Despite widespread subtle fears that the economic trends may not be favourably disposed to a bullish equities market this year, the market has already experienced a leap of sorts in the early days of 2020.
The market which closed the year 2020 at about -14.60 per cent negative even as the All share index stood at a disappointing 26,842.07 basis points is creating excitement again.
Ten days into the new year, the year to date return has leapt by 9.59 per cent with the ASI hitting 29,415.39. This has already created some excitement on Marina and Broad streets of Lagos.
‘This may be a good year’’, market observers are hoping.
But the economy has remained weak at a slow growth of 2.23 per cent in the third quarter 2019.
Whereas no expert can predict the market with accuracy, analysts sometimes are able hazard the picking of some stocks with potentials to reward investors with impressive returns in the short to long term. In the midst of complaints about the short comings in the management of the economy, stocks like Dangote Cement Plc, G T Bank, Nestle Nigeria, Fidelity, UBA among others have been fingered for investment.
G T Bank
As the market surge appears to resemble a bullish trend, GT Bank has gained 9.4 per cent from N29.20 per share on first trading day January 2, 2020 to close on Friday January 10, 2020 at 31.95 per share. While shareholders are not too quick to smile at the unfolding optimism, its GT Bank’s PE/ratio at 4.83 looks attractive. The bank has a history of strength which propels it to deliver strong performance indices sustainably. A reflection of the banks impressive performance is shown in the third quarter results with positive performance across all financial indices, reaffirming the Bank’s position as one of the most profitable and well managed financial institutions in Nigeria.
Profit before tax stood at ₦170.7billion, representing a growth of 3.9% over ₦164.2billion recorded in the corresponding period of September 2018. The Bank’s Loan Book grew by 9.2% from ₦1.262trillion recorded as at December 2018 to ₦1.378trillion in September 2019, while customers’ deposit rose by 5.1% to ₦2.390trillion from ₦2.274trillion in December 2018.
The Bank’s balance sheet remained resilient with Total assets and Shareholders’ Funds closing at ₦3.519trillion and ₦636.8Billion respectively.
Also, its Full Impact Capital Adequacy Ratio (CAR) remained very strong, closing at 23.6%. In terms of Assets quality, NPL ratio and Cost of Risk (COR) improved to 5.6% and 0.2% in September 2019 from 7.3% and 0.3% in December 2018 respectively. Complementing the improvement noted in NPLs and COR, it maintained adequate Loan Loss coverage of 95.2% for Lifetime Credit Impaired Loans (NPLs). On the backdrop of this result, Post-Tax Return on Equity (ROAE) closed at 32.3% while Post-Tax Return on Assets (ROAA) stood at 5.8%.
Over all, Guaranty Trust Bank plc’s continues to be best-in-class in the Nigerian banking industry in terms of all financial ratios i.e. Post-Tax Return on Equity (ROAE) of 32.3%, Post-Tax Return on Assets (ROAA) of 5.8%, and Cost to Income ratio of 36.9%. These ratios are testament to factors such as experienced Management, efficient Balance sheet structure and the general operational efficiency leverage of the Bank.
In recognition of the Bank’s bias for world class corporate governance standards, excellent service delivery and innovation, GTBank has equally been a recipient of numerous awards over the years. Some of these include Africa’s Best Bank and Best Bank in Nigeria from Euromoney Magazine, and Best Banking Group and Best Retail Bank by World Finance Magazine.
Zenith Bank international
Investors in Zenith Bank have already earned 16 per cent this year 2020 as its stock price impressively moved up from 18.70 per share as at January 2, to close on Friday at N21.95. At PE/ ratio of 3.4, the bank remains very attractive to bet on. Experts believe that Zenith Bank is one of the stocks that will wax strong this year and deliver impressive returns to its owners.
Its score card in the third quarter 2019 corroborates the position above.
In fact, Zenith Bank Plc Profit After Tax (PAT) was up 4.54 per cent to N150.72 per cent in nine months of 2019, and Profit Before Tax (PBT) grew by 5.31 per cent from N167.31 billion in Q3 2018 to N176.18 billion in Q3 2019, its unaudited results for the period ended 30 September 2019 sent to Nigerian Stock Exchange (NSE) has shown.
The bank’s gross earnings increased by 3.51 per cent to N491.27 billion from N474,607 billion recorded in Q3 2018 in Q3 2019, driven by fee and commission income and net trading income, which rose 19.09 per cent and 26.30 per cent respectively.
This was despite -5.05 per cent dip in interest income to N321.94 billion during this period, dragged down loans and advances to customers, which declined -18.16 per cent year-on-year.
Meanwhile, Zenith Bank also succeeded in its aspiration to cut down interest expenses -2.93 per cent to N107.31 billion from N110.55 billion in Q3 2018, while other operating expenses declined -6.59 per cent to N102.68 billion in Q3 2019, compared to N109.93 billion in the same period last year.
The commercial lender was able to give out 11.96 per cent more loans and advances to customers worth N2.04 trillion year-on-year as its total assets grew 6.42 per cent to N5.98 trillion.
It was able to muster 20.65 per cent more deposits to the turn of N3.95 trillion in Q3 2019 as Zenith Bank total liabilities increased 5.51 per cent to N5.11 trillion during this period.
The bank made 27.37 per cent higher provisions for its credits which went bad, amounting to N18.26 billion instead of the N14.34 billion it provided for in Q3 2018.
It was able to cut cost-to-income ratio down from 51.2 per cent in Q3 2018 to 50.1 per cent in Q3 2019, but grew Earnings Per Share (EPS) by 5 per cent from N4.58 in Q3 2018 to N4.80 in Q3 2019.
United Bank for Africa
Investors in UBA shares have scooped 16 per cent in the last 8 trading days as its price appreciated from January 2, 2020 to close at N8.40 per share on Friday January 10, 2020. A successful Pan- African Bank which made some adjustments on its board to reposition it for leadership. With a PE/ratio of 3.00, UBA stock is generating some interest on the stock exchange. Analysts have on account of its strong performance over the years fingered it as a would do well stock in 2020. The bank’s score card is impressive and commands the respect on many in the banking industry.
Despite the sluggish economic growth in Nigeria, UBA succeeded in increasing profit-after-tax by 32 per cent in the first nine months of 2019 to N81.63 billion.
The Pan-African bank grew gross revenue by 14.23 per cent to N428.74 billion, buoyed by dividend income, which shot up almost 100 per cent, causing other operating income to soar 91.46 per cent to N8.07 billion, its third quarter financial statements showed.
However, interest income only increased 10.77 per cent to N297.90 billion, while fee and commission income was up 24. 90 per cent to N86.53 billion, helped by 71 per cent rise in Credit-related fees and commissions.
While UBA spent 17. 55 per cent more as interest income expenses, amounting to N138.99 billion, it cost N23.24 billion to raise its fees and commission income, which was 27.49 per cent higher than it spent during the same period last year.
The bank had a total Assets of N4.96 trillion, an increase over the N4.87 trillion recorded in December 2018. Customer Deposits also grew to N3.37trillion, while shareholders’ fund rose 10.5 per cent to N555.53 billion.
Commenting on the results, the Group Managing Director, UBA Plc, Kennedy Uzoka, said: “The resilience of our business model and our focused growth of earning assets has yielded a 10.8 per cent growth in interest income. In addition to the commendable yield on interest earning assets, we also achieved a 22.1 per cent growth in non-interest income, driven largely by the increased penetration of our superior digital banking offerings, credit expansion, remittances and other lifestyle transactional services.”
“UBA remains committed to its vision of becoming the undisputed leading and dominant financial services institution in Africa. We will continue to innovate and lead in all our business segments, whilst delivering top-notch operational efficiencies and best-in-class customer service. We are beginning to realise early gains from our ongoing Transformation Program and I am indeed excited about the days ahead,” Uzoka stated.
Nestle Nigeria Plc
Though Nestle Nigeria’s stock closed flat in the last 8 trading days at N1,469.90 per share, it is a blue chip given its antecedents. It is the highest valued stock on the Nigerian Stock Exchange with history of sustained payment of dividends to its shareholders. Though it can prove to be illiquid sometimes, but investors in its shares hardly sell their stake. Nestle Nigeria belongs to the F&B family with strong fundamentals.
Nestle Nigeria recorded a revenue of N211.3 billion – a growth of 4.0 percent over the same period in the previous year and a profit after tax of N36.8 billion. Its unaudited financial statements reveal that Nestlé Nigeria Plc posted a revenue of N69.4 billion and profit after tax of N10.6 billion in Q3 2019.
Consequently, its Board approved an interim dividend of N25 per share.
Mr. Mauricio Alarcon, Managing Director and CEO of Nestlé Nigeria Plc said, “We are pleased to have again, recorded revenue growth in the increasingly volatile business environment.
“This indicates the strength of our brands and our consumers’ appreciation of the high quality affordable nutritious food and beverages we offer to Nigerians every day.
“As we approach the last quarter, we will maintain focus on efficient execution while we accelerate our marketing investments to expand the accessibility of our products.’’
Nestle Nigeria Plc began trading operations in Nigeria in 1961 and has grown into the leading Food and Beverage Company in West Africa.
It employs around 2,400 people and three world-class factories.
The company manufactures and markets a range of highly nutritious brands, including NESTLE PURE LIFE, GOLDEN MORN, MILO, KITKAT, MAGGI, NESCAFE AND CERELAC.
Fidelity Bank Plc said its gross earnings grew by 16.3 per cent to N161.4bn at the end of September 2019 from N138.7bn reported in the same period in 2018.
A statement said details of the nine-month results for the period ended September 30, 2019, released on the Nigerian Stock Exchange showed a strong double-digit growth in revenue, deposits and profitability among others.
It stated that its profit-before-tax rose by 14.7 per cent from N20.1bn to N23.0bn in the period under review.
Total deposits; a measure of customer confidence, increased by 14.0 per cent to close at N1.12tn from N979.4bn in 2018 financial year.
The Managing Director/ Chief Executive Officer, Fidelity Bank Plc, Nnamdi Okonkwo, said, “We look forward to sustaining the momentum in Q4 2019 and achieving our set targets for 2019 financial year.”
He said retail banking continued to deliver impressive results as savings’ deposits increased by 9.2 per cent to N248.9bn, adding that the bank was on course to achieving the 6th consecutive year of double-digit savings growth.
“Savings deposits now account for about 22.3 per cent of total deposits, an attestation of our increasing market share in the retail segment.”
The bank said the growth in deposits was complemented by its digital banking push which had resulted in having over 46.4 per cent of its customers enrolled on the mobile/Internet banking products and recording over 82.0 per cent of total transactions on digital platforms.
“Digital Banking continued to gain traction driven by the bank’s new initiatives in the retail lending and increased cross-selling of our digital banking products”, he added.
The statement said the non-performing loans ratio improved to 4.8 per cent from 5.7 per cent in the 2018FY while absolute NPL declined by 4.9 per cent in Q3 2019 compared to Q2 2019.
All other regulatory ratios remained above the required thresholds with Capital Adequacy Ratio at 16.4 percent and liquidity ratio at 32.6 per cent.
Dangote Cement has been tipped as one of the stocks to bet on in 2020. The company records huge sales every year. It is a popular brand that has now come to dominate the African Cement market and also now leaving its competitors far behind. Dangote Cement accounts for over 60 per cent of the cement market in Nigeria.
Whereas it declared N154.35bn Profit After Tax in third quarter 2019, its revenue also declined by 0.8 to N679 billion due high to cost of operations. The company’s unaudited result for September 30, 2019 shows that profit before tax also declined by 20.1 per cent as asset also eased by 13.3 per cent to N856billion.
Some of this can be explained. Ever since the Nigerian economy began to slip into very slow motion in growth terms, it had become difficult for firms to sustain a good profit position on the shrinking Gross Domestic growth (GDP) which stood at 2.3 percent in the third quarter of 2019.
Mr. David Adonri, a Lagos based analyst believes that the weak economy which has shrunk the purchasing power of the population caused by low wages could however be affecting the firm’s sales figures.
At the same time, the low performance had also been blamed partly on the bad roads situation and especially that of Apapa where the Port is located. The company said it lost over N50bn to bad roads and the congestion of the ports. But things may be looking up for the company given the construction of Oshodi –Apapa road which Dangote himself is handling for the government. This will ease transportation and timely evacuation of the company’s raw materials which are usually delayed at a high cost to the company.
Many industry analysts believe that the sector may also be favoured this year given the capital budget of over N2.5 trillion for infrastructure. More interesting even is the fact that the Company has just head hunted the Managing Director of its main competitor, Lafarge Cement.