Lookin for stocks to buy? Every week Nairametrics brings to you a list of stocks considered as Buy, sell or hold from some of the best Fund Managers in the country. This week, we take a look at 7 stocks that are considered a buy or sell by ARM Research, a leading Fund Manager in the country.
As usual, these are not a “buy or sell recommendation” for stocks. Always consult your financial advisor before making an investment decision.
The Nigerian equity market traded bearish last week, posting losses for 4 out of the 5 trading days. The market ended the week 2.11% lower WoW, making it the third consecutive week of decline.
The decline was largely due to negative performances in First Bank (-12.98%), Guaranty Bank (-4.88%), Zenith Bank (-4.17%), Lafarge (-13.33%), Nestle (-6.35%), PZ (-11.58%) and Okomu Oil (-9.78%). Dissecting the performance on a sectorial basis, all sectors closed in the red save the Cement sector with Construction (-6.19%), Banking (-4.73%) and Food (-4.44%) sectors leading the decliners.
- FBNH Plc – STRONG BUY (FVE: N14.40). FBNH looks increasingly attractive underpinned by improving asset quality. Precisely, we see further potential upside from lower provisioning, resilience in NIM, operational efficiency and possible streamlining of branches.
- Lafarge Africa Plc. – NEUTRAL (FVE: N34.71). Despite our expectation of improved fundamentals mainly from higher volumes, energy savings and lower finance cost, we believe Lafarge is still overpriced. Lafarge trades at 2018 EV/EBITDA and P/E of 9.7x and 49.9x compare to Bloomberg EMEA peers of 9.2x and 21.9x.
- Guinness Nigeria Plc – SELL (FVE: N88.21). Guinness is poised for further earnings recovery into 2019 underpinned by lower operating and finance expenses. However, from a valuation standpoint, we believe the stock is expensive due to the dilutive impact of the recently concluded rights issue.
- Dangote Sugar Refinery Plc – OVERWEIGHT (FVE: N20.23). We are cautiously optimistic on Dangote Sugar due to the recent smuggling of cheaper refined sugar which impacted on the company’s market share and, by extension, revenue. Irrespective, we believe the moderation in input costs would provide some support to 2018 earnings.
- PZ Cussons Plc – SELL (FVE: N16.57). Our sell rating on PZ is premised on expected slower recovery in volumes due to weak income levels. Additionally, the recent rise in Brent crude is expected to stoke pressures on petrochemical prices which would weigh on gross profit and earnings.
- Seplat Petroleum Development Company Plc – STRONG BUY (FVE: N975.27). The case for Seplat remains higher crude oil prices and volumes, unrecognized capital allowance, reserve accretion, higher receipt from crude oil lifted in OML 55 as well as the company’s extended debt maturity profile which feeds into an improved cash position.
- Okomu Oil Plc – NEUTRAL (FVE: N102.33). Okomu is our most preferred pick in the Palm oil sector, as 2018 presents opportunities for stronger growth in volumes, better operating efficiency, and lower finance cost which guides to improved earnings.
Note: These stock picks do not represent the opinion of Nairametrics or any of its writers. Always consult a financial advisor before you make investment decisions.