GTBank, Okomu, Access, Dangote Cement, Zenith top analysts’ stock picks in 2017

Despite a scaling-back of expectations on a number of listed companies’ earnings, the shares of Guaranty Trust Bank Plc, Okomu Oil Palm Plc, Access Bank Plc, Dangote Cement Plc, and Zenith Bank Plc are among some of analysts’ picks for year 2017.

Also found in the basket of most analysts’ stock picks are Flour Mills of Nigeria Plc, Nigerian Breweries Plc, Oando Plc, and FCMB Group Plc.

With investors still suffering from a negative 6.17 percent equity market return or N603.68billion value loss in 2016, many stock buyers are eagerly searching for investment clues on some value stocks to place their money on this year.

Guaranty Trust Bank Plc, resilient in the tier-one banking space, repeatedly occurred in some analysts’ stock picks available to BusinessDay, even though in the first trading week into 2017, the share price of GTBank lost N1.16 from year-open level of N24.70 to close N23.54 Friday.

Kayode Tinuoye, head research, financials, United Capital Plc, told BusinessDay that if profit from a possible come-back of foreign portfolio investments (FPIs) post another round of foreign exchange reforms, GTBank’s strong long dollar position should be earnings-positive for the tier-one bank.

Okomu Oil Palm Plc followed, as the company is believed to ride on renewed focus and strong growth in the agriculture sector. The share price of Okomu Oil steadied at N40.17 into the year 2017.

“Okomu’s strong sales growth was mainly responsible for the growth in earnings. We believe the strong growth in palm oil sales was mainly as a result of expansion plans by the firm. In the past, Okomu management expressed plans to aggressively expand the company’s palm oil plantation.

“We also suspect that weaker competition from imports due to foreign exchange devaluation, helped Okomu gain share and boosted its topline”, said the Jumoke Okeowo-led team of analysts at FBNQuest.
On an annualised basis, the nine months sales of Okomu Oil Palm were on course to meeting analysts’ consensus Full Year (FY) estimates of N13.2billion.
On a nine-month basis, Okomu sales grew by 41 percent year-on year. Profit before tax (PBT) and profit after tax (PAT) advanced by wider margins of 100 percent and 89 percent respectively, due to the strong sales growth.
Presco, which also operates in the agricultural sector like Okomu oil, is also on the recommendation list of investment analysts.

“Their numbers are good and Presco and Okomu both outperformed the market last year. The earnings potentials are impressive, as demand for their products are on the increase. There are limited imports of their products because of the foreign exchange issues. The high prices of their product are reflected in the impressive margins they posted in the last year. They are currently expanding their capacity to meet increasing demand. Favourable government policies also mean that the companies’ bottom line is poised for increase” said analysts at Cordros Capital.

Research analysts at Capital Bancorp Plc favoured Dangote Cement Plc in their top stock picks for 2017. The top-line numbers of Dangote Cement Plc in its nine months ended September 30, 2016 came in strong, though the bottom-line was negatively affected by higher costs. In just four trading days into this year, the share price of Dangote Cement Plc lost N6.99, from year open level of N173.99 to N167.

“New pricing and complete elimination of Low Pour Fuel Oil (LPFO) is set to boost Dangote Cement Plc margins. Its stock appears to be trading at a rich valuation”, said Dunn Loren Merrifield research analysts.

“Although the management of Dangote Cement Plc effected a significant price hike of around 39 percent for the Nigerian cement market in late August, the combination of slower sales growth in the three month ending September  (relative to the months preceding the price review) and significantly higher fuel costs more than offset the effect of the upward review in prices,” according to FBNQuest’s Tunde Abidoye.

Access Bank is another value stock for investors in 2017 which analysts believe its good asset quality and strong non-interest revenue will support the bank’s earnings, making its valuation also attractive. Access Bank shares gained 41kobo this year, from year open price of N5.87 to N6.28.

Access Bank group’s financial highlights in the nine months period to September 30 2016 show Gross Earnings of N274.468billion from N257.590billion in the nine months period of 2015, an increase of 7 percent.

Profit Before Tax (PBT) increased by 19 percent to N72 billion from N60.4 billion; while Profit After Tax (PAT) also rose by 19 percent to N57 billion from N48 billion.

Another favoured stock is Flour Mills of Nigeria Plc. The inclusion of Flour Mills of Nigeria in the 2017 stock picks results from analysts’ view that significant efforts at domesticating input sources should begin to pay off, thereby enabling the company to thrive despite foreign exchange shortages. Flour Mills Nigeria Plc lost 1kobo in the first trading week into 2017, from N18.49 to close Friday at N18.48.

Flour Mills of Nigeria half-year results shows that sales expanded by 43 percent to N136billion.

“A diversified product portfolio by Flour Mill should support growth in a challenging year”, United Capital analysts said.

Zenith International Bank Plc is another value stock for investors in 2017. Zenith Bank shares gained 2kobo into this year, from N14.75 to N14.77.  Zenith Bank’s nine months results came in strong with profit after tax growing by  151 percent  to N83billion in the nine months ended September.

Another top pick stock is Nigerian Breweries Plc. “Nigerian Breweries defensive attribute and foray into new low tier beer market should support top-line growth, despite foreign exchange challenges and pressured consumer wallets”, United Capital analysts said. Nigerian Breweries Plc lost N5.99 in the first trading week of 2017, from N147.99 to N142

United Bank for Africa Plc (UBA) is also another pick for analysts who say that the bank’s well diversified operations across Africa give it a competitive edge and dilute the headwinds in any particular market.

Dangote Sugar is another preferred stock for investors.  “ The company is a big player in the market and controls significant market share. The tight foreign exchange situation in neighbouring countries opened the market in those countries to the company. Earnings growth for the company is tight but better than that of other consumer goods companies. The company is a market leader and therefore, a price maker” said analysts at Cordros capital.

Analysts at Cordros Capital are also recommending Cadbury Plc.
“We think Cadbury is presently under-priced, given that their fundamentals are good. The management is always working on branding, formulation and it has a discount to Nestle’s products. We expect that the market will shift away from Nestle to Cadbury, given the challenged disposable income of Nigerians. Moreover, the company has introduced new products such as the Trident sugar-free chewing gum”
Lafarge Wapco is among preferred stocks for the year, as analysts forecast that they are going to overcome their foreign exchange chalenges for the year and improve on their performance.
“The market has overreacted to the challenges and it is anticipated that the factors that impeded their performance will be reversed in the first quarter of 2017.  This will lead to improved performance, as the cement sector remains attractive.”

United Capital also made the list of stocks that can make investors money this year.
“High dividend payout which we expect to be sustained makes the stock an investor’s delight” said analysts at Planet capital.

African Prudential is also on the recommendation list.

“The stock moved by over 20 percent last year and though there we expect mild profit taking by the beginning of the second quarter, we are of the opinion that performance will be strong as the high dividend payout of the previous year is sustained.”

Developments in the global oil market, liquidity level in the foreign exchange markets, and realignments in fiscal and monetary policies will dictate trading pattern and performance of Nigerian stock market in 2017.

Iheanyi Nwachukwu and Innocent Unah