Why Access Bank has a SELL recommendation

Stocks on our Buy/Sell/Hold list are picked from the top gainers and losers of the previous week, as well as various analysts’ reports.

FCMB: HOLD

Recent Results:

Results for the nine months ended September 30, 2018, show that gross earnings for the group increased from N118 billion in 2017 to N132 billion in 2018. This marks an 11.8% increase year on year.

Profit before tax jumped from N6.8 billion in 2017 to N14.7 billion in 2018. This represents a 116% increase year on year.

Profit after tax also increased from N5.4 billion in 2017 to N11.3 billion in 2018. This marks a 109% increase year on year.

Price Information

Current Share Price: N1.65
Price to Earnings Ratio: 2.15X
Price to Book Ratio: 0.18
Year to Date Return: -12.70%
One Year Return: -0.60%

External View

Analysts at United Capital have a “Buy” recommendation on the stock. They have a 12-month target price of N2.7, which represents a potential upside of 32.7% from the stock’s price of N1.7 as at when the report was prepared.

Analysts at FBNQuest have an “Overperform” rating on the stock. They have a target price of N3.3, which represents a 67% upside from the stock’s price of N1.9 as at when the report was prepared.

Our View 

FCMB is a HOLD in our opinion. A HOLD recommendation means that investors already in should maintain their positions. The stock has not shown sufficient decline (which is too early at this time of the year) to warrant taking a position.

If the market as a whole remains bearish, we could reconsider our position.

CCNN: HOLD

Recent Results

Results for the third quarter ended September 30, 2018, show that revenue increased from ₦13.62 billion in 2017 to ₦19.57 billion in 2018. This represents a 43.5% increase year on year.

Profit before tax increased from ₦2.85 billion in 2017 to ₦5.72 billion in 2018. This represents 99.7% increase year on the year.

Profit after tax increased from ₦2.03 billion in 2017 to ₦4.01 billion in 2018. This represents a 96.6% increase year on the year.

Price Information

Current Share Price: N18.45
Price to Earnings Ratio: 4.46X
Price to Book Ratio:1.37
Year to Date Return: -4.90%
One Year Return: 96.31%

Analysts’ Opinions

None

Our View

Cement Company of Northern Nigeria is a HOLD In Nairametrics’ opinion.

It is too early for investors to take positions, as the expected market decline is not yet pronounced.

The first month of the year is usually bearish as retail investors, tend to sell down to meet key expenses. The approaching elections mean that foreign investors (key drivers in this market) will stay on the sidelines.

Access Bank: SELL

Recent Results

Results for the nine months ended September 30, 2018, show gross earnings for the 9 months increased from N365.1 billion recorded during the corresponding period in 2017 to N375.2 billion in 2018. This represents a 3% increase year on year.

Profit before tax dropped from N72 billion for the period in 2017 to N70.3 billion in 2018.

Profit after tax increased from N56.4 billion, which was recorded during the same period in 2017, to N62.9 billion for the third quarter of this year.

Price Information

Current Share Price: N6.15
Price to Earnings Ratio: 2.56X
Price to Book Ratio: 0.57
Year to Date Return: -9.56%
One Year Return: 37.19%

Analysts’ Opinions

Analysts at FBNQuest have a “Neutral” recommendation on the stock. They have a target price of N12.6, which represents a potential upside of 85.5% from the stock’s price of N6.8 as at when the report was prepared.

Analysts at United Capital have a “Buy” recommendation on the stock. They have a target price of N10.6, which represents a potential upside of 50.4%, from the stock’s price of N7.1 as at when the report was prepared.

Our Opinion

Access Bank, is a SELL in Nairametrics’ opinion, despite it trading at a price earnings ratio slightly lower than other tier one counterparts such as Zenith Bank, which is trading at 3.8 times earnings, and Guaranty Trust Bank, which is trading at 4.91 times earnings.

Investors have reacted negatively since news of the bank’s intentions to merge with tier two lender, Diamond Bank was confirmed late last year, with the stock shedding 24.5% from then till date.

A potential N75 billion rights issue in the works, in addition to the shares that will be issued to Diamond Bank shareholders, means that pre-merger Access Bank shareholders would suffer some dilution of their shareholders.

A rights issue in the works could also lead to a lower dividend for the 2018 financial year, as management would seek to boost capital reserves.