Analysts at Meristem Research has identified 5 stocks that could potentially earn investors a return of about 20%. This was contained in a research note sent to their subscribers/customers.

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Remember this is not an investment advice or recommendation but merely the opinion of the writers. Always consult your investment adviser or analyst should you wish to pick any of these stocks.


Meristem picked these stocks;

Meristem also provided a detailed analysis of each of these stocks and why they believe the stocks will post the returns indicated. We outlined some of the key highlights below;

Dangote Cement Plc. (DANGCEM)

  • The company has consistently grown its revenue over the years with a 5-year CAGR of 15.84%.
  • DANGCEM has been reputable for its impressive dividend culture characterized
    by consistency in dividend payment and high pay-out ratio with a 5-year average
    of 77.51%.
  • Based on our expectation of impressive earnings result and investors positive sentiments towards the counter, we arrived at a Dec2018 target price of NGN258.57 which represents an upside potential of 8.19% based on the closing price of NGN239.00 on the
    12th of June 2018

Dangote Sugar Refinery Plc. (DANGSUGAR)

  • The modest cost to-sales is already impacting operating performance, given the 31.19% in gross margin as at Q1:2018, and we expect this to underpin the company’s
    performance in FY2018.
  • Given our expectation of an impressive financial scorecard, we expect the P/E
    of the company to rise to at least 7.0x, and expect the company to trade at no
    lower than 7.5x PE by the end of the year.
  • Hence, we forecast a target price of NGN29.70, which represents an upside potential of 52.31%, based on its closing price of NGN19.50 on the 12th of June, 2018.

Honeywell Flour Mills (HONYFLOUR)

  • Honeywell Flour Mills Plc. is one of the largest flour milling companies in
    Nigeria, with a capacity of 2,800 Metric tonnes/day. Honeywell is specifically
    renowned for the production and marketing of seven key product brands which
    include: Honeywell Superfine Flour, Honeywell Wheat Meal, Honeywell
    Semolina, Honeywell Noodles, Honeywell Pasta, Honeywell Composite Flour and
    Honeywell Brown Flour.
  • The Company has invested in capacity expansion over the years, with the
    modern Tin-can Island Port and the Ikeja factories amounting to multiple billions
    of Naira. The factories are fully equipped for wheat storage, milling, quality
    control and storage of finished products.
  • Furthermore, Honeywell flour continues to be preferred amongst bakers, given
    the quality of the product.
  • Considering these, we projected a YoY increase of 60.00% in revenue for
    FY2018, and Profit-After-tax of NGN6.37bn. Also, we projected a target P/E of
    4.5x, and an EPS forecast of NGN0.76. Consequently, we arrived at a FY2018
    target price of NGN3.42. This represents an upside potential of 27.66% based
    on its closing price of NGN2.35 on the 12th of June, 2018.

United Bank for Africa (UBA)

  • In its most recent financial scorecard, the bank recorded Year-on-Year (YoY)
    growths in Gross Earnings, Profit-Before-Tax and Profit-After-Tax of 17.89%,
    4.26% and 6.20% respectively.
  • We are encouraged by recent financial performances and prudential ratios
    which suggest that the Group is well positioned. The bank has a strong dividend
    paying culture which has been sustained over the years and we believe this
    culture would be maintained going forward. The group made a final payment of
    NGN0.85, implying a payout ratio of 36.99% which rests above its five-year
    average payout ratio of 30.68%.
  • We believe the stock has a strong medium to long term growth potential and is
    on course for an impressive FY2018 financial performance. Based on our
    valuation methodologies, we expect the EPS of the company to settle at
    NGN2.93. Given our expectation of a target PE of 5.00x, we arrived at a full
    year target price of NGN14.63.

Zenith Bank Plc. (ZENITHBANK)

  • Zenith Bank is known for its impressive dividend culture characterized by
    consistency in dividend payment and high pay-out ratio with a 5-year average of
    50.39%.
  • The company has maintained its standard this year, as its FY 2017
    financial performance card shows a final dividend payment of NGN2.45, posing a
    dividend yield of 7.90%, based on its closing price on the declaration date.
  • The bank remained within all regulatory limits at the end of the financial period.
    NPL ratio remained within bound at 4.70%, CAR remained above the minimum at
    27%, liquidity ratio stayed above the minimum at 69.70% and LtD ratio dropped

Get the full Meristem report here.

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