Vetiva expects growth in Industrial and Construction sectors

Vetiva Fund Managers limited expect growth in the Industrial and Construction sectors taking into consideration the proposed increase in CAPEX spend by the Federal Government.

In recent times, various events have fuelled investor fear in Nigeria: starting with the tightening and likelihood of further rate hikes by the United States Federal Reserve; to the downturn in the Chinese economy; to “lower for longer” oil prices; then to the tight FX supply leading to the depreciation of the naira in the parallel market.

In analyzing companies invested in, Vetiva take into consideration the fundamentals of the economy and the industry then drill down to the company itself.

We have mixed expectations for the various industries. Taking a cue from GDP expectations, we expect the Agriculture Sector to continue to grow.

However, on the back of FX supply issues, the firm expects the consumer goods sector to be fairly weakened. The Financial Services Sector also remains challenged as the credit contagion from the lower oil prices and overall challenging macro economy may affect banks’ books.

Based on the above, and our analysis of expectations for individual company revenue growth, earnings, competitive advantage, liquidity and management, “we believe in the growth story portended by the Industrials and will increase allocation to key companies in the sector.

On the other hand, whilst the fundamentals of the banks may be challenging, we still see value in some Tier-I banks as they have remained largely undervalued and present attractive entry points”.

The firm had started the year with a “cautious approach” to investing, and a focus on capital preservation. However, with most investors and analysts seemingly singing the “conservative stance” track, we thought it will be good to take a step back to reassess whether the current “conservatism” theme is being ruled more by fear or fundamentals.

HOPE MOSES-ASHIKE