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Editors Pick

Buy/Sell/Hold for the week ending June 18, 2018

Here are Nairametrics’ stock picks for this week’s trading session.

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Nigerian stocks, Buy Sell Hold, results

Stocks on our Buy/Sell/Hold list are picked from the gainers and losers from the previous week. Here are our stock picks for this week’s trading session.

* There was no trading on the Nigerian Stock Exchange (NSE) on Monday due to the Eid El Fitr holiday. Year to date figures are thus, for Thursday, June 14, 2018.

Learn Africa Plc: SELL

Learn Africa is into the publication of books across all levels. The company was established in 1961 as a subsidiary of Longman Group UK Limited, now Pearson Education. Longman became a subsidiary of Pearson Education following an increase of stake to 51%.

In 2011, both companies agreed to become separate corporate entities. Learn Africa was listed on the Nigerian Stock Exchange (NSE) in 1996.

Latest Results: Results for the 2017 financial year show that revenue increased from N2 billion in 2016 to N2.4 billion in 2017. Profit before tax increased from N134 million in 2016 to N296 million in 2017. Profit after tax increased from N237 million in 2016 to N266 million in 2017.

Pricing

Current Price: N1.58

Price Earnings Ratio: 4.51x

Price to Book Ratio: 0.38

YTD: 79.55%

One Year return: 90.36%

Latest information: The company recently released its financial statements for the 2017 financial year.

External View: None

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Our View: Learn Africa is a SELL in Nairametrics’ opinion. The stock is currently trading at a high of N1.58. Learn Africa has done 79% year to date, vastly outperforming the NSE even at its peak so far in January.

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While there could be further upside due to news of a dividend payment, it will not be sustained.

Newrest ASL Nigeria Plc: HOLD

Newrest ASL Nigeria (formerly Airline Services Limited) was incorporated as a private limited liability company on December 6, 1996. The company became a public limited liability company on February 26, 2007, and was listed on the Nigerian Stock Exchange on July 25, 2007.

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The company’s primary activities are the provision of catering services to international airlines operating in the country.

Latest Results: None.

Pricing

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Current Price: N4.71

Price Earnings Ratio: 2.51X

Price to Book ratio: 0.88

YTD: -24.37%

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One Year return: 3.54%

Latest information: The company will be holding its Annual General Meeting (AGM) on June 26, 2018. Dividend payment for the 2017 financial year will take place the following year.

External View: Results for the first quarter ended March, 2018, show revenue dropped from N1.3 billion in 2017 to N1.1 billion in 2018. Profit before tax, however, jumped from N131 million in 2017 to N229 million in 2018.

Our View: Newrest ASL is a HOLD in Nairametrics’ view. The stock is trading at 24% below its year high of N5.95. This leaves room for further downside in the event of the market going bearish.

Berger Paints Plc: HOLD

Berger Paints Plc was incorporated in Nigeria as a private limited liability company in 1959 and was converted to a public liability company in 1973. The company is primarily into the manufacture, sales, and distribution of paints and allied products in the country.

Latest results: Results for the first quarter ended March, 2018, show that revenue grew marginally from N788 million in 2017 to N834 million in 2018. Profit before tax, however, dropped from N129 million in 2017 to N103 million in 2018. Profit after tax also fell from N88 million in 2017 to N70 million in 2018.

Pricing

Current Price: N8.55

Price to Earnings Ratio: 11.10x

Price to Book Ratio: 0.95

YTD: 8.24%

One Year Return: 46.27%

Latest information: A few weeks ago, the company announced the appointment of Abi Ayida as its new Chairman. He replaces Oladimeji Alo who stepped down.

External View: None

Our View: Berger Paints is a HOLD in Nairametrics’ opinion. The stock is currently trading at 17%, from its year high of N10.35.


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.

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]

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Currencies

DEVALUATION: CBN updates website to official rate of N360/$1

The central bank of Nigeria has devalued its official exchange rate from N307/$1 to N360/$1.

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CBN website states oil price is still $61, Naira under pressure as Nigeria records poor export earnings, 4 key sectors the CBN plans to pump money into

Just as Nairametrics reported, the Central Bank of Nigeria has devalued its official exchange rate from N307/$1 to N360/$1. The apex bank has now reflected this change on its website signaling a confirmation. The bank is yet to issue a press release to this effect.

The CBN has now officially devalued by 15% moving from N307/$1 to N360/$1. Depreciation at the “market-determined” I&E window is 5% having moved from N360/$1 to N380/$1

Devaluation: Nairametrics reported yesterday that the Central Bank of Nigeria (CBN) sold dollars to banks at N380/$1 in a move signifying a devaluation of the currency. Banks trading at the Investor and Exporter (I&E) window bought dollars at N360/$1 from the CBN on Friday, March 20, 2020. The I&E window is the official market where forex is traded between banks, the CBN, foreign investors, and businesses. The central bank typically buys or sells in the market as part of its intervention program.

The CBN has updated its website with the official exchange rate.

Nairametrics also got hold of a letter from the CBN to banks informing them of the new exchange rate for dollars flowing from the International Money Transfer Operators (IMTOs). According to the CBN, IMTOs will sell to banks at N376/$1 while banks will sell to the CBN at N377/$1. The CBN will sell to BDC’s at N378/$1 while the BDC’s will sell to end-users at “no more than” N380/$1.

Single Exchange Rate: A report yesterday also suggested that the CBN also planned to move to a single exchange rate policy for determining the price of the dollar. A senior central bank official who does not want to be identified, said, ‘Today we allowed the rate at the importer and exporters (I&E) window to adjust in response to market developments.’

The central bank has now made an apparent u-turn after it had initially that the “market fundamentals do not support naira devaluation at this time” detailing reasons why it did not need to devalue.

Falling oil price: Oil prices fell to under $20 on Friday before climbing back up to settle at $23 per barrel. Nigeria’s Bonny light trades at $26 while the benchmark Brent crude trades at $29 per barrel. In response to the crash in oil price, Nigeria’s announced a cut to its 2020 budget by N1.5 trillion as it faced the reality of a potential drop in its revenues. Nairametrics also has information that state governments are getting jittery about their ability to sustain salary payments as a reduction in their federal allocation “FAAC” is anticipated.

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Career tips

Investment options for salary earners

Investment options for the salary earners
#Investing #Entrepreneurs #Investment #Salary #Wages

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Investment options for salary earners - bank loan

Recently, one of the readers of my articles asked to know what investment options are open to salary earners. A salaried individual is like everyone else except that he or she has a fixed monthly income. This implies that their investments and expenses have to be managed strictly according to their fixed monthly income.

Since salary is assumed to be the only source of income for the salaried, it is advisable that such an individual fortify himself financially before investing so that adverse investment performance will not have untold effect on him and his family. Therefore, if you are a salaried prospective investor, you need to:

READ: Where to invest N500,000 right now

Get life insurance

Most families in Nigeria are single income families so much such that if anything bad happens to the income earner, the family gets shattered, at least financially. Again, given the risks inherent in capital market investments, it is only prudent to have a life insurance as a first step in one’s investment journey. It is very baffling to see many investors very deep into the market, yet they do not have life insurance.

[Read Also: Understanding the risks in bond investing]

Life insurance is and should be a basic part of any financial plan. Life insurance is a protection for loved ones against financial hardship arising from the death of a breadwinner. This is even more important today than ever before with high cost of funeral expenses, college education and medical bills. So, the first investment option for a salaried individual is to get a life insurance.

Prepare for financial emergencies

Life is full of surprises, emergencies do happen, jobs are lost without notices, and even good investment opportunities emerge sometimes suddenly. There is, therefore, the need for a cash reserve to help weather the financial storms and emergencies when they come calling.

READ: SEC issues pre-notice on cancellation of certificates of 157 inactive CMOs

Cash reserves do not only provide for emergencies, they also help to ensure that investments are not liquidated prematurely or at inopportune times to cover unexpected expenses. There are no hard and fast rules on what the exact amount of the required cash reserve should be, but most financial experts and planners will advise that an amount that equals about six months of living expenses be set aside.

So, as a salaried person, your next investment should be to have a cash reserve. A cash reserve should not necessarily be in a savings account or under the mattress; it could be in an interest-bearing money market account, money market mutual funds with low to zero luck-up period or another form of very liquid investment that is readily convertible to cash without loss of value.

[Read Also: Understanding the risks in bond investing]

Know your risk appetite

As a salaried and fixed income individual, your risk appetite is most likely going to be low as well as your risk tolerance, although your extended family profile could change all that. You need to know or understand your risk tolerance before you engage in any capital market investment.

Your risk tolerance will and should drive the type of investments you go into. Your risk tolerance depends on your psychological makeup, your current insurance coverage, presence or absence of cash reserve, family situation, and your age among others.

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READ: Here’s what will happen to Nigeria’s insurance sector in the short to medium term

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Talking about family situation, it is reasonable to think that a married individual whose children are still in school will be more risk averse than an unmarried person. On the other hand, older people have shorter investment time horizon within which to make up for any losses. the reason for this is because the older you get the less time you have to work to recoup on losses.

In that case the risk tolerance of an older man will be less than those for younger folks. Again, the more cash reserve and insurance coverage you have, the more your propensity to take risk. Now having known your risk tolerance based on the underlying factors, you can then define your investment objectives

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[Read Also: Important tips on how to profit in a bearish market]

Set your Investment objectives/goals

Having met those essentials above, you are now ready for a serious investment plan or program. A good investment plan starts with investment objectives. Investment objectives are the force that determines what you invest in. Investment objectives range from capital preservation, to capital appreciation and constant income generation.

Capital preservation as an investment objective implies that you, the investor, aim at minimising the risk of loss by maintaining the purchasing power of your investment. So, if you are risk averse or you will need money from your investment soon for children’s education or for building a house or you are nearing retirement, this should be your objective.

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READ: CBN debits banks N216.1 billion for CRR compliance

Investors whose aims are to see their investment portfolios increase in real terms over a period of time are better suited for capital appreciation as an objective. This is better for investors that are more risk tolerant and those with more potential to recoup on losses along the way.

If you are already retired or nearing retirement, and therefore depend on your retirement plan supplemented by investment income, you need an investment that generates income rather than capital gains. In that case, your investment objective should be current income generation. It is always good to have investment goals stated in terms of risk and returns.

[Read Also: I-Invest generates over N2 billion transaction in less than 6 months]

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Decide on asset allocation

Armed with the knowledge of your risk appetite and investment objective, you are now ready to decide on what to invest in, and how much to invest in any asset class. This takes you to asset allocation decisions. Asset allocation involves dividing an investment portfolio among different asset classes based on an investor’s financial requirements, investment objectives and risk tolerance.

A right mix of asset classes in a portfolio provides an investor with the highest probability of meeting his/her investment objectives. Asset allocation is the most important investment decision an investor can make in a portfolio because it demonstrates an investor’s understanding of his or her risk preferences and return expectations.

READ: How to build a profitable Mutual Fund Portfolio

It is good to strive for a diversified portfolio. Unfortunately, the Nigerian market does not provide a lot of asset classes for optimal diversification, but diversification can be achieved across sectors or industries within the few asset classes in the Nigerian stock market.

Decide on how to invest

There are different ways to invest in the capital market. You can invest directly by making the stock selections by yourself, thanks to the online stock trading platforms that abound the world over. This implies that you have what it takes to conduct the required research and analysis of the companies whose shares or stocks you wish to buy.

[Read Also: How I Would Invest My Mother’s Retirement Funds]

It also implies that you have what it takes to know when to sell or add to existing positions. Another method is to have someone “do the heavy lifting” for you. In this case, that someone, often times called fund manager or portfolio manager, does the research and analysis and selects shares that suit your investment preferences, investment objectives, risk tolerance and appetite as well as your investment time horizon.

This route is most suitable for investors that lack the knowledge and time for the required research and analysis. If you decide to go this route, mutual funds are the best bet for you.

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