Markets
MTN Nigeria has a HOLD rating for next week
@mtnng and Dangote Cement have a HOLD recommendation for the trading week ending June 7 on the @nsenigeria
Stocks on our Nairametrics Buy/Sell/Hold list are drawn from the top gainers and losers of the previous week, as well as various analysts’ reports.
Access Bank: HOLD
Recent Results: Gross earnings rose from N137 billion in 2018 to N160 billion in 2019. Profit before tax increased from N27.2 billion in 2018 to N45.1 billion in 2019. Profit after tax jumped from N21.9 billion in 2018 to N41.1 billion in 2019.
Price Information
Current Share Price: N6.25
Price to Earnings Ratio: 1.62X
Price to Book Ratio: 0.3
Year to Date Return: -8.09%
One Year Return: -38.38%
Analysts at FBNQuest have an ‘Over Perform’ rating on the stock. They have a target price of N14.7, which represents a potential upside of 153.1% from the stock’s price of N5.8, as at when the report was prepared.
Analysts at United Capital have a ‘Hold’ recommendation on the stock. They have a 12 month target price of N7.1, which represents a potential upside of 19.3%, from the stock’s price of N6, as at when the report was prepared.
Analysts at Afrinvest Securities have a ‘Buy’ recommendation. They have a 12 month target price of N10.44, which represents a potential upside of 80% from the stock’s price of N5.8, as at when the report was prepared.
Our View
Access Bank is a HOLD in Nairametrics’ view. While the stock’s low multiples make a compelling case for a Buy (Access is trading at the lowest price ratio among FUGAZ banks and below the average PE of 7.8 times earnings on the NSE), investors would be better off waiting for the bank’s H1 2019 results.
This would enable investors measure progress made post-merger, more so as the results are likely to be audited. Access is one of the few banks to pay an interim dividend, and management has indicated in the past its willingness to maintain this practice post-merger.
MTN Nigeria: HOLD
Recent Results: Results for the financial year ended December 2018, show revenue increased from N887 billion in 2017 to N1 trillion in 2018. Profit before tax rose from N107 billion in 2017 to N221 billion in 2018. Profit after tax jumped from N81 billion in 2017 to N145 billion in 2018.
Price Information
Current Share Price: N136
Price to Earnings Ratio: NA
Price to Book Ratio: NA
Year to Date Return: 51.1%
One Year Return: NA
External View
Analysts at FBNQuest have a ‘Neutral’ rating on the stock. They have a target price of N148.7 which represents a potential upside of 12.2% from the stock’s price of N132.6, as at when the report was prepared.
Analysts at Chapel Hill Denham have a ‘Buy’ recommendation on the stock. They have a target price of N190.55, which represents a potential upside of 84.5% from the stock’s price of N108.9 when the report was prepared.
Our View
Nairametrics has a HOLD recommendation on the stock. Investors would be better off waiting for further clarity pertaining to investigations by the Economic and Financial Crimes Commission (EFCC), on its listing, as well as some progress with a court case filed against the Office of the Attorney General of the Federation (OAGF).
A negative outcome from any of these cases would lead to a drop in the stock’s price.
The stock is also up by 51.1%, out performing the NSE All Share Index which is down 0.56% year to date.
Dangote Cement: HOLD
Recent Results: Results for the first quarter ended March 2019 show that revenue dipped from N242 billion in 2018 to N240 billion in 2019. Profit before tax fell from N108 billion in 2018 to N78 billion in 2019. Profit after tax also dropped from N72.1 billion in 2018 to N60 billion in 2019.
Price Information
Current Share Price: N199.80
Price to Earnings Ratio: 9.01X
Price to Book Ratio: 3.2
Year to Date Return: 5.32%
One Year Return: -17.61%
External View
Analysts at FBNQuest have an ‘Overperform’ rating on the stock. They have a target price of N246.1 which represents a potential upside of 23% from the stock’s price of N200, as at when the report was prepared.
Analysts at United Capital have a ‘Buy’ recommendation on the stock. They have a twelve month target price of N235, which represents a potential upside of 15.8%, as at when the report was prepared.
Analysts at ARM Securities have a ‘Strong Buy’ recommendation on the stock. They have a target price of N248.14, which represents a potential upside of 24.1% from the stock’s price of N200, as at when the report was prepared.
Analysts at Afrinvest Securities have a ‘Buy’ recommendation on the stock. They have a target price of N257.67, which represents a potential upside of 28.8% from the stock’s price of N200, as at when the report was prepared.
Our View
Dangote Cement is a HOLD in Nairametrics’ opinion. The stock is trading at a PE ratio higher than the average PE on the stock exchange.
The stock has also outperformed the NSE All Share Index, which is down 0.56% year to date.
Flour Mills of Nigeria Plc: SELL
Recent Results: Results for the nine months ended March 2019 show that revenue fell by 6.3% from N427 billion in 2018 to N400 billion in 2019. Profit before tax fell from N19.5 billion in 2018 to N11.2 billion in 2019. Profit after tax also fell from N13.2 billion in 2018 to N7.8 billion in 2019.
Price Information
Current Share Price: N13.40
Price to Earnings Ratio: 6.20X
Price to Book Ratio: 0.37
One Year Return: -55.87%
Year to Date Return: -41.99%
External View
Analysts at FBNQuest have a ‘Neutral’ rating on the stock. They have a target price of N23.3 which represents a potential upside of 68.7% from the stock’s price of N13.8, as at when the report was prepared.
Analysts at United Capital have a ‘Buy’ recommendation on the stock. They have a twelve month target of N27.2, which represents a potential upside of 75.5% from the stock’s price of N15.5, as at when the report was prepared.
Analysts at Afrinvest Securities have a ‘Buy’ recommendation on the stock. They have a target price of N25.80, which represents a potential upside of 87% from the stock’s price of N13.80, as at when the report was prepared.
Our View
Nairametrics has a SELL recommendation on the stock. Results for the nine months ended December 2018 from indicate that its full year results will come in much lower.
Q1 2019 results for companies in the Fast Moving Consumer Goods space have been largely poor. We see no reason why Flour Mills would be different.
The stock recently hit a 10 year low and could drop further if bearish sentiments persist on the bourse.
Disclaimer
Please consult a financial adviser before making an investment decision.
Currencies
After hitting a 3-year low during the week, Naira stabilizes as traders wonder what next
The CBN still continues to warn against currency speculators who patronize the black market.
The exchange rate between the naira and dollar at the I&E remained stable on Friday, closing at N386 to a dollar. This was the same rate that was recorded on Thursday as traders mulled over reports that the CBN had adjusted the exchange rate at the SMIS window. There was also stability with the opening indicative rate as it recorded N386.86 to a dollar on Friday. This was the same rate that was achieved the previous day.
At the black market where forex is traded unofficially, the naira also remained stable as it closed at N461 to a dollar on Friday which was the same rate that it exchanged on Thursday. The exchange rate at the beginning of the week was N460 to a dollar. By crossing N460, the exchange rate has broken a psychological ceiling going past N460 for the first time since 2017.
Nigeria continues to maintain multiple exchange rates comprising the CBN official rate, the BDC rates, and the NAFEX (I&E window). Nairametrics reported last week that the government has set plans in motion to unify the multiple exchange rates in line with requirements from the World Bank. Nigeria is seeking a world bank loan of up to $3 billion.
Forex Turnover
Forex turnover at the Investor and Exporters (I&E) window recorded a decline on Friday, July 3, 2020, as it dropped by 48.7% day on day, a reversal from the huge growth that it achieved on Thursday at the foreign exchange market. This is according to data from the FMDQOTC, an exchange where forex is traded by foreign investors and exporters.
According to the data tracked by Nairametrics, forex turnover decreased from $204.90 million on Thursday, July 2, 2020, to $105.05 million on Friday, July 3, 2020, representing a 48.7% decline on a day-to-day basis. Despite falling short of the over $200 million trading volume that was achieved the previous day and in January, it is still a decent turnover compared to the low trading volumes recently.
This was still enough to provide trading boost to help reduce the pressure and stabilize the market.
According to a July 2020 report from Moody’s, the foreign currency funding gap for Nigerian banks is expected to rise to $5 billion due to the current low oil prices, volatile forex inflows and lower diaspora remittances amid the coronavirus pandemic. These challenges are threatening to renew the foreign currency liquidity pressures that hit Nigerian banks during the previous oil crisis in 2016-2017.
The report also indicated that dollar shortages are expected to persist over the next 12-18 months if low oil prices continue thereby renewing the forex liquidity crisis that led to severe rationing of dollar and ban on importation of some items during the last oil price crash in 2015-2017.
Forex Liquidity Issues
Despite a decent turnover recorded on Friday and the stability of the naira at the I&E window and the black market, the volatility and uncertainty of the forex market still persist due to accumulated demand and liquidity shortages across markets. The rise in demand and contrasting drop in supply has called for another round of devaluation, which the CBN has insisted it has plans to implement.
The CBN on Friday adjusted the naira at the retail forex auction from N360 to a dollar to N380 to a dollar in a move that most analysts see as part of the plans to unify the exchange rate. A devaluation last occurred in March. The apex bank wants to unify the exchange rate to conserve the dwindling external reserves which has been hard hit by demand by ever-increasing importers and the foreign investors wishing the exit. This current move by the CBN has moved the retail auction for importers and individuals, which is the official rate closer to the over-the counter-spot for investors and exporters. Nairametrics spoke to some traders who are still reviewing what the latest move by the CBN could mean on the future price of forex. Whilst some believe this is a major step towards reunification others believe the real test of the value of the exchange rate could be when the economy finally opens. For now, projection is all speculation, one trader informs Nairametrics.
The CBN still continues to warn against currency speculators who patronize the black market, thus widening the gap between it and the I&E window. The CBN maintains that the perceived demand cannot be substantiated following the drop in economic activities induced by the COVID-19 pandemic suggest demand should be low due to travel restrictions and drop-in economic activities.
The further decline in liquidity could further fuel speculations in the black market where the exchange rate has traded at a premium of N60+ over the last few weeks. The CBN claims most of the demand being cited is not represented by any official documentation and that it has informed foreign investors with genuine forex demand to be “patient” and that they will get their forex.
Commodities
Cocoa prices melt lower as COVID-19 weakens demand
The worsening wave of cases in major global economies strengthened concerns among cocoa traders.
Cocoa futures prices are melting lower as the resurgence of COVID-19 around the world threatens global demand for chocolate (Cocoa substrate).
At the last trading session, September Cocoa futures closed at $2,164.50.
As a result of weakening demand globally for cocoa and its substrates coupled with the present cocoa glut, as supplies outweigh demand, the price of September cocoa futures dropped to $2,159 per 1000kg, nearing a one-year low, before stabilizing above its support levels.
Globally chocolate is often classified as a luxury item, meaning, in times of high economic uncertainty like this, the consumption of such products will falter, as consumers focus more on necessity goods.
READ ALSO: Nigeria leads Africa combined in Q2 2020 on BTC P2P
The worsening wave of cases in major global economies strengthened concerns among cocoa traders.
However, Nigeria’s leader remains optimistic recently that efforts made by fiscal stakeholders in that sector, seems to be bearing fruit, as Nigeria recorded a surge in revenue in Cocoa, year to year.
President Muhammadu Buhari said Nigeria’s revenue from cocoa and sesame seeds has increased by $79.4 million and $153 million respectively in the past year.
“Our efforts on growing non-oil exports have started to yield some results. For instance, in the past year, our revenue from cocoa and sesame seed increased by $79.4 million and $153 million,” he said.
READ ALSO: Nigeria and US Authorities battle former Enron Nigerian Subsidiary over $80 million Yacht
Nigeria plays a leading role in the cocoa industry, covering a 6.5% share of the global production of cocoa.
Nigeria is also the fourth largest exporter of cocoa beans globally, behind Côte d’Ivoire, Ghana, and Indonesia, according to the National Export Promotion Council. Cocoa exports in Nigeria are projected to grow annually by 4% in the coming years.
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These export earnings from cocoa, if invested properly, could further help Nigeria reduce its reliance on crude oil, which makes up a large chunk of its export earnings (about 90% Est), and minimize the impact of oil price swings to its economy.
Cryptocurrency
Best time to make money trading BTCs
Midweek had more volatility in the BTC market than the beginning or end of the trading week.
Most BTC investors and crypto traders are changing their methods of trading in 2020, preferring to trade around the American trading session because of the high price volatility that occurs at the start of New York stock market trading time, about 2.30 pm local time.
Data seen on Twitter feeds show that price volatility for the world’s flagship currency by market capitalization is highly correlated with the opening of American financial markets.
In addition, other trading sessions like the London and Asian financial market openings have considerably little impact on BTC’s price volatility.
READ ALSO: How BTC Whales can push BTC market value to $1 trillion
“Can we just halt $BTC trading during Asia + Euro hours,” a crypto trader, Hsaka, said uploading evidence, which relates to the previous few days on U.S. exchange, Coinbase.
Can we just halt $BTC trading during Asia + Euro hours. pic.twitter.com/X6hp6y9jMC
— Hsaka (@HsakaTrades) July 3, 2020
The data may have unearthed changing tendencies among BTC traders, possibly due to the increasing prevalence of institutions within the market.
Furthermore, Skew.com, a crypto analytic firm, found out that the midweek had more volatility in the BTC market than the beginning or end of the trading week. Weekends were also observed to be quiet.
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Meanwhile, data from Glassnode, a data analytic firm, showed that about 1.8 million Bitcoins are held in miner wallets around 10% of the supply (18.5million BTC). However, around 1.73 million belong to first-time miners (7+ years) and are most likely lost. That leaves only 70k BTC in the hands of current mining pools.
1.8M $BTC are held in miner wallets – around 10% of the #bitcoin supply.
However, around 1.73M belong to very early miners (7+ years) and are most likely lost.
That leaves only 70k BTC in the hands of current mining pools.
Track miners' balance live 👇https://t.co/5EIY4nDmq2 pic.twitter.com/PqM1iwZ544
— glassnode (@glassnode) July 3, 2020
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