FBNH rallies 17 percent in 3 wks but how far can it go?

Nigeria’s biggest bank by assets FBN Holdings has rallied by some 17 percent in the past 3 weeks.

The stock closed on Friday at N3.51 per share and currently trades at 0.2x book value or the theoretical price that shareholders would get if all assets were sold and liabilities paid-off.

FBN Holdings is a particularly interesting bank stock.

It has the largest asset base of any Nigerian bank (N5.06 trillion) as at Q3 2016, which is a large lever it can pull to boost profits.

The NSE banking index has lost -3.27 percent (to Dec. 2), while the NSE all share index has returned -10.29 percent this year.

So how far can FBNH run?

FBNH just crossed the 200 day moving average (MA) for the first time in more than a year (see chart), which is a particularly bullish indicator for stock technicians.

The stock seems to have bottomed and consolidated at the N3 per share mark for close to 4 months (August to December).

The Relative Strength Index (RSI) shows an overbought reading meaning there could be some light pull back in the near term to perhaps the 200 MA which should act as support.

FBNH has been rallying as the NSE index falls and sentiment towards the stock is generally negative to neutral by analysts.

This is a major bullish signal in our opinion.

For investors any further upside will be by catalysed positive fundamental news from full year 2016 earnings, however the stock should remain on investors watch list and radars for potential sustained move up.

PATRICK ATUANYA