Many stocks have made analysts BUY ratings this week as investors begin to take positions ahead of the upcoming second-quarter (Q2) 2023 earnings season. Despite last week’s negative close to equities trading, many analysts remain optimistic about equities market due to the key fuel subsidy and foreign exchange reforms.
Key reforms attract investments into equities market
At the LBS Executive Breakfast meeting, Financial Derivatives Company (FDC) analysts noted that favourable economic policies wet investor appetite for Nigerian equities. “Apex bank’s policy on FX trading strengthened investor sentiment for banking stocks. Oil subsidy removal sustains investors optimism for oil and gas downstream stocks,” they added.
They said in their July outlook that, “NGX will experience a blend of gains and losses. Strict economic policies will attract foreign inflows to the equities market”.
The FDC analysts also expect improved equity market liquidity through revived foreign portfolio participation, though noting that NGX will this month shed some gains via profit taking activities from speculative investors.
“A further hike in interest rate at the next MPC meeting could push investors back to high yielding securities. Dwindling consumer purchasing power will taper earnings and share price valuations. Squeezed consumer wallet will discourage savings and investment culture,” they added.
“Considering that there are many stocks trading at attractive discount, we expect a mixed sentiment in the market this week. However, we note the attractive yields in the fixed-income space could serve as a distraction to investors. Profit-taking might continue to take a toll on market direction,” according to Futureview research analysts in their recent note.
Stocks to buy this week
Futureview analysts want investors to buy Guinness Nigeria, Dangote Sugar Refinery, Lafarge Africa, BUA Cement, and Fidelity Bank.
These stocks and others rated BUY according to the analysts are expected to return at least 10percent above the current market price over the next 12 months.
Other stocks in their BUY list include AIICO, Access Holdings, Nestle, Nigerian Breweries MTNN, UBA, NEM Insurance, and Axa Mansard. Also, over the next twelve (12) months, they expect investors to HOLD stocks they expect range of return between 0percent and 10percent from the current market price.
These stocks are: Dangote Cement, GTCO, Seplat Energy, Fidson Healthcare, Total Energies, Airtel Africa, and Zenith Bank.
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Also, in their stock recommendation for the week Lagos-based Meristem Research analysts asked investors to buy Access Corporation, Ecobank Transnational, Fidelity Bank, Sterling Bank, UBA, Wema Bank, AIICO and Lasaco.
“We attribute the selloffs witnessed in the local bourse last week to profit-taking activities, especially on banking, insurance, and consumer goods tickers. As a result, this lowered the market prices of some stocks and presents bargain-hunting opportunities for investors.
“Also, recent disclosures in the financial services sector, including Access Corporation proposed acquisition of Standard Chartered’s banking businesses in five African countries, are envisaged to spur positive sentiments in the market this week.
“Furthermore, we do not expect a significant flow of funds away from the equities market to the fixed-income market owing to the robust interbank liquidity. Overall, we envisage that the market would close up this week”, according to Meristem research analysts in their July 17 note.
Other stocks on Meristem research BUY list are Custodian Investment, United Capital, Guinness, Nigerian Breweries, Flour Mills, Nestle, UACN, Unilever, Okomu Oil, May & Baker, Fidson, GSK, Neimeth, Lafarge Africa and MTNN.
In the same vein, Meristem Research analysts want investors to HOLD stocks like FCMB, FBNH, GTCO, Stanbic IBTC, Zenith Bank, Axa Mansard, NEM, Coronation Insurance, Dangote Sugar, Presco, Dangote Cement, CAP, Berger Paints, Seplat Energy, Total Energies and Airtel Africa.
United Capital Research analysts expect the bullish sentiments to resume in the equities market this week “as investors will look to take advantage of the low-pricing of stocks (from last week’s selloffs) in the market. Lastly, we expect investors to begin to take positions ahead of the upcoming second-quarter (Q2) 2023 earnings season”.
In their July 17, Vetiva research analysts did not rule out the possibility of a recovery in the market this week, particularly due to the steep losses recorded in the banking space last week. “Furthermore, with the Q2’2023 earnings season coming into focus, this too should drive sentiment in the space this week”.
As noted in their coverage snapshot, Vetiva analysts want investors to BUY GTCO, Zenith Bank, UBA, Access Corporation, FBN Holdings, FCMB, Fidelity Bank, Dangote Sugar, Nestle, Lafarge Africa, Dangote Cement, Julius Berger, Presco, MTNN, Seplat Energy, and Total Energies.
Vetiva research noted that these stocks they rated BUY are considered highly undervalued, “but with strong fundamentals, and where potential return in excess of or equal to 15percent is expected to be realised between the current price and analysts’ target price”. Meanwhile, they want investors to HOLD stock like Okomu Oil Palm, saying they consider it correctly valued with little upside or downside, “and where potential return between +5percent and +14.99percent is expected to be realised between current price and analysts’ target price”.
