After a remarkable gain in the first-half (H1) of 2023, the Nigerian stock market is expected to continue to ride on the recent reforms as investors look forward to half-year (H1) results of companies and possible interim dividends. Going into the second half (H2), some of analysts target prices (TPs) for some stocks signal upward potentials.
In first six months of this year, equities value increased by N5.3trillion, thanks to oil & gas, banking, consumer goods, and insurance stocks.
Dangote Cement, MTNN, Airtel, Lafarge seen reoccurring picks
According to research analysts at Lagos-bed Vetiva, stocks like Dangote Sugar Refinery, Lafarge Africa, Dangote Cement, Julius Berger, Presco, Okomu Oil, MTNN, Seplat, and Total are good for investors to buy.
They believe that these stocks are highly undervalued, but with strong fundamentals, and have potential return in excess of or equal to 15percent realisable between the current price and analysts’ target price.
Though looking at the outlook for second half (H2) of 2023, Vetiva analysts said its “remains dependent on several factors, including government policies and global economic conditions”.
“With continued implementation of market-friendly measures and ongoing economic reforms, the Nigerian equity market is expected to maintain a positive trajectory. Overall, the outlook for H2’23 is cautiously optimistic, supported by the government’s commitment to bolstering the economy and attracting investments,” they added.
In their recent stock recommendation, United Capital research analysts asked investors to buy Nigerian Breweries and Guinness.
“Positive sentiments amongst investors continued to drive the rally in the market amid the depressed fixed-income environment,” United Capital research analysts noted recently.
According to them, investors should hold stocks like FBN Holdings, FCMB, Fidelity Bank, Stanbic IBTC, Zenith Bank, Nestle, Unilever, Flour Mills, Nigerian Breweries, Guiness, Dangote Cement, MTNN, Airtel, Okomu Oil, Presco, Total and Seplat.
Stock rated “Hold” are considered correctly valued with little upside or downside and have potential return between 5percent and 14.99percent realisable between their current price and the analysts target price.
“We expect the bullish sentiments in the equities market to persist on the back of the attractiveness of the market over the depressed rates in the fixed-income market.
“Also, we believe the positive sentiments around the new policies to continue to drive the rally in the market. Lastly, we expect investors to begin to take positions ahead of the upcoming of second quarter (Q2) 2023 earnings season,” United Capital research analysts said.
Also looking at Meristem Research analysts stock picks, they want investors to buy Ecobank Transnational, UBA, Africa Prudential, Flour Mills, Nestle, Dangote Cement, Lafarge Africa, MTNN and Airtel Africa. Meanwhile they want investors to hold FCMB Group, FBN Holdings, Union Bank, AIICO, Custodian Investment, United Capital, Guinness, Nigerian Breweries, UACN, Presco, Fidson, Neimeth, CAP, Ardova, and Seplat.
Meristem research analysts anticipate that the positive momentum in the market will persist this week, “hinged on investors’ optimism in the Nigerian equities market”.
Read also: Bank stocks race to 6-yr high on FX reforms
Furthermore, they said in their outlook for this week that, “Another pillar of our projection for the local bourse this week is the technical readings. Specifically, we considered outputs from the Moving Average Convergence Divergence (MACD) and the Relative Strength Indicator (RSI) which signify continuance in the positive trend, despite the ASI crossing the overbought region.
“Nonetheless, we do not rule out the likelihood of profit taking on tickers that have appreciated significantly. Overall, we expect the market to close positive this week barring any significant news that could potentially move the market in the opposite direction”.
All-Share Index reached its highest level in 15 years
At the close of trading on Friday, June 30, the Nigerian Exchange Limited (NGX) All Share Index (ASI) and Market Capitalisation stood at 60,968.27 points and N33.197 trillion compared to 51,251.06 points and N27.915trillion at the beginning of the year. The market’s six months positive return increased to 18.96percent.
“The Nigerian Exchange Limited (NGX) concluded the first half of the year on a positive note, with the NGX All-Share Index reaching its highest level in 15 years at 60,968.27 points. Despite concerns, investor confidence remained strong, driven by positive sentiments surrounding the peaceful transition of power and favourable policies introduced by President Bola Tinubu’s administration,” said Futureview research analysts in their recent note.
“The stock market witnessed a rally, breaking a four-year streak of losses in June and recording the best monthly performance in over two years. The market’s performance was influenced by factors such as increased demand for long-term instruments, changes in the foreign exchange framework, and the suspension of the Central Bank Governor.
“The equities market gained 18.9percent in the first half of the year, with market capitalisation also experiencing significant growth. The influx of local investors and favourable policies contributed to market stability and increased capital gains. The market’s positive trajectory is expected to continue during the earning season, driven by investors’ anticipation of attractive dividends and a promising yield environment,” Futureview research analysts further said.
Here are stocks that recorded impressive returns in H1’23
Stocks that exceeded 100percent return in the review six months period include MRS (+460.3percent), Conoil (+213.2percent), Eterna (+213.9percent), FTN Cocoa (+724.1percent), Transcorp (+210.6percent), Sterling Bank (+140percent), and BUA Foods (+108.8percent).
Other stocks that rallied by over 100 percent include: Unity Bank (+114.5percent), Norther Nigeria Flour Mills (+114.6percent), Lasaco (+198.9percent), Coronation Insurance (+107.5percent), International Energy Insurance (+281.6percent), Tripple Gee (+374.7percent), Geregu (+101.3percent), Ikeja Hotel (+280percent), Nahco (+185.2percent), Skyway Aviation Handling Company (+103percent), and Transcorp Hotels (+274.4percent).
Aside the above counters, investors also raised remarkable bet on banking stocks like Access Corporation (+95.3percent), FBN Holdings (+56.4percent), UBA (+61.2percent), Fidelity Bank (+60.9percent), GTCO (+52.2percent), Stanbic IBTC Holdings (+61.4percent), and Zenith Bank (+42.7percent).
Operators in the capital market had noted that the policies of the new administration under President Bola Tinubu which includes the harmonisation of different exchange rates and the floating of the Naira at the Investors and Exporters window had led to the rise in the fortunes of investors. This was against the cash crunch, soaring inflation and uncertainties in the build-up to the 2023 elections that dampened the mood of stock investors as they activated the cautious attitude to equities trading.