The Nigerian equity market has continued its bullish start to the year as it posted gains in February, despite global macro-economic worries. The All-Share Index (ASI) in the month of February has gained 1.65% for the month starting at 46,624.67 basis points to ending at 47,394.53 basis points.
The market capitalization also grew in similar fashion from N25.1 trillion at the beginning of the month only to end the month trading N25.5 trillion, representing a 1.67% gain.
It is still earnings season in the market and the month of February has seen a lot of the listed companies on the exchange release their financial report for the period. Having a cursory overview of the results released so far, we have seen recording breaking performances by some companies.
After witnessing MTN Nigeria’s stellar revenue generation in January 2022, we now see Dangote Cement, the cement producing giant of Africa, owned by Africa’s richest man, Aliko Dangote, doing the same. The company reported a 32% increase in its profit to N364 billion. The firm also increased its dividend payout by 25% compared to the previous year.
Impressive performance in the banking and manufacturing sectors
- Banking giant, Zenith bank, also posted impressive profits as it was able to increase by 6.07% despite the inflationary concerns of 2021. Dangote’s competitor, Lafarge PLC also posted an impressive 65% growth in profit to approximately N51 billion.
- Another impressive performance was seen by United Capital, which grew its profits by 44.14% to N11.26 billion. United Capital is one to be noted as the month of February has seen its share price appreciate by 25.90% due to an attractive dividend yield which currently stands at 11.32%.
- Speaking on the SWOOTs, collectively they were able to grow their market capitalization by N195.7 billion, representing a 1.09% increase from N17.9 trillion at the beginning of the month to N18.1 trillion on the last day of February 2022.
- The SWOOTs now account for 70.96% of the total market capitalization of the stock exchange. Notably, in the month of February, the increase seen is majorly attributable to the 4.95% increase in Dangote Cement’s share price and market capitalization.
- Asides from Dangote Cement, we also saw a marginal 1.77% increase in MTN Nigeria. Due to Dangote Cement’s weight among the SWOOTs, representing 25.71% at the end of February, the SWOOTs collectively were able to post gains despite declines seen from Airtel Africa and BUA Foods.
The month also saw a record-breaking acquisition by Seplat Energy PLC. The company announced an agreement to acquire Mobil Producing Nigeria Unlimited (MPNU) from Exxon Mobil Corporation, the world’s biggest oil and gas corporation and a member of the world’s Fortune 10 companies. The acquisition potentially positions Seplat to become the second largest oil company by million barrels of crude oil equivalent (MMboe) in Nigeria. Year-to-Date, Seplat’s share price has gained 45.51%.
The Nigerian stock market has managed to end the month of February bullish despite the ongoing Russia-Ukraine war. On the 24th day of February, Russian President, Vladimir Putin, announced a special military operation into Ukraine, marking the beginning of Russia’s invasion of Ukraine. Many exchanges around the world have mixed reactions to the current global economic crisis that comes along with the war. The NGX for example, has gained marginally by 0.33%, since Putin’s announcement, adding 153.52 basis points to its All-Share Index.
What the experts are saying
Speaking with the CEO of Qualinvest Capital, Adebayo Teriba, he shared some stocks that he is bullish on. He stated, “Ardova is my top choice for the month. Although its results were not encouraging as it posted negative returns for 2021, I believe the stock still has potential. Investors have reacted negatively to the report which presents a buy opportunity. Ardova made some acquisitions last year that do not currently reflect on their books. I believe that these acquisitions will further boost their performance and overall value in the further.”
He further added, “I am also bullish on Dangote Sugar. Although its results were not impressive, which investors have reacted negatively to, we are seeing recovery from the selloff seen. I am also taking this as a buy opportunity because a closer look at the results reveals that the major reason for the decline is due to an increase in cost of sales which was caused by inflationary pressures seen in the price of raw materials in 2021. The firm generated more revenue than it did in 2020.
“Another stock I am looking at is Lafarge Nigeria. Although the firm declared the same dividend as it did last year despite and improved performance in its full year report, I believe there is still a lot of capital appreciation that is yet to be seen in the stock. Fundamentally, the firm has been able to deal with its loan obligations which shows a strong company. This is also evident as the firm’s EPS is currently above N3.
“Lastly United Capital. The past few weeks has seen its share price break into new highs as its price rallies due to investors reaction to its dividend payment of N1.50 per share which is the highest dividend payment the company has ever offered. I expect a price rally to at least N15 towards the mark down date because its dividend yield still stands above 10% at current prices. To add, I do not expect much movement from Zenith bank until after its mark down date. The direction of the bank is dependent on how its first quarter performance was.”
Speaking to Paul Uzum, the head of securities trading at Planet Capital, gave his own opinion on stocks investors should look out for in March. He stated, “Actions of investors in the month of march will focus on dividend play, investors will be buying equities of companies that are capable of giving a dividend yield of 7%-10% with a special focus on the leading banks – Zenith Bank, Guaranty, Access, and UBA.
“However, the market is already 10% up this year, having priced in dividend expectations in the market. So far market reaction to corporate actions from companies has been muted. Thus, I do not expect any significant market rally in the month of march, safe for isolated circumstances, especially for companies undergoing Mergers & acquisitions like Seplat, Union Bank and Honeywell.
“Seplat will likely sail to N1,100 levels, Union Bank will likely rally, with the market price converging with the acquisition price for the bank, mind you, there would be a Mandatory Tender Offer on the shares of Union Bank and Honeywell for minority shareholders. The market is keeping vigil for the corporate action of Julius Berger, the companies FY21 was spectacular with EPS of over N6, but you know investors in Nigeria are particular about dividend.
“Okomu Oil and Presco are also, stocks to watch out for, their earnings have been spectacular but investors want dividend or bonuses. Transcorp is another stock to watch out for as it seems its bad days are over, it will be right-priced during the year,” he said.
Olumide Adesina, a financial analyst at Quantum Economics also gave his thoughts on stocks to watch out for in March. He stated, “In times of growing inflation, investors should place their funds in dividend-paying stocks, particularly those that pay a dividend yield above 10%, like Zenith Bank, and which may raise their dividend payout.
“As commodity prices rise with the conflict between Ukraine and Russia distorting the market, investors should consider discounted Oil stocks like Total and Conoil. It makes sense for long-term investors to target the second quarter of 2022 to buy the anticipated dip – this would allow them to acquire the stock at a comfortable support price level that boasts a higher dividend yield.”