Despite the pandemic and decline in GDP growth numbers, the Nigeria stock market is up by 14% and 35% on year to date and 6 months respectively. Some sectors have no doubt accounted for this big move; finance, health and consumer stocks.
If you have missed the rally or have recently taken profit on your biggest stock winners, here is one consumer stock that deserves your attention right now:
NASCON Allied Industries PLC provides food products. The Company products salt, vegetable oil, tomato paste, and seasoning products. NASCON Allied Industries serves customers in Nigeria.
As Nigeria sees its fastest yearly spike in food prices this year caused by border closure, Covid-19 disruptions and the latest nationwide looting of warehouses following the EndSars protest, I think the consumer good sector is in a position to benefit from the looming food crisis.
The average price of food has surged by over 50% in the last 365 days causing food inflation to hit 16.6% in 30 months. (Source: BusinessDay)
Let’s look the fundamentals of Nascon in the last 9 months:
As of September 2020, Nascon has generated N21.8b which is 3.8% higher than N21b reported in the previous comparable period (2019) with the gross margin topping at 41.2% (vs 24.2%). This shows that for every 1 Naira of sales, the company keeps 41kobo after accounting for direct cost.
Operating margin prints at 16.5%, an impressive increase of 16% over 14.2% in the 9-month of 2019.
The company’s bottom line also went up as profit before and after-tax increased from N2.7b and N1.85 to N2.9 and 2b respectively.
Some of the highlights of this result:
- Nascon benefited from zero cost on external haulage service compared to N2.7b paid in 2019.
- Gains on other operating activities to the tune of N579m against N2m generated in 2019.
As we look forward to the company’s Q4, I think the increase in food prices, higher net forex gain and zero cost of external haulage service should support the company’s bottom line.
Market Sentiments and Technical Analysis
Nascon stock closed today’s trading session at N13.95. With the share price trading above the rising 20-day, 50-day and 100-day moving averages, the stock is considered bullish.
Besides, the performance of the stock in the last 3 and 6 months ( 45.31% and 38.81%) is also reflective of the positive sentiments driving the price.
There are two key levels I am watching closely as the stock moves northward, the first is the N15.73, a region it has resisted twice – 16th July 2019 and 20th, January 2020. We may see a bit of volatility around this region and if the price clears this level, then we are up for a bigger move to N18 – N20, that’s like an upside potential of 29% from a market price of N13.95.
Disclaimer: Kindly do your due diligence before you trade the stock.