Stocks on our Buy/Sell/Hold list are picked from the top gainers and losers of the prior week, as well as various analyst reports
International Breweries: HOLD
Recent Results: Results for the nine months ended September 2018, show that revenue increased from N36.5 billion in 2017 to N83.3 billion in 2018. The firm however recorded a loss before tax of N9.1 billion in 2018, as against a N3.1 billion loss in 2017. It made a loss after tax of N7.1 billion in 2018, as against a N1.4 billion profit after tax recorded in 2017.
Current Share Price: N16.7
Price to Earnings Ratio: NA
Price to Book Ratio: 4
Year to Date Return: -45.25%
One Year Return: -62.05%
Analysts at FBNQuest have an ”Underperform” rating on the stock. They have a target price of N28.2, which represents a potential upside of 52.1% from the stock’s price of N18.6, 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 N38.1, which represents a potential upside of 105.4% from the stock’s price of N18.6, as at when the report was prepared.
International Breweries is a HOLD in Nairametrics’ opinion. Though the company has yet to release its full year 2018 and Q1 2019 results (nor given guidance as to when they will be released), it will most likely record a loss.
Information from the parent company’s full year 2018 results however, show that the Nigerian unit had a healthy double digit growth.
The stock has also yet to significantly decline, to warrant entry.
Presco Plc : HOLD
Recent Results: Results for the first quarter ended March 2019 show that revenue dipped from N6.5 billion in 2018 to N5.5 billion in 2019. Profit before tax fell from N3.4 billion in 2018 to N2.5 billion in 2019. Profit after tax also declined from N2.5 billion in 2018 to N2.1 billion in 2019.
Current Share Price: N50
Price to Earnings Ratio: 13.07X
Price to Book Ratio: 1.9
Year to Date Return: -21.88%
One Year Return: -28.67%
Analysts at FBNQuest have a “Neutral” recommendation on the stock. They have a target price of N66, which represents a potential upside of 20% from the stock’s price of N55, as at when the report was prepared.
Analysts at United Capital have a “Buy” recommendation on the stock. They have a target price of N74.5, which represents a potential upside of 35.5% from the stock’s price of N55, as at when the report was prepared.
Presco Plc is a HOLD in Nairametrics’ opinion. The stock has underperformed the NSE All Share Index which is down 5.30% year to date. It still has room for further decline.
Dangote Sugar Refinery: HOLD
Recent Results: Results for the first quarter ended March 2019 show that revenue fell from N41.1 billion in 2018 to N31.1 billion in 2019. Profit before tax however increased from N8.3 billion in 2018 to N10 billion in 2019. Profit after tax also rose from N5.2 billion in 2018 to N7 billion in 2019.
Current Share Price: N12.45
Price to Earnings Ratio: 6.25X
Price to Book Ratio: 1.40
Year to Date Return: -18.36%
One Year Return: -29.94%
Analysts at FBNQuest have a “Neutral” rating on the stock. They have a target price of N14.9, which represents a potential upside of 40.6% from the stock’s price of N10.60, as at when the report was prepared.
Analysts at United Capital have a “Hold” recommendation on the stock. They have a target price of N16.8, which represents a potential upside of 58.5%, from the stock’s price of N10.60, as at when the report was prepared.
Dangote Sugar is a HOLD in Nairametrics’ opinion. While the stock is currently trading at a PE ratio lower than the 8.2X average on the NSE, it has not declined sufficiently to our required entry point.
Please consult a financial adviser before making an investment decision.
13.9 million Nigerian youth are unemployed – NBS
About 13.9 million Nigerian youth are unemployed as of Q2 2020.
Data from the National Bureau of Statistics reveals Nigeria’s unemployment rate as at the second quarter of 2020 is 27.1% indicating that about 21,764,614 (21.7 million) Nigerians remain unemployed.
Nigeria’s unemployment and underemployment rate (28.6%) is a combined 55.7%. This means the total number of Nigerians who are unemployed or underemployed as at 2020 Q2.
The data also reveals the worst-hit are Nigerian youths with over 13.9 million currently unemployed. In Q3 2018, the last time the report was released there were about 13.1 million Nigerian youths unemployed. Youth between the ages 15-24 have about 6.8 million Nigerians out of jobs and another 7.1 million also unemployed.
- The highest unemployment rate was recorded for youths between 15 – 24 years 40.8%,
- This is followed by ages 25 – 34 years at 30.7%.
- NCE/OND and Nursing recorded an unemployment rate of 30.8%
- The unemployment rate amongst second-degree holders (M.Sc/MS/MAdm) stood at 22.9%
- Unemployment rate as classified by Doctorate degree holders is 23.3%
What this means: The NBS also reports Nigeria’s youth population eligible to work is about 40 million out of which only 14.7 million are fully employed and another 11.2 million are unemployed. A high youth unemployment rate is synonymous with increased insecurity and poverty a situation that is also seen as a ticking time bomb.
To put things into context, Nigeria’s unemployed youth of 13.1 million is more than the population of Rwanda and several other African countries. Youth Population is also about 64% of total unemployed Nigerians suggesting that the most agile working-class population in the country remains unemployed.
The Covid-19 pandemic has also worsened the economic condition in the country making it even harder for employers to create more jobs. The private sector has relied on cutting jobs in the guise of downsizing and right sizing to reduce overheads and stay afloat.
The recent data also buttresses the high rate of Nigerians seeking greener pastures outside the country with most of them highly skilled and looking for jobs of the future. According to most recent data, in 2019 about 12,600 Nigerians gained permanent residency in Canada last year helping the country to become the fourth-leading source country of new immigrants to Canada, behind India, China, and the Philippines.
Last year, the Government of Canada revealed Nigeria ranks third in the rating of the countries with the highest number of Express Entry invitations to Canada in 2018. This is revealed in the 2018 report released by the Canada Government. According to the report, a total number of 6,025 Citizens of Nigeria received invitations to apply (ITAs) for Canadian Express Entry in 2018. It was further revealed that Nigeria is just behind China who recorded 6,248 ITAs in 2018.
Official: Imo State is unemployment capital of Nigeria
According to NBS, 75.1% of the total employable people in Imo State are either underemployed or unemployed.
Data from the National Bureau of Statistics reveal Imo State, located in the South-Eastern part of Nigeria has the highest unemployment rate in the country.
In contrast, Anambra State is the state with the least unemployment in the country with 13.1% unemployment rate. The national average for the unemployment rate is 27.1%
Imo State has an unemployment rate of 48.7% as at the second quarter of 2020, by far the highest when compared to any other state in the country.
According to the data, 75.1% of the total employable people in the state are either underemployed or unemployed.
- Total number of employable people – 2.48 million
- Fully employed people – 618, 481
- Unemployed people in the state – 593. 347
- Underemployed – 656, 394
Imo State is largely a civil service town and has been unlucky with state governors over the last 20 years. Private sector jobs are hard to come by in the serene state with most industries setting up show in nearby cities like Aba, Port Harcourt, and Onitsha.
The city was once notorious for ritual motivated murders and kidnappings but has since overcome these challenges.
Akwa Ibom State is next on the list with an unemployment rate of 1.14 million people. The state’s underemployed population is about 551k people while the unemployment and underemployment rates combined is 66.9%.
The best: The state with the lowest unemployment rate in Nigeria is Anambra State with 13.1% out of the total working population of 2.25 million people. The state was 37 out of 37 states in the ranking of unemployment by state. About 1.9 million people in Anambra State are either fully employed (1.57 million) or under-employed (384k) in the state.
Lagos State, Nigeria’s commercial capital and where most graduates rush to for jobs currently has an unemployment rate of 19.5% and sits at 27 in the state by state unemployment ladder. The data shows about 6.8 million people make up the labour force population in Lagos State out of which 3.99 million people are fully employed and another 1.5 million people are underemployed. About 870k Lagosians who are employable did absolutely nothing.
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Concentration: In terms of the concentration of unemployed people, Rivers State came first with a whopping 1.7 million people out of jobs in the state. The state as a working population of 3.9 million. Rivers State unemployment rate is 43.7 and ranks third as the worst. 21.7 million Nigerians are unemployed.
Lagos State had the most employed persona with about 3.99 million people out of a total of 35.5 million.
Julius Berger’s rebound contingent on full economic bounce back
Julius Berger’s construction portfolio includes infrastructure, industry, building, and facility services solutions.
Due to the COVID-19 pandemic as well as the economic impact of the measures put in place to slow the spread of it, many industries have experienced slower growth. The construction industry was not left out. According to reports by GlobalData, the construction output growth forecast for Sub-Saharan Africa (SSA) has been revised to 2.3%, down from the previous projection of 3.3% (as of mid-April) and 6.0% in the pre-COVID-19 case (Q4 2019 update).
The reason for the contraction was noted by GlobalData to be as a result of the global slowdown and the outbreak of COVID-19 in the region. Other factors responsible include economic headwinds such as inflation, spending cuts, widening fiscal slippages, suspension of certain projects and more that could disrupt the construction sector. This contraction is projected to be 4.3% in South and Southeast Asia while France is expected to shrink by 9.4% in 2020.
Leading Construction Company, Julius Berger, had foreseen the contraction in the industry and commenced efforts to mitigate its impact and cushion the blow. One of such efforts was the reduction in dividend pay-out. After initially announcing a dividend pay-out of N2.75K per 50K share for the financial year ended December 31, 2019 and a bonus of 1 (one) new share for every existing 5 (five) shares held, the company eventually recommended a final cash dividend pay-out of N2.00K per 50k share.
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It noted that the Group had “carefully considered the emerging social, operational, financial and economic impact of the COVID 19 pandemic, the outlook for Nigeria for the financial year 2020, and the impact on the business and cash flows of the Group.”
The company’s fears have been confirmed by its recent financials which, among other negatives, showed huge foreign exchange losses of N3.102 billion in the first half of 2020.
Q2 was the hardest
Julius Berger’s construction portfolio includes infrastructure, industry, building, and facility services solutions. With companies and nations alike revising scheduled capital expenses as a result of the shrinkages in product demand (owing to global quarantine measures), uncertainties around supply logistics as well as supply of materials, the company had gotten hit. Q1 had its own issues, but Q2 birthed a new dimension of challenges for the company.
Revenue was down 33% from N68.9 billion in Q2 2019 to N46.1 billion in 2020. There was also a huge loss in profit after tax of around 200% from a profit of N2.3 billion in Q2 2019 to a loss of N2.3 billion and this can be attributed to lower revenue, and increased losses from the company’s many investments.
Exchange difference on translation of foreign operations for the quarter alone increased by 227% to N1.4 billion in Q2 2020 from N438.5 million in the comparative quarter.
Outlook for the company and for investors
The disruptions the construction industry is currently experiencing is expected to continue for the medium-long term. Reports by Beroe Inc., a procurement intelligence firm, reveal major concerns that companies in the industry will witness profits being hurt and may even incur losses on a number of projects.
Companies having worldwide supply chains could see tier 2 and tier 3 suppliers highly affected by disruptions related to the pandemic. Worse off, it explains that construction materials like “steel, wood, plaster, aluminum, glazed partition systems, cement and cementitious products, paints, HVAC equipment, electrical equipment, and light fixtures from China are expected to be delayed.”
For the company, cost-cutting has never been more important. While there are a series of strategies it could explore to augment the challenges, its growth right now depends largely on the speed of global economic recovery. This is because both the company’s input needs as well as its output in terms of the recommencement of projects, depends on the speed with which business as usual commences and the amount of time it takes for the industry to find a new balance for its operations.
READ MORE: The “new normal” in business and economy
For investors, however, this presents a long term opportunity. Julius Berger currently trades at N15.05, falling 44.26% just within the last 3 months. The share price is also on the downside of its 52-week range (N14.42 and 22.92) and its price-to-book ratio of 0.6331 shows that the stock is undervalued.
While the company’s EPS is currently low at N2.52, investors who are willing to wait the time could find a gem in the stock particularly with the increased infrastructural needs born out of the population expansion which is taking place in many parts of the world in the years to come.