Zenith Bank shares closed trading Friday the 20th at N16.49 and its lowest month to date. The share price has taken a hit for two major reasons.
Dividend Payout – Zenith Bank shares was marked down last week, after it closed its register March 16th, 2014. After opening the week at N20.6 and deducting dividend of N1.75 the share price immediately took a nose dive and kept loosing momentum all though last week. It was as if the rally in the preceding week that got the stock to as high as N21.75 was a dividend play for investors. Immediately they confirmed dividend the next was to dump the stock in droves.
Market sentiments – Last week was a bearish week for stocks as the All Share index has lost 4.5% week to date. Nearly all the big chip stocks lost ground confirmed by the 5.5% and 11% loss suffered by the NSE 30 and NSE banking index respectivel last week. Zenith Bank belongs to both indexes and with a 19.9% drop it was a major contributor to market sentiments.
Buy sell or hold? The question on some people’s mind could be what to do with the price at N16.49. Do I buy, sell or just hold. We believe Zenith @16.49 is clearly undervalued. Our valuation metrics values this stock at about N21 which is 25% higher than the current price. With the market bearish there is no guaranty that the current price will even remain at N16.49. It could even drop further and may even hit its year low of N14.54. We also believe the company still has sound fundamentals as its latest full year results show. This price in our view is a massive buy opportunity.
Decision – Buy
Disclosure – The author(s) of this article own shares in Zenith Bank for both short and long term purposes. The author of this article wrote it themselves, and do not write this article on behalf of Zenith Bank, its associates or representatives. The article is purely their opinion.