Make no mistake, trading the stock market isn’t all about buying low, sell high, at times I make more money buying high and selling higher. But the only setback here is that you can only adopt this strategy in a confirmed bull market; a trend that reflects positive sentiments.
Now that treasury bill has finally crashed below 1% with stop rate on 91-day, 182-day and 364-day hovering around 0.34%, 0.50% and 0.98%, there is no doubt the bull will get stronger in coming months.
And if you are looking for a good stock to jump into at ceiling price, leverage on growing positive sentiments among institutional investors after a solid Q2 number, Flourmill Nigeria stock should be on your watchlist.
Flour Mills of Nigeria PLC provides food and agricultural products and services. The Company offers flour, noodles, pasta, oil and spreads, and sugar, as well as feeds, fertilizers, and logistics and support services. Flour Mills of Nigeria serves customers in Nigeria.
I had put a buy rating on this stock in January 2020 before the Covid-19 outbreak. This weighed on the expected rally as investors flee the NSE market to safe-haven assets. But I think the stock is back on track to my target but this time, straight to its 2018 high.
In its latest Q2 2021, the company reported a revenue of N355bn, which is 31.2% higher than N271bn generated in the previous comparable period. After accounting for direct and indirect expenses, profit before tax and after-tax expanded by 69% and 68.3% to N14.6bn and N9.9bn respectively.
Earnings per share also increased significantly to N2.33 (from N1.33 reported in previous comparable period)
While all the segments showed improved performance, a break down of its revenue figure shows that Agro-allied contributed most to the company’s bottom line; sales of N72b with N6.3b reported as profit after tax against N49.3bn generated in the previous year and a loss of N135m. This represents an increase of 46% and 4762% respectively.
It’s actually clear the Flourmill is reaping from its strategic investment in Agro-allied segments and increased demand for essential items.
The NSE all-share index is up by 27% in the last 6 months, but Flourmill stock crushed the index by 7% as it shows a 34% run in the same period.
Using today’s closing price of N28.2, which is above its rising 50-day and 100-day averages, the consumer good stock has appreciated by a whopping 65.88% in the last 90-days.
This tells us that investors love the stock and as we look forward to Q3 2021, the direction of the stock should align with investors sentiments.
Flourmill stock just broke out of its 2-year high of N24.18.
In 2017, the stock showed high volatility around this region before it finally appreciated to a high of N38 but not without pulling back to the 20-day moving average during the uptrend.
In July 2018, the stock gapped down to N24.18 (B) and since then it had acted as a resistance (marked by C, D and E) before breaking out at F region.
As we look forward to a bullish run after the breakout, watch out for pullbacks to the 20-day SMA as this is where I intend to buy and accumulate more units.
Recommendations: Buy at the market price below N28 or on a pullback to the 20-day SMA and exit at 28-30% profit which should be between N36-N37.