The Nigerian All Share Index closed relatively higher last week ending a two weeks period of losses that drove the exchange to a 19% year to date loss. Despite these gains many stocks (about 77) still remained at the bottom of the pack trading at their one year lows. Typically, stocks that trade at their one year lows are considered prospects for bargain buying as they potentially could have bottomed out and start to creep back up. Here are some of the stocks;
Seplat: The local oil giant has lost 18.5% last week in a slide that begun two weeks ago. The stock closed the week at N436 far from its year high of N720.5. The reason for the drop in price is not unconnected with the drop in global oil prices which is expected to affect the company’s bottom line one way or the other. The company’s recently released 9 months results showed a 62.6% drop in year on year earnings per share to N64 as revenue dropped leading to a slide in margins. Despite the threat of further decline in its profits come year-end, the current price of N436 appears undervalued and may just be the right time to buy.
Opinion – Buy
Computer Warehouse Group – The computer distributor hit a year low of N4.56 last week making it the third time it is recording a year low this year. The company is yet to release its 9 Months results and posted a 47% drop in earnings per share in its first half of the year amidst declining sales and margins. This has impacted negatively on the share price as investors project more declines come end of the year. If the company post 30 kobo per share at the end of the year (which is triple its half-year EPS) this share price will still be a high P/E of 15x.
Opinion – Don’t buy
Courteville Business Solutions – Courteville remained at 50kobo which it had dropped to as at November 7 2014. Investors dumped the stock amidst sell offs that took place early November and do not seem interested in a return even though it at times attracted a bid of 52 kobo during the week. Courteville posted a 39% rise in earnings per share to 10kobo which at this stage is a 5x Price earnings ratio. Courteville remains in our portfolio.
UPDC – The property company touched a low of N10.93 last week following modest gains during the week. The company has been struggling with margin drops in recent years hanging on to asset sales to churn out profits. Its rental income business has been performing poorly putting significant pressure on the company’s earnings and dependency on property sales. Profits were down 78% in the latest 9 months 2014 results stoking a fear of an impending loss this year. The current price suggests a P/E ratio of 34x if you base it on the latest 9 months results. UPDC could as well sell more properties towards the later part of the year which could boost earnings however, I do not see the company posting beyond 50kobo per share in earnings per share at the end of the year. That will give the company a 20x earnings per share at this price.
Opinion: Don’t Buy
Note: Nairametrics does not trade short-term. We like to hold our stocks for long-term and will only sell if we perceive an imminent threat to fundamentals of the company which we consider adverse to value. As such, our opinions are purely for long-term investors. Opinion might differ if you were to buy short-term (for profit taking).