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Stocks to buy and sell this February

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The Nigerian Stock Exchange (NSE) closed January up at 15.95%, buoyed by improved macroeconomic fundamentals and renewed interest from foreign investors. To date, the All-Share Index is up 16.73%. Here are a few stocks which could witness significant price appreciation this month, as well as some that are not performing so well.

Stocks to buy

Zenith Bank

Tier one banks have taken a back seat in terms of price appreciation this year, but Zenith still has room for a bit of upside compared to GT Bank.

Interest income for GT Bank increased from N181 billion in 2016 to N248 billion in 2017. Earnings per share increased from N4.11 in 2016 to N4.14 in 2017.  GT Bank closed at N49 per share on Friday’s trading session.

Zenith’s results for the 9 months ended September 2017 show gross earnings increased from N527 billion in 2016 to N531billion in 2017.  Earnings per share also increased from N3.03 in 2016 to N4.11 in 2017. Zenith closed at N31.95 on Friday’s trading session.

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Seplat

While Seplat’s 9 months ended 2017 results are still in the red, the losses have reduced drastically. Revenue has also increased For the 9 months ended September 2017, revenue increased from N49 billion in September 2016 to N85 billion in September 2017. The company also made an operating profit of N16.2 billion in 2017 compared to an operating loss of N13.1 billion in the comparative period of the prior year. Losses also fell from N24 billion in 2016 to N1.6 billion in 2017.

The company last year restructured some of its loan obligations and resumed crude oil exports from the Forcados terminal.

Year to date, Seplat is up 9.40%, underperforming the All Share Index, as well as other companies in the oil and gas sector.

Custodian Insurance

Custodian Insurance typically trades within a tight band of N3.00 to N4.00 but has broken out due to bullish market sentiments. At its current price of N4.28 in last week’s trading session, the stock is trading at 5.5 times its earnings.

Results for the 9 months ended September 2017 show that gross revenue increased from N27.1 billion in 2016 to N31.8 billion in 2017. Profit before tax also increased from N5.1 billion in 2016 to N6.0 billion in 2017. Earnings per share also increased from N0.66 in 2016 to N0.76 in 2017.

Lafarge Plc

Investors may have decided to overlook the stock in 2017 due to the dilutive effect of its rights issue. Proceeds of which were used to repay loans from its parent company. The company has however returned to profitability

For the 9 months ended, September 2017, revenue increased from N161 billion in 2016 to N223 billion in 2017. From a loss of N40 billion in 2016, the company made a profit before tax of N1 billion. Earnings per share have also bounced back to N0.10 from a loss per share of N8.27 in 2016.

Stocks to sell

Skye Bank

Skye Bank closed Friday’s trading session at N1.43, up 186%. The impressive return mirrors that of other tier-two banks in terms of price appreciation. The rally, in this case, is however not driven by fundamentals as the bank is yet to release any financial statements for the 2016 and 2017 financial year.

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Reliable sources have confirmed that the unreleased results are largely negative. Having beaten the ASI in terms of price appreciation, investors would be better off selling down the stock pending clarity about the bank’s financials.

Japaul Oil and Maritime Plc

The Nigerian Stock Exchange (NSE) commenced new trading rules last week which include the shift of the minimum price floor from N0.50 to N0.01. Investors that have held the stocks for years and gained very little in terms of capital appreciation or dividends are keen to sell off. Penny stocks with poor fundamentals such as Japaul, will suffer significant price depreciation.

For the 9 months ended September 2017, turnover fell from N1.4 billion in 2016 to N1.0 billion in 2016. The company’s losses also increased from a loss before tax of N3.4 billion in 2016 to a loss before tax of N4.4 billion in 2017.

Multiverse Plc

Multiverse Plc is another stock with poor fundamentals that investors could decide to exit from, by taking advantage of the revival of trades due to the new N0.01 minimum price rule. Results for the 9 months ended September 2017 show that revenue fell from N6.3 billion in 2016 to N4.3 billion in 2017. The company’s losses reduced slightly from N381 million in 2016 to N249 million in 2017.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via [email protected]

Company Results

COVID-19 boosts Fidson Healthcare Plc’s Q2 2020 performance

A cursory analysis of the company’s result shows revenues got a boost, despite the challenges of Covid-19.

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Fidson Healthcare Plc

Fidson Healthcare Plc’s reported revenue for Q2 2020, increased year on year by 16.19%, from N3.83 billion to N4.45 billion.

Fidson Healthcare Plc is one of the leading pharmaceutical manufacturing companies in Nigeria. It is the second-largest pharmaceutical company in the country by Q2 2020 revenue, after GlaxoSmithKline Consumer Nigeria Plc – with a revenue of N5.44 billion.

Explore the Nairametrics Research Website for Economic and Financial Data

A cursory analysis of the company’s result shows revenues got a boost, despite the challenges of Covid-19. The lockdown affected the importation of products including some of its exports.  Yet revenue topped, thanks to an increase in sales of prescription drugs.  

Fidson has two key segments – Prescription (Ethical) drugs, and Over the counter sales. While revenues from over the counter sales were flat; the company booked revenues of N4.69 billion, compared with N3.7 billion in the period under review.  COVID-19 pandemic has largely boosted sales for most healthcare companies, as Nigerians rushed to buy immune boosters, thought to provide protection against the virus. 

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READ: Japan’s Ohara Pharmaceutical takes over 20% stake in Fidson Healthcare

Prescription drugs (Ethical drugs), also increased as a result of that, when compared with Q2 2019. The COVID-19 pandemic boosted the revenue of pharmaceutical companies, compared with previous periods as medicine sales surged.  

Apart from growing demand, the sector has also attracted interest from the CBN and the FG. Recently, The Central Bank of Nigeria (CBN), intervened in the sector through the provision of N100 billion credit, towards managing the pandemic, “providing opportunities to explore the development of new products,” according to the Chairman of the company, Mr. Segun Adebanji. 

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READ: Nigeria’s total foreign trade drops to N6.24 trillion in Q2 2020, export plunges by 52%

Despite the interventions, the sector still faces a major challenge, as noted by the Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN). The association said that local drug manufacturers may run out of business, as most raw materials and nearly finished pharmaceutical products are imported into the country. The Association submits that the reason for this is inconsistent government policies, which results in a lack of investment in the sector.    

Commenting on the surge in profits and reduction in certain costs, the Chairman of the company noted that various cost-cutting strategies were utilized in driving performance upward. The Earnings Per Share (EPS) of the company, grew by 433.33% from -6 kobo at the end of 2018, to 20 kobo at the end of 2019.  

READ: Fidson reports over 500% increase in profit for 2019

Fidson shares currently trade at N3.50 per unit. The share’s highest price in 52 weeks was N4.05 and the lowest was N2.21. A total volume of 1,132,011 units was sold in the last seven days trades. Shares outstanding is 2,086,360,250 units. As for GSK, a total volume of 2,882,893 units, was sold in the last seven days trades. Shares outstanding is 1,195,876,488 units.  

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Currencies

Investors flock to US dollar, as Gold, Bitcoin, Global Stocks record heavy sell-offs

The US dollar is stronger this morning on the back of a marked drop in risk appetite in European and US markets.

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Investors flock to US dollar, Gold, Bitcoin, as Global Stocks record heavy sell-offs, Twitter Poll: Bitcoin price expected to reach $100,000 by 2021, cybercriminals, What it will take Bitcoin to hit $100,000?

The U.S dollar closed high on Monday, hitting a six-week high, as currency traders and global investors rushed into the safe-haven currency.

This is coming on growing COVID-19 fears and worries over the U.S. Congress’ stimulus impasse drove a heavy sell-off in almost all other assets that include gold, Bitcoin, and Stocks.

What we now; At the time this report was drafted, Bitcoin traded at $10,463.98 with a daily trading volume of $23,554,819,012. BTC price is down -4.6% in the last 24 hours.

READ: U.S dollar drops lower, as U.S Federal Reserve plans on boosting inflation

Overnight on Wall Street, the Dow Jones Industrial Average fell 1.84%, the S&P 500 lost 1.16%, and the Nasdaq Composite dropped 0.13%.

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Gold spot lost about 2.1% to trade at $1,909.05 per ounce on Monday, after falling as much as 3.4% earlier in the session, its lowest since Aug. 12. U.S. gold futures settled down 2.6% at 1,910.60.

Australia’s S&P/ASX 200 dropped 0.7% pressured by miners and energy stocks, while China’s blue-chip index shed 0.1% and Hong Kong’s Hang Seng index was down 0.5%. Japanese markets were closed for a public holiday

READ: U.S stock futures trade flat, Apple regains $2 trillion market value

However, at the time this report was drafted, U.S. Dollar Index, which tracks the greenback against a basket of other currencies, dropped some gains to trade at 93.608

Quick fact: The U.S. Dollar Index tracks the greenback against a basket of major global currencies such as the Japanese yen, British pound sterling, Swedish Krona, Euro, etc. Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries like Europe, and Japan, would need to pay more dollars in fulfilling such payment obligations.

READ: FIRS generates N490 billion tax revenue in July, collects 89% from non-oil sector

Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics gave vital insights on the safe-haven currency, saying:

“The US dollar is stronger this morning on the back of a marked drop in risk appetite in European and US markets, but off overnight highs, as US stocks are rebounding in good order.

“Two factors explain much of the risk aversion. Banking shares are sharply lower following the International Consortium of Investigative Journalists report examining bank behavior in the context of Suspicious Activity Reports. Travel and leisure names are weaker in Europe on the back of continued angst around the rising COVID-19 case count in the Eurozone and the UK.

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“The fickle nature of currency trading these days suggests that as US stocks fall, the USD rises, reflecting the USD’s dominance in demand when there are big down moves in risk sentiment.”

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Cryptocurrency

U.S Banks now permitted to hold Tether, Circle

The OOC has insisted that national banks and federal savings associations may hold “reserves” on behalf of customers who issue stablecoins.

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Tether expected to surpass Ethereum, based on strength of the U.S dollar, ther mints 80,000,000 USDT to unknown wallets within 24 hours, Tether mints over a billion dollars’ worth of USDT, Tether mints over a billion dollars’ worth of USDT

These are surely good times for Stabelcoins. The world’s largest economy’s banking regulator.

In a detailed letter released yesterday, permitted national banks to hold reserve currencies for stablecoins (Tether, Circle). The letter which was released by the Office of the Comptroller of the Currency (OCC) responds to questions regarding the application of stablecoin-related bank activities. It concludes that national banks and federal savings associations may hold “reserves” on behalf of customers who issue stablecoins, in situations where the coins are held in hosted wallets.

“National banks and federal savings associations currently engage in stable coin-related activities involving billions of dollars each day,” Acting Comptroller of the Currency, Brian P. Brooks, said. “This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”

READ: GTBank, Access Bank, 11 others pay workers N271.64 billion in H1 2020

The letter addresses the use of stablecoins backed by a single fiat currency on a one-to-one basis, where the bank verifies at least daily that reserve account balances meet or exceed the number of the issuer’s outstanding stablecoins.

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What are Stablecoins?

Stablecoins are cryptocurrencies created to minimize the price swings that occur in a crypto asset. They are usually pegged to fiat currencies and often exchange-traded commodities.

Stablecoins give owners a sense of security as users can store their assets whenever there is high volatility in the crypto-verse or other financial markets.

Consumers can also with great ease convert from unpegged cryptocurrencies to stablecoins when they are worried about where the markets are heading next, eliminating the need to return to a fiat currency.

READ: CBN allows banks to pay winnings, salaries for 7 banned betting & gaming companies

These conversions can also be less expensive than when switching between crypto and fiat, as it takes the transaction fees of payment processing providers and banks out of the equation.

Global Investors and traders are using it to give their investment portfolios exposure to the US Dollar during these times when uncertainty is high, as a result of the worst pandemic (COVID-19) known to man.

READ: Jaiz Bank: First shared-profit bank in Nigeria approaches 10 years

Sequel to this landmark statement, Nairametrics about a month ago, detailed the importance of stablecoins in modern-day finance.

Stablecoins like Tether are particularly useful for capital flight, as their USD-pegged value means users selling off large amounts in exchange for their fiat currency of choice can rest assured that it’s unlikely to lose its value as they seek a buyer,” Chainalysis said in the report.

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