These are the stocks on our Buy Sell or Hold list for the week ending April 21, 2018.

May & Baker Nigeria Plc – HOLD

Latest Results

Earnings per share 2017 FY 38 kobo up from a 4-kobo loss in 2016 FY


Share price – N2.9

Bua group

Price-earnings ratio – 7.6x

Price to book ratio – 0.85

YTD Return –  11.5%

1 Year return – 229%

Latest information

May & Baker is planning to raise capital soon. In a corporate notice issued recently, its board authorised a rights issue at N2.75 per share, on an allotment basis of 1 for 1 for 980,000,000 shares to raise N2.6 billion. It is also seeking shareholders’ approval to increase authorised share capital from N1.9 billion to N3 billion. It will likely use the cash to repay its debt and hope to save the over N600m it spends annually on interest payment. HOLD FOR US.

Our View

A capital raise triggers an automatic dilution of its shares. We also do not like buying stocks when they have announced a capital raise. Yes, the offer price is at a discount to its current market price but we won’t be wooed by that.

Coronation Research

Oando Plc – SELL

Latest Results

Board just approved but yet to be Published


Price-earnings ratio – N/A

Price to book ratio – 0.77

YTD Return – 26%

One year return – 35%

Latest Information

Minister of Finance, Kemi Adeosun, last week ordered the redeployment of the Acting SEC DG for flouting her order to maintain the suspension. She had instructed him to do so pending the review of the forensic audit report by the NSE, SEC, JSE, and other parties.

Our View

Oando Plc, has gained 26% since the lifting of its suspension but we doubt this has anything to do with its fundamentals. Perhaps, they need to push the share price higher in anticipation of a sell down or new equity raise. With Oando you never know as deals happen all the time. Nevertheless, we will be offloading this stock if we still owned it. No time for the drama.

Seplat Petroleum Development Company Plc – BUY

Latest Results

EPS is N141 in 2017 compared to 79 kobo loss in 2016.


Current Share Price – N698.3

Price-earnings ratio – 4.9x

Price to book ratio – 0.72

YTD – Up 11%,

1-year return – 79%

Latest information

Recently announced the completion of its $350 million 9.25% Senior debts and wants to use the debts to refinance existing loans.

They recently reached a settlement with Crestar over its wholly owned subsidiary, Newton. Seplat had deposited $20.5m in an escrow account ahead of the outcome of the litigation. It has now agreed to give Crestar $10.5m while it keeps back $10m

Also recently announced that the Board was meeting to declare dividends.

External Analysts view

Analysts at ARM have placed a BUY recommendation on Seplat. They hinged this on higher crude oil prices, improved cash flow due to a debt rescheduling exercise, as well as increased production volumes. At ARM’s crude oil and gas price projection of $60/bbl and $3/Mscf respectively, Seplat would have a 40% YoY expansion in revenue to $634 million, comprising oil revenue at $494 million (+50% YoY) and gas revenue at $141 million (+13% YoY). Oil is currently trading at $70 per barrel. The company has also hedged 3.6mbbls and 3.0mbbls in H1 and H2 2018 at an average strike price of $40/bbl and $50/bbl respectively, in a bid to support its cash flow strategy. ARM has forecast a 36.4% upside from its current price of N698.30.

Our View

The operational performance of Seplat is directly correlated with the price of oil. With oil price now above $70, it is hard to bet against Seplat. Its price-earnings ratio of sub 5x is coupled with a price to book of 0.72 suggest it is also relatively cheap. We would consider buying more Seplat at this stage as we look ahead to the stock hitting N900 by year end and N1000 in a year’s time.


Latest Results

Yet to release 2017 FY results.


Current Share Price – N12.2

Price-earnings ratio – 19.8x

Price to book ratio – 0.69

YTD – Up 38.6%,

1-year return – 302%

Latest information

The bank (not the group) says it has no plans of paying dividends this year They have also reorganized their overseas subsidiaries and have strong hope in a turnaround. Digital business seems to be moving in the right direction and cost is being reigned in.

Analysts View

Analysts at ARM rate FBNH a strong BUY. The factors behind the recommendation were namely lower loan loss provisioning (due to a rise in crude oil prices), no plans to grow risky assets and its adequate capital buffer.

Given the recovery in crude oil production and higher crude oil prices, ARM expects First Bank’s upstream O&G NPL to moderate to ~30% in FY 18. They also forecast NPL and Cost of Risk in FY 18F to print at 18% (FY 17E: 20%) and 3.5% (FY 17E: 6.5%) respectively.

Oil and Gas loans constitute 90% of First bank’s non-performing loans at 9M in 2017.  The bank also plans to streamline its branch network.

 FBNH trades at a P/B of 0.7x compared to peer average of 1.4x  with  FY  17  P/B  of  0.4x at a discount to the peer average of 0.9x.

Furthermore, at current pricing, its 2017 expected dividend translates to a dividend yield of 6.4%. ARM’s analysts expect a 32% upside from the current pricing of N12.25 as at today’s release of the report.

Our View

We think there is a limited upside for this stock as everything possible has been priced in already. If we owned this stock for the short term we would at least sell to take off some profits. 20x Price earnings is super expensive for a bank stock and except earnings per share doubles, we don’t see the share price sustaining this momentum. SELL FOR US

This is not a buy sell or hold recommendation. Remember to consult a competent financial analyst or stockbroker if you need help with your investment decisions. 



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