by : Oge Company Analysis, Top Gaining Stocks

How to Find Bearish Stocks That Will Recover

A stock is said to be bearish when its price has fallen successively week on week as investors react to market news. Such stock tends to fall into a low level where it becomes oversold.

Oversold means that stock prices have decreased substantially to a level sell orders aren’t strong enough to move the price down anymore. One of the overlooked advantages of stock prices in the oversold region is that they most times become undervalued and attractive to institutional investors.

As such a rare opportunity makes the stock a potential pick for bargain hunters and value investors (as long as fundamentals are intact), it is normal for prices to recover and reward early buyers.

Some Trade Examples You Should Learn From:

Zenith bank stock lost 46.25% of its value in one week (from 6th to 13th, March) – the stock dropped from N20 to N10.75, then recovered twice from that support level to N14, that’s like 40% price appreciation.

Another banking stock that rewarded early buyers as it recovers from dip was Access bank. The stock lost 40.26% of its market cap in just 9 days, from N9.04 to N5.4, before staging a comeback. You will notice that the stock rejected the N5.41 support level twice before appreciating bt 22% to N6,65

Away from banking stocks, Oando, an oil and gas stock, also validated the profit potential of an oversold stock.  Even though the stock is highly exposed to longterm debt, I discovered that the stock, having met the strategy of picking stocks at bottom prices in my video, appreciated by 10% to N2.4 with more upside potentials.

The stock recovered, after it shed some value, at N1.89 (a region it last touched in Feb 2016) which makes it a critical support level.

find bearish stocks

Picking stocks at the bottom like this is like you trying to catch a falling knife, it is extremely dangerous as prices may fall further. But you can make it less dangerous if you combine the power of technical and fundamental analysis.

Fundamental analysis is very important because only a good stock can attract bargain hunting but a bad stock can remain at low levels or support region for a long time as investors flee from unimpressive financials or negative news.

While the above analysis (fundamentals) lets you screen for potential stocks that will recover from their bottom prices, technical analysis lets you spot stocks that are appreciating from support levels. And with a combination of price action, volume and two important tools mentioned in my video, you can easily scan the Nigeria stock market in 2-5 minutes, get ideas on oversold stocks that are recovering.

This is the same strategy I used to spot GTBank and Nestle stock before I shared further analysis on why you should buy these blue-chip stocks right now.

Price Action:

Price action lets you see the movement of stock prices so you can make decisions based on recent and actual prices

Volume Analysis

Is the stock attracting investors’ attention? It is of no use following or buying a stock that isn’t rising on increasing volume, you might be trapped and eventually sell at a loss.

While this strategy isn’t 100% accurate, I have recorded huge success trading fundamentally sound stocks at bottom prices.

Like to get the full analysis? watch my short video course on your mobile or PC, click here.

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by : Oge Company Analysis

At What Price Will CCNN Stock Turnaround?

Nothing puts a smile on one’s face like a high- flying growth stock. Not only will stock in your portfolio that has returned 100%, 200% or even 500% help you build wealth faster but it also makes up for several losing stocks.

While this makes high-growth stock appealing, how can one spot such an opportunity before others? Amongst several strategies shared by top investment analyst, turnaround stock trading strategy seems to be the most rewarding of all.

What is a turnaround stock strategy?

In simple term, turnaround strategy picks temporarily out-of-favour stocks with upside profit potential. Of course, not all bearish companies offer potential turnaround opportunity, but this investing principle believes that bearish stocks with real value will always prevail regardless of the stock’s setback.

In the NSE market, one of the stocks that have been trending down week on week and has got everyone asking questions after a significant decline in EPS to 44k from N2.57 is Cement Company of Northern Nigeria (CCNN).

The company is engaged in the production and marketing of cement under the brand name “Sokoto Cement”.

In its latest financial results, the stock recorded an 82.7% fall in distributable earnings following a merger arrangement with Kalambaina Cement Company Limited 2018. Since FY2018 was released, the stock has lost up to 30% of its market value and might shed more as investors price in expected full year’s EPS for 2019 (based on 13.1 ordinary shares outstanding compared to pre-merger shares of 1.2b).

As of this analysis, CCNN stock trades for N14, 56% down from its 52-weeks high of N32.At the current market price, this may not be a stock to trade now but it does offer real value that could reward smart investors who key in at a bottom price.

Here are some key metrics that support the fundamentals of CCNN:

Continue reading “At What Price Will CCNN Stock Turnaround?”

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by : Oge Company Analysis

Is The New Access Bank Destined for Greatness?

Investors love banking stocks that beat the market index without getting ahead of its financials or risking sell-off on overvaluation. In this financial analysis, we looked at the new Access bank, short term chart analysis, and basic banking metrics to check if the recent financials support strong price growth.

What we’re looking for?

We will be looking at key areas like:

  • Net Interest and Profit After Tax
  • Efficiency
  • Return on Equity
  • Customers’ Deposit
  • Book Value Per Share

In the bank’s recent result, Access bank reported a significant growth in net interest income to N53b (from N39.6b in the previous first comparable quarter). This was largely boosted by interest on investment securities which grew by 227%.

This growth at the top level, coupled with the net gain of N6b on foreign exchange transaction, were supportive of the 86% growth in profit after tax to N41b.

On the efficiency level, a key metric that tells how the bank is able to manage its operating expenses. Access bank efficiency ratio prints at 54.6%, down from 55.7%. While this is below the industry standard of 60%, the bank needs to cut a chunk of its operating expenses to rank at per with its peer.

Return on Equity, a measure of how the bank utilised shareholder’s fund, prints at 7.1% compared with 4.5% reported in the previous quarter. This represents a 57% growth Q on Q.

Customer deposit from the newly merged entity also grew by 35% to N4.6tr which is a form of cheap money (that comes with lower interest expenses) expected to generate higher earnings from an investment in fixed income market.

The customer deposit to liability ratio, a key measure of how the bank generates cheap money is 79%, a slight increase from 77% reported in Q1 2018. The significance of higher deposit/liability to a bank is that it tends to pay lower interest on savings/term deposit compared to interest on debt instruments like commercial paper, and Eurobond.

Since we can’t ascertain the full year’s earning with the first quarter result, it makes sense to use the net asset valuation approach to estimate the value of the bank’s stock. An asset-based approach identifies a company’s net assets by subtracting liabilities from assets. The asset-based valuation is often adjusted to calculate the net asset value of a company based on the market value of its assets and liabilities.

Continue reading “Is The New Access Bank Destined for Greatness?”

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by : Oge Company Analysis

Is It Worth Buying Stanbic IBTC Despite Higher Prices?

Among the three banks trading above N20 per share and have released their 2018 full year’s result, Stanbic IBTC bags the most impressive bottom line figure having recorded a significant increase in profit after tax and EPS to N74 billion (from N48b) and N7.04 (from N4.6), representing a high double-digit growth of 54% and 53% respectively. Not only is the bank doing a great job of maintaining its market share in its core investment banking business, and generating a better than expected non-interest revenue in a tough environment but also growing shareholders’ wealth.

The question now is, How is Stanbic IBTC able to grow her earnings faster? 

Let us look at the performance of the bank in the last 4 years, 2015 – 2018 period.

Source: Financial Statement 2015 and 2016

Source: Financial Statement 2017 and 2018

Revenue

The bank’s gross earnings grew from N140b in 2015 to N222b representing 12.22% average annual growth in 4 years. This is largely driven by non-interest revenue which went up by an average of 16.17% year on year (from N56b in the last 4 years to N102b).

Interest income is also growing by an average of 16.05%.

We know that banks make money by lending at a higher rate than what they pay to depositors. Banks collect interest (the money a borrower pays for the ability to use the bank’s money) on loans and pay interest (the money a bank pays depositors for allowing their money to be held). The difference between these two rates is known as net interest margin (or ‘the spread’) and is how traditional banks make money.

Stanbic IBTC net interest margin, a measure of the bank’s profit on its interest-generating assets, is still well above the industry standard of 4%, 8% (2015), 9.3% (2016), 11.9% (2017) and 9.2% (2018). Based on its 4 years of history, it has an average margin of 9.6%.

Continue reading “Is It Worth Buying Stanbic IBTC Despite Higher Prices?”

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by : Oge Company Analysis

Why Shares of Oando is Rising Amidst Huge Debt.

The price of Oando stock has been trending higher in the last 6 days, a bullish run with no recent corporate announcements. As of this analysis, the oil stock trade for N7.25, up by 9.85% in today’s trading session with YTD return now at 45%.

Let us look at the performance of the stock on a chart and analyse the trend of the stock for short term traders who might want to buy at the current market price.

On the chart above, I added the 50-day simple moving average (SMA) to gauge market sentiment towards the oil stock. Between November 2018 and December 2018, Oando stock was resisted at the 50-day line; each time the stock trend close to average, it turned bearish. (as indicated by A, B, C and D) But, notice how that same 50-day SMA rejection (which would have occurred at the region marked E ) was broken as the price went up through the resistance with a stronger run from N4.76 (and cross above the 200-day SMA) to N7.25, 52%.

Continue reading “Why Shares of Oando is Rising Amidst Huge Debt.”

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by : Oge Company Analysis, Dividend Income Stocks

This is Why Zenith Bank Made More Profit in 2018

Zenith bank had just released its full-year result for 2018 with profit after tax coming out better than the previous year’s figure (2017).

The bank also increased its final earnings (PAT) by 11% to N193b, from N173b while gross earnings fell by 15% to N630b, from N745b.

While this isn’t a bad result, I believe a deeper look at specific figures will help us know where the bank is and possibly, future direction.

Let us look at some of the key figures and performance metrics:

  • Interest and similar income fell from N474b to N440b,  7.1% drop. No thanks to a drop in interest on loan and advances to customers

Continue reading “This is Why Zenith Bank Made More Profit in 2018”

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by : Oge Company Analysis, Top Gaining Stocks

Looking for an Undervalued Penny Stock in the Banking Sector?

While everyone is cautious about buying stocks in the NSE market on growing bearish sentiments, Sterlings bank’s stock seems to have shown some resistance last week as it appreciated by 6.67% to close at ₦1.60, from an opening price of ₦1.5. This might be one of the undervalued bank stocks to buy in the Nigeria stock market.

You are strongly advised to do you own research.

The upward move in the share price isn’t unconnected to the bank’s impressive Q3 results which showed revenue, interest income and profit on double-digit growth trajectory.

As of this analysis, the stock is selling for ₦1.65 with 1-year and YTD performance now at 57.17% and 48.15% respectively.

Analysis Recent Result

Results for the 9-month ended September 2018 show that interest income increased from ₦78.6 billion in 2017 to ₦93.5 billion in 2018, 18.9% growth.

Profit before tax jumped by 30%; from ₦6.5 billion in 2017 to ₦8.5 billion in 2018. Profit after tax increased by 38%; from ₦5.9billion in 2017 to ₦8.2billion in 2018.

In summary, the bank’s bottom line was largely supported by efficient utilization of customers’ deposit on loan and over 50% reduction in impairment charges. This is coming at a time other top tier banks (GTB, Zenith, UBA, FirstBank) are cutting down on their loan book which unsuprisingly affected interest income.

The bank has a Return on Equity 10%, Return on Asset of 1% while Net Interest Margin is 7%

Customer’s deposit, a measure of customers’ confidence in the bank, also grew by 5% to ₦723 billion from ₦684 billion. This also translated to increased lending to the private sector, as loan and advances to customers increased from ₦662 billion from ₦598 billion.

OPEX increased by 54% as the bank incurred more cost on administrative expenses.

Cash generated from operations on the Q3 report is ₦7.6 b (compared to a negative cash flow ₦100 billion in the previous comparable period)

Technical Analysis

Sterlings bank share price is trading for ₦1.65, above its 50-day average of ₦1.52 and 20-day moving average price of ₦1.43.

Generally, a stock is bullish on a short and long term when its share price is above 50-day and 200-day moving averages respectively.

With the price showing a recent cross above the 200-day SMA of ₦1.50, Sterlings bank might be set for an impressive long-term bullish run

undervalued bank stocks to buy

Valuation

Sterlings bank reported a 9-month EPS of 28k, which is 33% more than the EPS of 21k in the comparable period (2017).

Using an adjusted discount rate of 15%, an assumed zero growth on TTM EPS of 37k we assign a fair value of ₦2.46 to the stock, which is 49% above the current share price of ₦1.65.

Besides, the banking stock has a forward PE ratio of 4.45 which is below industry average; there is room for upside.

Market update

No update on

Recommendation

We assign a BUY rating on Sterlings bank’s stock.

About Sterlings Bank Plc

Sterling Bank PLC provides banking products and services to personal and business customers. The Bank offers services in corporate/commercial banking, retail & consumer banking, financial investments and management services, capital markets, insurance, and other financial services.

by : Oge Company Analysis, Mutual Funds, Treasury Bills, Bonds, etc, Personal Finance, Stock Trading Strategies

Top 7 Stocks That Could Offer Mouth Watering Returns in 2019

Best Stocks to Buy and Hold In Nigeria 2019 – Banking and Insurance Stock Recommendations In Nigeria – Best Performing Dividend IncomeStocks To Invest Your Money.

Nigeria still relies on oil as a key revenue driver but this year, the energy market has had an insignificant impact on the country’s stock market index, down year to date by 16%, despite the rising price of crude oil in the international market, now above $60 per barrel.

As we wrap up 2018 and prepare for the new year, I would like to discuss the economic indicators, and market risks that will influence equity market investment decisions and key sectors to focus on.

See – ” Sure Growth Stocks, That Started Well in 2019, You Should Buy Now

Where Are We Economically – Risk Perspective?

Nigeria relies on imported products for its daily personal and business needs as such exchange rate stability is very important to the sustainability of the economy.

This is the sole reason…

The CBN has shown its resolve to keep the Naira from weakening against the dollar at all cost, even if it’s going to starve the private sector of credit and burn through the country’s external reserve as a record price.

(Source: BusinessDay)

Foreign capital exit to high-yielding assets in the developed countries., at the same time, is expected to intensify on the back of a rising yield on US Treasuries as the Fed plans more rate hike in 2019 and growing political uncertainties which will impact the risk premium on Naira-denominated assets and put pressure on the exchange rate.

The Naira has already weakened from N360, the rate it exchanges to a US dollar at the beginning of the year, to N363.32 at the I & E windows. This, coupled with massive equity sell-offs in the local bourse, is a clear indication that foreign investors are already exiting the economy for greener pastures.

Here is a big opportunity for smart investors:

Since the CBN has vowed to protect the weakening Naira, it surely would have to find a way to reduce Naira sales at the I & E window by enticing these foreign investors with higher rates on fixed income securities like Treasury Bills and Bonds.

Using the recently concluded Auction on Wednesday, 31/10/2018, where Treasury Bills worth N145 billion were issued the stop rate on 91-day T-bills trended upwards to 10.975% compared to the stop rates at the previous auction, 10.96%, it is also visible that the apex bank has started its drive to make Naira asset attractive.

The rate of 182 days and 364 day T-bills rose to 13.49% and 14.4% respectively from 12.69% and 13.45%. I expect this to continue in the coming auctions.

With average bond yields at around 14%, the rise in T-bill yields is gradually taking us back the era of “FREE MONEY IN THE MONEY MARKET“, last seen in 2017 when the yield on short-term securities rose to 17% record level, above long-term rates. This will no doubt mount pressure on the government as debt servicing cost may rise to 69% by the end of the year.

When yields on T-bill starts rising and becomes attractive, funds that would have been channelled to private sector lending would be diverted to these safer government securities.

If CBN T-bills slow-down hurts bank’s profitability in the first and second half of 2018 financial year, it makes sense to say that the rising yield on T-bills issued will also drive the financial sector’s profitability in which the bank, insurance, and other asset managers are part of.

Offering a higher yield on short-term securities may not be the only resolves of the apex bank, it is also “upping” dollar interventions to save the Naira from devaluation but the former seems to be more effective but expensive.

Going Forward – Key Sectors to Watch in 2019

Banks

Bank lending, as shared on how bank wants to make more money, is already dipping on the account of weak economic activity and political uncertainties with big banks cutting their loan book while increasing their investment securities. In 2019, we expect banks to park more of deposit generated in T-bills.

  • My top 3 banks to watch are Zenith, UBA and GTB; they all offer attractive dividend yield and may appreciate in price.

Based on my 6 checklists for picking dividend income stocks, UBA and Zenith are my preferred dividend stocks.

Insurance

Insurance companies are also expected to invest more of the net premium income generated from policyholders on these fixed-income assets. I would advise you key into profitable insurance stocks with above average return on equity and a combined ratio of less than 100%.

  • My top insurance stock picks are Custodian Investment plc (dividend and share price appreciation) and NEM (share price).

Asset Managers

Investment firms that provide investment banking, asset management, securities and insurance services to corporations, governments, high net worth, institutional and retail clients are also not left out of the interest income from rising yield on T-bills in 2019.

  • My top picks for dividend income and share price appreciation are UBA Capital and Africa Prudential

While these best stocks to buy and hold in Nigeria 2019 have had their past profitability driven by rising yield on T-bills, it doesn’t in any way imply a BUY or SELL recommendation nor negate other listed equities, you are advised to do your homework.

One of my results – I shared an analysis of Cement Company of Northern Nigeria ( CCNN ) in February and why you should buy the stock. The price has increased from N16 to hit N31, 90%+, now at N22.

by : Oge Company Analysis, Top Gaining Stocks

This Top Gaining Catering Stock Still Has 96% Upside Potential

Investors love stocks that consistently appreciate and are still trading below their fair value estimate; we call such stock cash cow as their risk of melting down is minimal while the upside potential is high.

In my company’s analysis, I will be reviewing Newrest ASL (Airservices), a stock with an upside potential that is clearly supported by its improving financials and could reward smarter investors who key into the current price of N6. Although I started accumulating the stock at N4.95, the closing price of N6.6 is grossly undervalued when compared with its estimated fair value.

Newrest ASL Nigeria Plc provides catering and related services. The Company operates inflight catering facilities, lounges, and restaurants. Newrest ASL serves the aviation industry operating in Nigeria.

See – How I Pick Penny Stocks To Trade

The stock is up by 10.92% on YTD as investors increase their bid in today’s trading after Q3 results were released.

Fundamentals.

Newrest ASL has just released an impressive Q3 2018 results with revenue coming out at N4 billion against N2.8 billion reported in 2017, representing a 42%.

On a breakdown, revenue growth was largely supported by Inflight catering services from Lagos branch, Handling and Laundry services. The company also commenced catering services to local flights and industry which contributed a significant N93million value to the top line.

Gross profit margin fell marginally to 65% (from 67%) but well above industry standard.

Operating margin, which was negative in the previous comparable period, was also impressive at N402 million while profit after tax increased by 191% to N1 billion respectively.  Interestingly, the company had surpassed its 2017 record profit of N428 million.

Return on Equity, a measure of how the firm utilized shareholders’ fund also increased to 22% against a paltry 8.5% in 2017 while exposure to debt was scaled down as debt to equity declined from 40% to 33%.

The liquidity position of Newrest ASL as indicated by current ratio increased to 3.6 from 2.7′; the company can settle its short-term obligations with its working capital.

Cash generated from operation fell from N1.7 billion to N902 million.

Technical Analysis

The stock closed at N6.6 which is above its 20-day and 50-day moving average of N5.99 and N5.57 respectively. Technically, the stock is bullish on short-term as long as the 20-day moving average is above the 50-day MA.

While the share price is above 200-day moving average of N3.38, long-term sentiments are also positive.

Valuation

Newrest ASL didn’t only reported a 293% growth in Q3 EPS, from 44k to 173k but also surpassed previous year’s EPS of 68k. Using an adjusted discount of 15% on TTM EPS of 197k, we assign a fair value of N13 to the stock which, when compared with its current closing price of N6.6, represents 96% upside potential.

From our end, we assign a BUY rating on the stock.

by : Oge Company Analysis

Why Caverton Offshore Is a Penny Stock to Watch Closely

As of this writing, Caverton had just released its Q3 2018 earnings report with key metrics indicating that the company is on track to beat its previous year record.

The stock is selling for ₦1.91 with a YTD performance of 48.06%.

Recent Result

Results for the 9-month ended September 2018 show that revenue increased from ₦14.8 billion in 2017 to ₦23,1 billion in 2018 while operating expenses also increased to ₦14.7billion (from ₦9.7billion).

The revenue was driven by 61% growth in contracts from Aeroplane and Helicopter services.

Profit before tax jumped from ₦1.8billion in 2017 to ₦2.8 billion in 2018. Profit after tax followed suit; from ₦1.1billion in 2017 to ₦1.6 billion in 2018.

Return on Equity grew from 6.9% to 10% while Debt to Equity expanded from 1.9% to 2.3%. Although interest coverage above 2 means that the company still pay its interest obligations from operating profits, the gradual accumulation of debt should be closely watched.

Cash generated from the operation on the Q3 report is ₦10.9b (compared to ₦2.3b)

Technical Analysis

Caverton, as of this writing, is trading for ₦1.91, above its 50-day average of ₦1.90, but below 20-day moving the average price of ₦1.92. Technically, the stock may have turned bullish as indicated by the moving average crosses, backed by the company’s impressive fundamentals.

The long term sentiment is clearly bearish, except the price surges past its 200-day moving average of ₦2.24

Valuation

Caverton reported a 9-month EPS of 48k, which is 33% more than the EPS of 36k in the comparable period (2017).

Using an adjusted discount rate of 15%, an assumed zero growth on TTM EPS of 89k we assign a fair value of ₦5.93 to the stock, which is 337% above the current share price.

Market update

No update on Caverton.

Recommendation

We assign a BUY rating on Caverton’s stock.

About Caverton Offshore Support

Caverton Offshore Support Group Plc operates in the marine and aviation logistics sectors of the Nigerian oil and gas industry.

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by : Oge Company Analysis, Stock Trading Strategies

How Nigerian Banks Want to Make More Money

How Do Banks Make Money in Nigeria – Analysis of Banking Stocks In Nigeria Stock Market and How They Make Money From Loan, Treasury Bills and FGN Bonds

Understanding the business of banking isn’t an option for investors looking for good banking stocks to buy but a required process that will help you uncover and weigh profit opportunities and inherent risks.

It is easier to say that banks accept deposits from individual and corporate customers and lend to borrows at a higher rate or invest in fixed income securities but knowing which of these categories accounts for 80-90 of the profits declared is critical to selecting the right bank that is positioned to make more money and pay higher dividend per share.

A bank can be loan driven if it gives most of the money generated as deposits to qualified borrowers at a higher rate while paying less as interest expenses. On the other hand, an investment-driven bank is one that is constantly increasing and investing deposits in fixed income securities like CBN Treasury bills, FGN bonds or other risk-free securities. The return on these two (2) income-opportunities is called “interest income”

As more banks deploy advanced technology infrastructures to ease transaction processes like payments, transfers, account inquiry and statements, the fees and commissions, earned on transactions performed on their platforms, are called non-interest income.

I won’t be talking about non-interest income.

How is your bank making money?

Before investing in a bank’s stock, I always take my time to understand their key revenue drivers and align with banks that are well positioned to grow their bottom line based on economic realities.

As of this writing, some banks had just released their 9-month results and it makes more sense to use their recent results to know whether they are loan or investment-driven, this will help me analyse their revenue opportunities and industry risks.

The three key metrics to focus on are the customer deposits, loan to deposits, and loan to assets ratio.

  • Customer deposit reveals the cash held on behalf of its customers, both savings, current and term deposits.
  • Loan to deposit ratio shows the proportion of the customer deposit that is advanced to customers at a higher rate.
  • Loan to asset ratio shows the proportion of the bank’s total asset that is advanced to customers.

Guaranty Trust Bank

GTB in its Q3 results reported a total asset of N3.4tr against N3.3tr in 2017. A breakdown of the total asset showed that N1.27tr was advanced to customers compared to N1.44tr in the previous comparable period, a decrease of 11%.

The bank’s loan/asset fell from 43% to 37% which shows that it is cautious in its lending to the private sector. Investment assets stood at N598 billion against nil figure in 2017.

GTB generated more cash as the deposit grew from N2tr to N2.2tr.

Loan to deposit ratio, a metric that tells us the percentage of customer’s deposit that is advanced to borrowers, fell from 72% to 57%.

While GTB is still a loan driven bank, we can easily deduce that the bank is lowering exposure to loan risk and investing more in fixed income securities.

Watch out for rising yield as inflation and economic risks increase; this might be another opportunity to key into the bank’s stock in 2019.

Zenith Bank

Zenith bank, in its Q3 results, grew its customers’ deposit to N3.2tr (from N3tr) which is 6% growth.

The total asset as of September 2018 was N5.6tr, up from N5.1 in 2017. A breakdown of the bank’s asset showed that it has reduced its exposure to loans and advanced to N1.8tr, from N2.1. Loan/asset ratio as 25% (compared to 41% in the previous quarter).

The loan to deposit also fell from 70% to 56%.

The bank, from my analysis, is also cautious of private sector lending, rather it is gradually investing more in CBN treasury bills as evident in additional N100b injected in the short-term securities.

United Bank for Africa (UBA)

The bank in its Q3 result reported a total asset of N4.5tr, up from N4 in 2017. A break down of the bank’s asset showed that loan and advances to customers fell from N1.6tr to N1.5tr while investments securities were shored up to N1.5billion against N1.2 billion.

Loan to assets ratio is at 33% against 40% in the previous comparable period.

Based on the Customers’ deposit,  which grew from N2.17tr to 3.1, loan to deposit ratio stands at 48% (compared to 59% in 2017).

Access Bank

The bank, as of this writing, reported a total asset of N4.3tr against N4.1tr in the previous comparable period. Out of this value, loan and advances stood at N1.97tr, a slight decrease from N1.99; the bank is still focused on private sector lending.

Based on data presented, loan to asset ratio fell from 48% to 45%

Deposits from customers increased from N2.2tr to N2.4, hence, loan to deposit ratio was 82% as it maintains stance on increasing interest income from loan portfolio.

Investment securities as at the reporting period were N446 billion, up from N276 billion.

In summary, Access bank is more of a loan-driven bank but gradually building up its investment securities to take advantage of the free money in the fixed income market.

From my analysis, you will notice that Tier 1 banks are lowering exposure to loan risks, and expanding their fixed income portfolio. A smart investor should pay attention to economic risks, the biggest driver of yield in the fixed income market.

When economic risks are high, investors clamour for high yield on FBN bonds and CBN treasury bills to compensate for the risk and such earn more.

As banks build their fixed income portfolio, it is a clear indication that they want to make more money from the fixed income market and less from loan and advances, since it comes with a greater risk.

by : Oge Company Analysis, Top Gaining Stocks

This Bank’s Stock Has a 33% Upside Potential.

Wema Bank Annual Reports & Analysis of Banking Stocks – See My FInancial Result Analysis of Wema Bank and Fair Value Estimates Using Q3 2018.

NSE banking index has been worst hit by market sell-offs and we already know why: the effect of fallen yield on fixed income securities and cautious lending to the private sector, hence lower loan and advances.

Amidst these risks, Wema bank seems to be the only short-term penny stock in the banking stock I’d love to buy and resell in 2-3 months. Here is why:

The bank had just released its Q3 earnings report with key metrics showing double-digit growth.

The stock is selling for 63k with its YTD performance of 30.77%.

In January, Wema bank had an explosive run from 46k to ₦1.48, 221% growth but had since fallen to a year low.

Month to Date, the stock is up 15% which is the second month the bank stock closed higher, a sign that investors may have started accumulating the stock again.

Recent Result

Results for the 9-month ended September 2018 show that interest income from loan disbursements grew from ₦37.4 billion in 2017 to ₦38 billion in 2018 while interest expenses declined to ₦23billion (from ₦25.2billion).

Net impairment loss on financial increased to ₦477.04 (from ₦255.6), a development the bank needs to watch and manage closely.

Profit before tax jumped from ₦1.7billion in 2017 to ₦3 billion in 2018. Profit after tax followed suit; from ₦1.5billion in 2017 to ₦2.6 billion in 2018. Thanks to the well-managed operating expenses.

Wema bank generated ₦362.2b deposit compared to ₦250.9b, an increase that is tied to the bank’s growing subscribers on ALAT mobile banking app.

While tier 1 banks like GTB, UBA, and Zenith reported a lower loan and advances to customers on cautious lending, Wema bank is strategically increasing her loans to private sectors. This is evident in its recent partnership with the development bank of Nigeria.

Loan to deposit fell from 84% to 67% as the bank looks to explore the fixed income space; asset held for trading increased from ₦4.3b to ₦12.2billion.

Cash generated from the operation on the Q3 report is ₦53.3b against a negative figure reported in a similar period.

Technical Analysis

Technically, Wema bank stock’s price is below its 20-day price of 66k and 50-day moving average price of 75k which suggest bearish sentiments. As price approaches its 20-day average price, the bank’s stock may be set for some rally on the recent impressive result.

The long-term sentiment is clearly bearish, except the price surge past its 200-day moving average of 76k.

Valuation

Wema bank reported a 9-month EPS of 9.2k, which is 73.5% more than the EPS of 5.3k in the comparable period (2017).

Using an adjusted discount rate of 15%, and a projected year-end EPS of 13.2k we assign a fair value of 88k to the stock, which is 33% above the current share price.

Market update

The bank announced its partnership with development bank of Nigeria (DBN) to help small businesses access to cheaper loans of up to ₦600 million.

Recommendation

We assign a BUY rating on Wema Bank’s stock on the back of increased interest income from loan and advances and expected rise in yield on fixed income securities.

About Wema Bank

Wema Bank Plc provides commercial banking services. The Bank offers retail and corporate banking services, trade finance, treasury as well as foreign exchange operations.

by : Oge Company Analysis, Top Gaining Stocks

Is CCNN Still a Good Buy or Sell Stock?

While the overall NSE index is down by 15% or more, CCNN stock has already doubled shareholders’ wealth this year. As of this writing, CCNN’s stock year to date and one-year returns are 137.89% and 170.7% respectively. The stock is currently the best performer so far and as the government plans to rebuild northeast and finance more infrastructural deficits in that region, CCNN is better positioned to deliver impressive results this year.

Month to Date, the stock is down 26.86% as it looks overvalued. The current share price is N22, down from N31.35, its 52-weeks high.

See – How I analysed and bought this stock at N16

Recent Result

Results for the half year ended June 2018 show that revenue grew from ₦8.5 billion in 2017 to ₦12 billion in 2018 while the cost of sales increased to ₦6.6billion (from ₦5.4billion). From the result, Sales increased by 41%. On each Naira sales, the company spent less as cost ratio declined from 63% to 55%.

Profit before tax jumped from ₦1.3billion in 2017 to ₦3.6 billion in 2018. Profit after tax followed suit; from ₦1billion in 2017 to ₦2.6 billion in 2018.

Gross profit margin improved from 35% in 2017 to 45% in 2018.

Debt to Equity, a measure of financial leverage, increased from 70.8% in 2017 to 77.6% in 2018 but the increase in interest coverage shows that the company is able to finance its interest expenses with profit from operations.

Technical Analysis

Technically, CCNN stock’s price is below its 20-day price of ₦30 and 50-day moving average price of ₦27 which suggest that investors are taking profit right now. A break below the 50-day average price may set the stock up for further fall which is a great opportunity for long term investors to key into the company as fundamentals remain intact.

The long term sentiment is clearly bullish as the price is well above the 200-day moving average of ₦20.56

Valuation

CCNN reported a 2018 half year EPS of ₦2.07, which is 152% more than the EPS of 82k in the comparable period (2017). Using a discount rate of 14%, an assumed zero growth and a TTM EPS of ₦3.82, we assign a fair value of ₦27 to the stock, which is 22% above the current share price.

Market update

No recent news.

Recommendation

We assign a BUY rating on CCNN stock.

About Cement Company of Northern Nigeria

Cement Co Northern Nigeria PLC is a cement manufacturing and marketing company.

by : Oge Company Analysis

A Closer Look at May & Baker Stock

As of this writing, May and Baker’s year to date and one year return are -4.35% and 13.85% respectively. The stock’s sell-off started in 2016 after it reported a loss after tax. May and Baker’s raw materials are imported, and as such availability of forex is a key driver to the company’s bottom line; higher exchange rates lead to increased cost of sales while a lower rate is favourable.

It paid a dividend of ₦0.20 to shareholders on June 6, 2018. The dividend yield on the payment date was 7.87%

Its current share price is ₦2.49 while 52-weeks high is ₦3.42

Recent Result

Results for the half year ended June 2018 show that revenue grew from ₦4.4 billion in 2017 to ₦4.6 billion in 2018 while the cost of sales improved to ₦3billion (from ₦3.1billion).

Profit before tax jumped from ₦139million in 2017 to ₦388.9 million in 2018. Profit after tax followed suit; from ₦94 million in 2017 to ₦264.4 million in 2018. From the result, Sales increased marginally by 4.5%. On each Naira sales, cost ratio declined from 70.7% to 65%.

Gross profit margin improved from 29% in 2017 to 34% in 2018.

Debt to Equity, a measure of financial leverage, improved from 1.43 in 2017 to 0.91 in 2018. Thanks to the significant jump in retained earnings.

Technical Analysis

The above-average increase in volume shares traded last week, September 3, 2018, to September 7, 2018 (from 114,000 to 1,138,000) was an indication of fresh buying interest on May and Baker stock.

Technically, May and Baker stock’s price is above its 20-day but below 50-day moving the average price of ₦2.68. A break above the 50-day average price may set the stock up for a fresh bullish run as the relative strength index, a measure of momentum, is already at 49.

Crosses above 50, from 30, means that investors are bullish on a stock while a fall below 50 indicates a sell-off.

The long-term sentiment is clearly bullish as the price is well above the 200-day moving average of ₦1.73

Valuation

May and Baker reported a 2018 half year EPS of 26.98k, compared to 9k in 2017, a 199% increase.  This is not just an impressive growth but already covers 71% of 2017 full year’s EPS of 38k.

Using a discount rate of 14%, an assumed zero growth and a TTM EPS of 50k, we assign a fair value of ₦3.57 to the stock, which is 43% above the current share price and in a close range with its 52-weeks high.

Market update

The company is seeking additional equity capital of ₦3billion via right issues to finance expansion to more Africa countries. An application to issue 980million ordinary shares at an offer price of ₦2.50 has been filed with the NSE.

Recommendation

We assign a BUY rating on May and Baker at the current price with a target price of ₦3.5.

About May and Baker Plc

May & Baker Nigeria Plc manufactures and distributes pharmaceutical products, such as vaccines, antibiotics, and sera. The Company also sells diagnostics, medical equipment and bottled water in Nigeria.

by : Oge Company Analysis

Analysis of Dangote Sugar Refiney’s Stock

Dangote Sugar Refinery Share Price – My Analysis of Stock Performance on the Nigerian Stock Exchange and Why Should Buy Now for Short-Term Gain.

As of this writing, Dangote Sugar year to date return is -21.5%, a not-so-impressive performance that is not unconnected to the company’s revenue shortfall.

It paid a dividend of ₦1.25 to shareholders on June 20, 2018. Dividend yield on the payment date was 6.58%.

Its current share price is ₦15.7

Recent Result

Results for the half year ended June 2018 show that revenue declined from ₦118.6 billion in 2017 to ₦84 billion in 2018 while the cost of sales improved to ₦60.7billion (from ₦91billion).

Profit before tax fell from ₦25.2 billion in 2017 to ₦19.9 billion in 2018. Profit after tax followed suit; from ₦17.1 billion in 2017 to ₦12.7 billion in 2018.

From the result, Sales fell significantly by 41% as the company is faced with increased competition from sugar importers and lower sugar prices per kg. On each Naira sales, cost ratio declined from 76.7% to 71%.

Gross profit margin improved from 22% in 2017 to 27.6% in 2018.

The payment of ₦18 billion to trade partners as part of the company’s strategy to reduce debt contributed to the improved Debt to Equity ratio, from 1.10 in 2017 to 0.87 in 2018.

dangote sugar share price

Technically, Dangote stock is trading at the lower price compared to its 20-day and 50-day moving average after which portends a bearish sentiment on a short term. The long-term sentiment is clearly bullish as the price is well above the 200-day moving average of ₦9.68

Valuation

Dangote Sugar reported a 2018 half year EPS of 1.07, compared to 1.43 in 2017, a 25% decline. Using a discount rate of 14%, an assumed zero growth and a TTM EPS of 2.8, we assign a fair value of ₦20 which is 27.3% above the current share price.

Market update

No recent update on Dangote Sugar Refinery Plc.

Recommendation

We assign a BUY rating on Dangote stock at the current price with a target price of ₦18-₦20.

About Dangote Sugar Refinery PLC

Dangote Sugar Refinery PLC produces, refines, packages, and sells granulated raw white sugar domestically and regionally in Africa. The Company also plans to increase international focus.

by : Oge Company Analysis, Stock Trading Strategies

How to Pick Great Nigerian Stocks To Buy Using Quarterly Result

How To Pick Great Nigerian Stocks To Buy Using Quarterly Result – Learn How To Spot Stocks That Will Rise Faster Than Its Peers And Trade For Profit.

A lot of investors make the mistake of using a company’s annual financial statement to analyse performance and possibly know whether the company’s equities is profitable to invest in or not.  For me, I feel it’s a complete waste of time; the annual report of a company isn’t the best tool you need to pick the best stocks to buy as a short-medium term trader, even though, it contains a summary of the financial performance, what you actually need is the quarterly results.

The quarterly result is an interim report that contains the profit or loss, statement of financial position and cash flow statement of a company in the last 3 months, it’s fresh and new; you can actually rely more on it to forecast the growth pattern of your potential stock. A company’s annual report, on the other hand, lets you analyse past performance in the last one year.

Do you really think that waiting for a whole year to pass before analysing the company you invested is the best strategy to be on top of your stock investing game? Not all, you to constantly monitor current trends as it happens real-time which is only available in the company’s quarterly result.  Besides, since, the aggregation of the four (4) quarterly results makes an annual report, isn’t it wiser to always track financial result on a quarter by quarter basis?

A company that will do well in a particular year would have posted series of impressive results on its quarterly statement. As a smart short-term trader, your focus should always be on how the company had performed in the latest quarter relative to the same comparable period in the previous year.

Key points to note:

  • When you analyze the first quarter result of a stock, make sure the previous annual results are better than the preceding year.
  • IWhen you analyze the second quarter result of a stock, make sure the first quarter result is better than the comparable quarter in the previous year (by at least 25%).
  • When you analyze the third quarter result, make sure the half-year result beats the company’s previous half-year result.

Why you should follow the quarterly result:

Take a look at the financial results of companies that performed well on a year-to-year basis in the Nigerian stock market, you will notice that before the massive jump in their share price, their quarterly sales,  and profit figures were already rising faster than expected. Stocks like Dangote Sugar, Nestle, Zenith, UBA, GTB, among other top stocks reported impressive double-digit growth in their quarterly report prior to the impressive run in 2017 and if you are to spot the same opportunity today, you must focus on companies that are growing by double-digit figures too.

In this guide, I will be sharing one stock that is currently showing a double-digit run so far and analyze the performance using their recent Q1, 2018 result.  The stock is Transcorp Nigeria Plc.

I have already discussed the annual performance of this stock, check it out here

Transcorp Plc Q1, 2018

  • Revenue for Q1, 2018 was N26.3 billion against N15.7 reported in Q1, 2017 (67% growth). The key drivers are room sales,  food and beverage, energy segment of the conglomerate.
  • Cost of sales ratio declined from 56% in Q1, 2017 to 54% in Q1, 2018 while gross profit margin increased from 43.9% to N45% in the same period.
  • Interest cover remains strong at 3.5 times (from 1.82) – the company can finance its interest expenses from operating profit.
  • Profit before tax rose by 242%; from N1.7bn to N5.9bn while profit after tax expanded significantly, up from N1.4bn to N5.4bn, representing 285%.
  • Net profit margin also from 8.9% to a double-digit figure of 20.5%
  • Transcorp plc EPS figure for Q1, 2018 is up by 510%, 5.5k vs 0.91k. The company reported a half-year EPS of 3.87k in 2017 which is less than Q1, 2018 figure. By the third quarter, Transcorp should surpass its 2017 full year EPS. No doubt, shareholders are in for a bumper harvest this year if the company maintains this growth level for the rest of the year.
  • Return on equity stands at 5.3%, against 1.4% in Q1, 2017 while debt to equity declined from 88.9% to 81.9% which implies that the company is reducing its debt and earning more with shareholders’ fund.
  • Although the liquidity position isn’t impressive, there seems to be a significant improvement compared to last quarter (Q1, 2017) and I hope the company finds a way to lower their short-term borrowings.
  • Transcorp PE ratio stands at 16X, an indicator that investors are currently betting on the future potential of the company. Can this stock meet up to expectation? Watch the EPS growth, Transcorp reported an EPS figure of 11.7k, which is 631% higher than the 2.2k loss in 2016. The current Q1, 2018 is 510% higher than Q1, 2017 EPS, and had already covered the half-year EPS in 2017.  Transcorp, no doubt, is fundamentally strong and can meet up considering the higher revenue figure from room/food and beverages as the company’s hotel in Abuja is believed to enjoy much patronage from top politicians as 2019 election draws near.
  • The stock is up by 10% YTD, still outperferming the NSE index.

When you compare quarterly result like this, I bet you, spotting great stocks won’t be a challenge again because you will quickly know which company is growing at a double-digit rate ( of at least 25%), a clear sign that dividend payout is sure and since investors love fast-growing dividend income stocks like this, it is natural for demand to drive the share price upward.

On a final note, do your homework, check out the quarterly results of stocks that were ranked top performers in 2017, you will notice that they posted double-digit growth in their 2 or 3 quarterly earnings before their share price moved up.

My rule of thumb is this:

  • Sales/Revenue should be up by at least 10-15% Q on Q.
  • The cost of sales/revenue should also be stable or in a fall.
  • Profit before and after tax should also be up by at least 15-20% on Q on Q.
  • EPS  should be up by at least 25% Q on Q to beat the previous years’ annual EPS.

I hope you found this guide useful?

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by : Oge Company Analysis

Unilever First Quarter Result, 2018- Key Ratio Analysis

Unilever released its first quarter result for 2018.  see here

  • Revenue increased from N22.1bn to N25.8bn, representing 14% growth. The growth was driven by an increase in sales of the firms’ food and home care products.
  • The cost to sales ratio increased slightly to 72%, up from 71% in the corresponding period.
  • Gross profit margin also fell marginally to 27% (compared to 28% in Q1, 2017).
  • Interest coverage ratio expanded to 38.8, from 4.1 in Q1, 2017 – the company can comfortably cover its interest expenses from operating profit (EBIT).
  • Profit before tax and after tax grew by 85% and 75% respectively.
  • Net profit margin increased to 10.8%, from 7.2% reported in Q1, 2017
  • Return on equity increased to 3.5%, from 2.1% while debt to equity declined to 9.4%, from 11.2%.
  • EPS also increased from 28k to 50k, 78.5% growth.
  • As of this writing, Unilever is up by 31% YTD, outperforming the NSE index of 7%.
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by : Oge Company Analysis

Zenith Bank First Quarter Financial Result: Key Ratio Analysis

Yesterday, GTBank released its first-quarter result for 2018 which showed its interest income dropped by 3.95% to N80.77bn (N84bn in 2017) and a slight increase in net income by 7.7% to N44.67bn up from N41bn reported in 2Q1, 017. This compares to the 50.6% growth in interest income recorded last year when the yield on TB surged to an all-time high of 22%.

The result isn’t a surprise as the federal government looks to cut domestic borrowing on the back of a lower cost on foreign borrowing, a decision that isn’t unconnected to the massive drop in interest on fixed income securities to less than 13%.

While this fall is expected to pose a great threat on bank’s profitability in 2018, Zenith bank is showing no sign of slowing down as the bank’s recent first quarter result, released today, showed impressive performance on key figures.

Here is a link to Zenith bank’s Q1, 2018 result.

Continue reading “Zenith Bank First Quarter Financial Result: Key Ratio Analysis”

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