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Top-5 Nigerian Equities League for the week commencing 3 February, 2014

Category: Stock PICKS


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Top-5 Nigerian Equities League for the week commencing 3 February, 2014

Monday, February 3, 2014 / Morgan Capital**

Bears tighten grip as the market trades a full week in the red.

The Nigerian Equities Market lost on all trading days in the just concluded week as negative investor sentiment pervades the market. Banking stocks continued their downward slide as investors’ price in the impact of the hike in CRR hike for public sector deposits from 50% to 75% into their earnings expectations for the Banks.

The shares of Oando PLC was not left out of the onslaught as investors reacted to the announcement of the Company to undertake another round of capital raising (Rights Issue) to raise N50Billion and a further N200Billion either through debt or equity. Investor apathy for Oando shares stems from the uncertainty of whether or not the Company can meet the January 31st 2014 deadline of concluding the Conoco Philips deal and if it has really raised enough funding to conclude the asset acquisition considering the repeated capital raising / debt acquisition to conclude this deal. Also, the reality of the rising debt profile of the company and the impact of the huge cost of fund (interest charge) on profitability and the declining price of crude in the international oil market with its impact on the projected revenue also contributed to the negative investor sentiment towards the stock. Despite Managements efforts at assuaging the fears of investors, the price of the stock recorded major price declines (over 20%) during the just concluded week

Going into the new week, we expect the onslaught on banking shares to subside as some of the banks have opened good entry windows.

We urge our subscribers to continue to invest based on the principles of sound fundamentals at good entry prices bearing in mind that in a bear market, stocks with good fundamentals have the capacity to retain value, and even when their prices crash, they are the quickest off the mark in price appreciation when the market sentiment becomes bullish.

Top 5 Nigerian Equities League for the Week commencing [03/02/2014]


Commentary

Dangote Sugar retains the top spot this week on our league table. The company currently has an upside potential of 23.28% from current price to our estimate fair value. Our dividend forecast for the stock is 60K

Diamond Bank makes its debut on the top-5 this week, making it straight to the second position on the league table. The mid-tier lender is one of the Banks that was only slightly affected by the effect of the CRR hike to 50% and this is due to the Banks strong retail focus. (See our report on the impact of the CRR hike on Nigerian Banks by clicking the link for details http://morgancapitalgroup.com/pdf/morgan_capital_equity_research_impactof_crr.docx_ .pdf . We expect the Bank to consolidate on this strategy to deliver sustainable returns to investors going forward. The upside potential of the stock is 17.92%

Julius Berger comes in at the third on the log this week. The Company currently has an upside potential of 14.61% and our dividend expectation is N3.00. The Company was in the news recently when the US Justice Department charged the Company N5.1billion ($32million) for bribing Nigerian Officials to obtain and retain contracts contacts related to work for the Eastern Gas Gathering System (EGGS), a project valued at $387million. We think this may have impacted on the price given the expected cash outflow. However, it is our opinion that the Company may have already adjusted its cash flow to reflect this position as the case has lingered for quite a while before the ruling was delivered. We therefore do not expect any huge unexpected cash outflow for 2013.

7UP comes in at the fourth position on the top-5 league table. Our dividend expectation for the stock is N3.00 and our upside potential is 14.29% from current price

FBNH, drops to the bottom of the log for this week with a potential upside of 14.19% from current price to our estimate fair value. Our dividend expectation for FY 2013 is N1.00 per share



For other stocks that make up the top ten on our league table and other company specific research reports, investors can send their enquires to customercare@morgancapitalgroup.com. Our research is based purely on fundamentals and emerging verifiable information.

Kindly note that our league table is subject to change based on fluctuations of market prices and/or a review of our fair value estimates. These reviews are based on fundamentals and verifiable information coming from the companies
.

Click Here to Download Full Report

Related News:
1.
Top-5 Nigerian Equities League for the week commencing 6 January, 2014
2.
Top-5 Nigerian Equities League for the week commencing 13 January, 2014
3.
Top-5 Nigerian Equities League for the week commencing 20 January, 2014
4.
Top-5 Nigerian Equities League for the week commencing 27 January, 2014

** Disclaimer/Advice to Readers:
While the website is checked for accuracy, we are not liable for any incorrect information included. The details of this publication should not be construed as an investment advice by the author/analyst or the publishers/Proshare. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All opinions on this page/site constitute the authors best estimate judgement as of this date and are subject to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment decision. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions. This article is published with the consent of the author(s) for circulation to the online investment community in accordance with the terms of usage. Further enquiries should be directed to the author whose e-mail is MorganCapital Group [research@morgancapitalgroup.com}



Tags: Top-5 Picks,  Nigerian Equities,  investors,  Equities market,  banking stocks,  Nigerian Bourse,  P/E multiples,  JBERGER,  FBNH,  DANGSUGAR,  7UP,  TOTAL, 



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