,588k to 2,347k which is 47.8% with its current price of N181.00 its P/E ratio and earnings yields are 7.7x and 13% respectively.
Presco went ahead and declared a N2.00 interim dividend.
Nestle on the other hand as a manufacturer and also a net borrower took the hit of the current currency revaluation and the resultant finance cost plunged its earnings into the negative zone as it declared a negative EPS of 5,433k as against the previous 5,050 representing -207%.
An increase in finance cost from N9.070b to N156.528 was what wreaked havoc on their financial statement for the quarter under consideration. That represents a whopping 1,625 increase in their finance cost.
The big elephant is slowly taking its shape back as in its Q22023 it grew its EPS from 251k to 654k a growth of 160%. Currently trading at N16.85k its P/E ratio and earnings yield are 2.6x and 38.8% respectively.
• What is driving the growth in Chams Plc and Geregu?
Chams and Geregu are just recovering from the pullback their prices faced in recent times. Recall that Cham’s 52-week high is N2.11 and it traded at N1.49 on October 20. Significantly it is just the run of play of the market that is responsible for Cham’s movement.
On the other hand, Geregu’s 52-week high is N380 and it traded at N315 on October 20, so we might just be seeing its journey back to the high price.
• VFD dropped in price by 18.98% to close the week at N218.2 from N269.3, the initial listing price. How attractive is the stock?
VFD group’s first and only earnings released to the exchange after its listing showed a lackluster performance where the EPS of the company slowed down from 2,820k to a paltry 359k a decline of 87.2%.
The market is a discounter, and does not tolerate this type of outcome and would move to appropriately reprice any stock that falls into this category.
• What are the stocks to watch?
Access Corp, GTCO, Unilever, Presco, JapaulGold and Nascon.