The regulatory and macroeconomic environment has been unpalatably macabre, as 2019 will be a year investors and industry players will want to forget in hurry.
Of course, they are counting theirs loses as the Christmas period was soured by spiralling prices of basic food products, while a high inflationary environment squeezed their wallets.
Every sector wasn’t spared the pang of a scorching environment.
From a border closure that compounded the woes of consumer goods firms struggling with low consumer purchasing power and a low yield environment that undermined banks’ revenue, it wasn’t surprising that earnings result of the biggest corporate fell below analysts’ expectation.
To stoke further sell-off of shares by investors is a slew of regulations by the central bank, new rules that sent a predawn chill down the spine of bank directors and shareholders.
Despite these challenges, some companies have been able to surmount the tempest, making them the toast of analysts and investors.
These stocks will offer a lot of opportunities for investors in 2020. The companies are; Access Bank Nigeria Plc, Lafarge Africa Plc, Guaranty Trust Bank, MTN Nigeria Communications Palc, and Nestle Nigeria Plc.
Access Bank Nigeria Plc
The lender’s earnings have been growing at a blistering pace after acquiring Diamond Bank (a mid-sized bank) to emerge as the largest lender by deposit and total assets.
It is the third-largest by profit after Guaranty Trust Bank and Zenith Bank as it continues to intensify on its risk management strategies. And if it continues to record double-digit growth in earnings amid a low-interest-rate environment, it could climb its way to becoming the largest by profit.
Despite acquiring a company (Diamond Bank) with a notoriously deteriorating assets quality, Access Bank is able to keep its Non Performing Loans (NPLs) at a manageable level of 6 per cent, just shy away from the 5 per cent regulatory benchmark.
It has generated more investment profit since the beginning of the calendar year (2019) than any of its peer rivals, as it is the only bellwether to outperform the broader market.
A recent analysis of seven banks shows that only Access Bank has a positive 1 year-to Date return (YTD) and 5 year-to-date return (YTD), thanks to consistent earnings growth.
Read also: Access Bank promotes financial inclusion among senior citizens with free banking
Access Bank has the best bank stock yield on a YTD basis with a return of +45.59 per cent, that compares with United Bank for Africa (UBA), (-9.09 per cent); Zenith Bank, (-18.66 per cent); FirstBank Holdings, (-21.38 per cent); Stanbic IBTC Holdings, (-24.31 per cent); Guaranty trust Bank or GTBank (-14.37 per cent), and Ecobank Transnational Bank, (-50.0 per cent).
For the first nine months through September 2019, it is the only lender to record strong earnings growth.
Its net income increased by 44.23 percent as at September 2019, that compares with Zenith Bank’s (+4.53); GTBank’s (-3.35); Stanbic IBTC Holdings (-7.03 percent); FBNH (15.32 percent); UBA (32.32 percent), and ETI (-12.35 percent).
GUARANTY TRUST BANK PLC
Just as the lion is the king of the jungle, so is Guaranty Trust (GTBank) Bank the strongest lender in Africa’s largest economy.
Everything about the lender is superlative. Its N853.50 billion market capitalization makes it the most capitalized among peer rivals.
Investors crave for a firm that keeps cost at the barest minimum whilst generating delivering a higher return on investment.
It has a cost to income ratio of 36.90 per cent as at September 2019, this compares with 71.50 per cent for First Bank Holdings Plc; Access Bank, (63.10 per cent); Zenith Bank, (50.10 per cent); and United Bank for Africa,(60.80 per cent).
The lender has been deploying the latest technology (superb automation activities) to control costs, as evidenced by fewer branches across the country that are satisfying customers need in an efficient and expeditious manner.
GTBank has utilized the resources of shareholders in generating higher profit as its return on average equity of 32.30 (ROAE), the highest in the industry.
The lender’s shares closed at N29 as of 2:00 pm Friday in Lagos while it has a price to earnings ratio of 4.38 times.
LAFARGE AFRICA Plc
Investors brought into Lafarge Africa’s growth story after the disposal of a subsidiary helped lower debt, spurring it to the path of profitability.
The cement maker is the only company in the building material industry to make money for investors as evidenced in a positive year to date of +12.45 per cent.
That compares with Dangote Cement’s (-26.20) and Cement Company of Northern Nigeria (CCNN) (-6.70 per cent)
The rally in Lafarge Africa’s stock is simply because of its impressive financial performance as at the nine months ended September 2019.
Read also: Lafarge Africa: Confronting industry challenges with newly improved ‘Elephant Supaset’ cement
For instance, debt to equity ratio, a leverage ratio that measures the proportion of debt in the capital structure of a firm reduced to 18.67 per cent in September 2019, which is far lower than the 60 per cent and 70 per cent company expectation.
This means investors own N0.813 of every Naira of company assets while creditor own N0.186 on the dollar.
The debt to equity ratio is a financial, liquidity ratio that compares a company’s total debt to total equity. It shows the percentage of company financing that comes from creditors and investors.
A higher debt to equity ratio indicates that more creditor financing (bank loans) is used than investor financing (shareholders).
The company’s decision to diversify its energy sources has bear fruit as its total cost of production has fallen, which will further added strength to future margins.
The future is bright for the company as the government proposed copious infrastructure spend is expected to spur demand for cement.
MTN Nigeria Communications Plc
Since it listed on the bourse in May 2019, the telecommunications giant has been taking advantage of Nigeria’s burgeoning population and the proliferation of smart-phones to magnify subscriber base and earnings.
The largest mobile operator in Africa’s largest economy is using its brand name to make an inroad across the continent.
With a net income of N148.15 billion as at September 2019, MTN is the second most profitable company in Nigeria after Dangote Cement.
MTN Nigeria accounted for the largest share (42%) of total subscriptions while it recorded 488,000 new internet subscriptions in October compared with 73,000 additional subscriptions recorded in September.
Following the Nigeria Communications Commissions (NCC)’s approval of the 800 MHz spectrum band in Q2 2019, MTNN was able to increase its 4G coverage to >35 per cent.
The company’s shares closed at N105 on the bourse as of 2;00 pm in Lagos, valuing it at N2.13 trillion.
Nestle Nigeria
Arguably the most successful consumer goods firm in the country. Nestle Nigeria has been using its brand name, diversified product portfolio, and strong distribution network to surmount the headwinds.
It has the strongest margin and profit expansion among peers. In short, it is the most profitable consumer goods firm in the country
The consumer goods giant’s revenue growth can be ascribed to consistent investment in the company’s brand, marketing and route-to-market initiatives which are delivering stable demand for its products
The growing sales volumes of flagship product: Maggi, Milo and Nescafé are the key drivers of revenue growth with average prices largely unchanged year-to-date.
Nestle robust cash-flow and steady dividend payment have earned it BUY Ratings from investment houses across.
The company’s shares closed at N1,430 as of 2:00 pm Friday in Lagos, valuing it at N1.02 trillion. Its stocks yield 4.40 per cent in the dividend.
