The Nigerian equity market has started the year 2022 strong. The All-Share Index (ASI) in the month of January has gained 9.15%% for the month starting at 42,716.44 basis points to ending at 46,624.67 basis points. The market capitalization also grew in similar fashion from N22.3 trillion at the beginning of the month only to end the month trading N25.1 trillion, representing a 12.68% gain.
It is also earnings season in the market and we have seen recording breaking performances by companies. MTN for example, was able to generate a total of 1.65 trillion in revenue, attributable to a major increase in its data revenue which grew by 55% in 2021. Asides from MTN, we saw the listing of BUA Foods on the exchange and its share price rallied by 33.06% in January to become a new member of the SWOOTs (Stocks Worth Over One Trillion).
Speaking on the SWOOTs, collectively they were able to grow their market capitalization by 1.57 trillion, representing a 9.64% increase from 16.4 trillion at the beginning of the month to N17.9 trillion on the last day of January 2022. The SWOOTs now account for 71.36% of the total market capitalization of the stock exchange. Notably, in the month of January, Airtel Africa overtook Dangote Cement to be the most capitalized stock on the NGX. Airtel also became the first company listed on the NGX to break through the $5 trillion mark in terms of market capitalization in the same period.
Also, during the month, the market witnessed a flipping between banking giants Zenith Bank and Guaranty Trust Holdings. For the first time since September 22nd, 2011, Zenith Bank share price traded higher than that of Guaranty Trust.
The gains seen on the NGX comes as Wall Street experienced a sell-off on its major indexes due to inflationary pressure and hawkish stance by the United States’ Federal Reserve. Asides from Wall Street, the FTSE 100 and the NIKKEI 225 also saw a sell off as supply chain crisis coupled with inflationary pressures also affected the respective indexes.
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What the experts are saying about stocks
Speaking to the CEO of Qualinvest Capital, Adebayo Teriba, he explained that some stocks have already begun their bullish raise due to investors anticipating strong dividend payments. He stated, “Fidelity bank, Flour mills and United capital have all been bullish throughout the month of January due to investors anticipating that these companies deliver good returns and ultimately, better dividend payments.”
He further added, “I expect Lafarge to do better in its full year report and that will also translate to an increase in its share price. For the banks, all eyes should be on Zenith bank and access bank. Although Access bank is trading close to its 52-week high, an improved full year report will surely propel its share price to new heights. Another stock investors should consider is NGXGROUP. This stock is also on my watch list and I would love a retracement to N19 per share before I invest in it. The breweries sector too, Nigerian Breweries and International Breweries are major players in the sector to also keep an eye on.”
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Speaking to Paul Uzum, the head of securities trading at Planet Capital, gave his own opinion on stocks investors should look out for in February. He stated, “This is earnings season and focus is on dividends. The best stocks to buy are GTCO and Zenith Bank (they will both give a dividend yield of 12%) is bought at current prices. Next is Access and UBA (with a dividend yield of 8-10%). Outside Banks, Lafarge (WAPCO) and Dangote Sugar are also fundamentally sound stocks that can give you a dividend yield of 8%.
“Guinness has been on my top recommended stock list. The company has recovered from bad times and has started posting strong fundamentals as shown in its Q1,2022 which is expected to be reinforced in its Q2,2022 expected by the end of this month. From the current price of N42, it will easily sail over N50 and move to N60 by April when it will be publishing Q3,2022.
“Other strong stocks which have significantly improved their fundamentals which will reflect in price rally this year are Transcorp, and PZ. Finally, there will be a deregulation of fuel price in mid-2022 to pave way for the smooth takeoff of Dangote Refinery in Q3,2022. That would trigger a rally in Oil & Gas stocks like Total, Conoil and Ardova. Total has a very strong fundamental at the moment which with earnings that will compete with Nestle post-deregulation. For presco and Okomu, it depends on how only good dividend can sustain their price.”
Olumide Adesina, an analyst at Quantum Economics explained that the banks are the stocks to watch in February. He stated, “Tier 1 banks like GTCO, Zenith, FBNH, UBA remain very attractive despite their recent lukewarm share price appreciation on the bias they exhibit solid fundamentals, regular dividend payouts, and high dividend yields.
“Further, consumer and brewery stocks in the NSE30 are also among my top picks, owing to the fact that they have posted substantial revenue growth in their latest earnings as the CBN continues to stimulate spending.
“However, in the medium term, significant drawdowns may be seen in these stocks, especially for those dependent on imported raw materials, due to difficulty in obtaining forex, especially considering the arrears of unmet forex demand that CBN is still grappling with at this time coupled with expected tapering of Nigeria’s economy could also mop up liquidity.”