Top Gaining Insurance Stocks To Watch This Week – 23nd April

The NSE All-Share Index and Market Capitalization depreciated by 0.28% to close the week at
40,814.89 and N14.743 trillion respectively.

Similarly, all other indices finished lower with the exception of NSE CG, NSE Premium, NSE-Main
Board, NSE 30, NSE Banking, NSE Oil/Gas, and NSE Pension indices, which appreciated by 1.08%,
1.38%, 0.54%, 0.13%, 2.34%, 0.73% and 1.42% respectively.

See – NSE weekly stock market report here

As usual, we select our top stocks to watch from a pool of stock that closed last week on a positive note. But, something is quite interesting about my pick this week; the two stocks, I am going to buy and hold for two weeks are insurance stocks.

Insurance like I shared in my post on how I analyse insurance stocks, is one of the financial products that are difficult to sell in Nigeria; the adoption of insurance policies in this part of the world is very low which is even evident in the sector’s contribution to GDP growth. However, this doesn’t mean you should avoid the big opportunities inherent in the sector; some companies are actually doing well. I shared the 3 key ratios to uncover top insurance stocks in that post and when you combine that with the potential of trading penny stocks, I still feel, insurance is a sector to look into but not without caution.

Let’s see the two insurance stocks on my radar:

Custodian And Allied Insurance Plc

The stock open at N4.9 to close at N5.09,  3.8% growth but here is why I picked the stock:

  • It is trading at an all-time high right now.
  • Investors’ sentiment is largely positive as the latest financial result looks good, no wonder the stock is up by 33.9% YTD, outperforming both insurance and NSE indices.
  • Technically,  the stock is trending up on the daily, weekly and monthly chart.

Top Gaining Insurance Stocks In Nigerian Stock Market

Advice:  Buy now and take profit at N5.34-N5.5.

NEM Insurance Plc

The stock gained 22k to close the week at N2.62, 9.17%. NEM is one of the most profitable insurance stocks to watch this year as the company’s result so far is impressive. I have already analyzed this stock extensively when I posted my guide on “how to trade insurance stocks“. You will recall that I ended my verdict on NEM stock as “overbought” when it traded at N2.7: there was a possible fall as investors were expected to profit.

Watch this chart closely:

Top Gaining Insurance Stocks In Nigerian Stock Market

In line with my forecast,  NEM actually fell from N3 to N2.64 (the yellow region).

Here is why and when I will buy NEM insurance:

  • The overall sentiment on this insurance stock is positive on the weekly and monthly chart but the daily chart isn’t fully bullish yet.
  • The latest financial result of NEM insurance is on point.
  • NEM insurance is up by 66.4% YTD, outperforming the insurance and NSE indices.

Verdict: Wait for the stock to show more bullish sign this week and buy at N2.8 with a target profit of N2.94-N3.08.

That’s all for now. I hope you will follow this two insurance stocks in the next two weeks to see how they performed.

Top Gaining Stocks to Watch This Week, 3rd April

The NSE All-Share Index and Market Capitalization appreciated by 0.08% to close the week at 41,504.51 and N14.993 trillion respectively.
Similarly, all other indices finished lower during the week with the exception of the NSE Premium, NSE Consumer Goods, NSE Lotus II and NSE Pension Indices that appreciated by 1.15%, 1.73% 1.58% and 0.34% respectively

On a weekly basis, we pick top stocks to watch from the list of previous week gainers, these are stocks we think will continue their upward move following week.

Wema Bank

The banking stock gained 24k to close at 99k (from a market opening of 75k), that’s like 32%. Technically, the stock is looking good and set to continue its move as all indicators, on daily, weekly and monthly chart, signals a buy entry.

Caverton Offshore Support

The oil stock gained 18k to close at N2.67 (from a market opening of N2.49), that’s like 7.23%. Technically, the stock has just broken a trend channel to the upside.

Continue reading Top Gaining Stocks to Watch This Week, 3rd April

One Overlooked Profitable Micro-finance Banking Stocks To Buy Right Now

Best Banking Stocks to Buy Right Now In Nigerian – Learn The Best Stock Market Investing Strategies That Tells You Top Financial Stocks To Invest In

It’s not every time you will read my recommendations on popular stocks in Oil and Gas, Banking, Consumer, Healthcare sector, today I decided to share one unpopular and overlooked financial stock no one is talking about. The amazing thing is that, when I find unpopular top-performing stocks, I am always surprised because no one is talking about it on financial news websites in Nigeria.

Which stock are you talking about? My dear, it is one Micro-finance bank’s stock, the company is a niche stock that focuses on providing financial products and services, including retail banking, loans and advances, money market activities and financial advisory services to Nigerian police. I am talking about Nigerian Police Force Microfinance bank.

Let’s see what the stock’s performance had been: In the last 6 months, 3 months and 1 months, the stock is up by 84.35%, 69.6%, and 13.98% respectively. NPF Microfinance bank’s share is N2.02 and as this writing, I expect the price to go up.

What is responsible for this growth you may ask? Let’s take a quick look at the company’s financial statement on the quarterly basis to ascertain the fundamentals.

NPF Micro-finance bank recorded growth on key figures across the board; from Q1, Q2, Q3 to audited result, the stock grew its gross revenue, interest income, profit after tax, and EPS. Besides, all financial ratios like the cost to income, net interest margin, return on equity etc indicates that the financial stock is worth paying attention to.

You can also check this post to see my practical approach to analysing banking stocks including all the metrics that will help you pick the right stocks in the banking sector. All you need to do is plug in the figures from the company’s financial statement, available on the financial section of Nigerian stock exchange website and get a quick overview of the bank’s performance.

Using the Q4 result, let’s understand the core business of NPF Microfinance bank, how they get their money, and performance metrics like return on equity, net interest margin, efficiency, loan risk, EPS and expected growth rate.

The core business of NPF Microfinance bank:

NPF has a total asset value of N15.9bn, out of which N9bn was advanced to customers and N16m held as investment securities. Without further analysis, NPF Microfinance bank is a loan driven bank it relies more on credit to generate interest income more than investment in securities.

How NPF Microfinance bank get money

Continue reading One Overlooked Profitable Micro-finance Banking Stocks To Buy Right Now

Top Gaining Stocks to Watch: 26th, March

The NSE All-Share Index and Market Capitalization depreciated by 1.11% and 0.14% to close the week at 41,472.10 and N14.982 trillion respectively.
Similarly, all other indices finished lower during the week with the exception of the NSE CG, NSE
Banking and NSE Pension Indices that appreciated by 1.07%, 3.31% and 1.67% respectively.

We draw our top stocks to watch from the previous week’s top gainers believing that they may sustain their current trend for 5 days.

Zenith Bank

Investors sold the stock despite the impressive the financial result released. Last week, it bounced back from a low of N27.6 to N30.2 representing 9.42%. The stock had just tested its support region (marked yellow) and is already trending upward on increased weekly volume.

Eterna Oil

The stock gained 7.54% last week to close at N6.13. Eternal oil stock had also bounced from the 20-moving average an increased volume. We also expect the momentum to continue this week.

top Nigerian stocks to watch

Would you like to learn how to pick stocks that will rise? click here to order my book.

SEPLAT Stocks – Best Turnaround Oil Stocks To Buy In 2018

The exceptional skills that will make you stand out in the stock market are not just your abilities to spot growth and dividend stocks, even though they are one of the big money-makers, but being able to uncover turnaround stocks that are making a huge comeback.

What are turnaround stocks you may ask? These are stocks that were affected by a temporary economic trend which eventually led to massive sell-offs and are rising again. You will see affected companies, like this, report declining sales figures on quarter to quarter basis, year on year and even make a loss, and at the end return to profitability after restructuring.

A look at Nigerian stock market

Oil and gas companies in the Nigerian stock market were worst hit by the collapse in oil price coupled with numerous attack on oil facilities by Niger Delta militant that led to low production output. This crisis was largely reflected in their share price performance in 2014, 2015 and 2016, but as the price of crude oil reversed its year-long downtrend after an agreed-OPEC output cut, we saw an increased inflow of petrodollars into the economy. Now that the activity of these militants at near zero level, some of the stocks have begun to rise again as manager of these companies had concluded facilities repairs and built alternative export routes to control future loss.

As a stock trader, I had taken time to single out one perfect turnaround stock you should focus on this year.The stock is SEPLAT

Seplat is a leading independent oil and natural gas producer in the prolific Niger Delta area of Nigeria and a leading supplier of gas to the domestic market. As a full-cycle upstream oil and gas exploration and production company, our focus is on maximising hydrocarbon production and recovery from our existing production and development assets, acquiring and farming into new opportunities in Nigeria (specifically those which offer production, cash flow and reserve replacement potential with a particular focus on the onshore and shallow water offshore areas) and realising the upside potential within our portfolio through focused appraisal and exploration activities. A strong track record and high-quality asset base Our portfolio comprises direct interests in five blocks in the Niger Delta area, four of which Seplat operates, and one further revenue interest.

One interesting discovery on SEPLAT chart is that the price pattern of the stock on a monthly chart mimics the global crude oil market price trend and NSE all share index. As of this writing, the stock is already posting weekly gain as investors’ sentiment turn positive; they had just released a full year result that beats 2016.

Here is my personal analysis that reveals the big upside potential of SEPLAT in 6 months.

Let’s talk about the company performance from 2016.

As culled from the SEPLAT’s 2016 result:

Oil price weakness continued into 2016 with Brent touching a low of US$26.01/bbl in
January. Although prices staged a modest recovery over the remainder of the year,
exiting 2016 at a peak of US$54.96/bbl following the announcement of production
cuts by OPEC members and certain other producers, they remained well below the
average of US$103.43/bbl and peak of US$128.14/bbl that was seen from the start
of 2010 to September 2014 when the abrupt decline set in.
• The challenge of adjusting to the low oil price environment was further compounded
by significant levels of price volatility in the year and uncertainty created by the overall
fragile market state.

More details about the effect of oil price on SEPLAT stock:

• Nigeria’s oil production in 2016 was severely impacted by elevated levels of militancy targeted at key export infrastructure throughout the Niger Delta, and in particular the export terminals that the onshore producers have relied upon to monetise their production.
• Seplat was significantly impacted by this and, like many other producers, was forced to halt exports via the Forcados terminal when the terminal operator, Shell Nigeria, declared force majeure on 21 February 2016 following disruption by militants to the terminal subsea crude export pipeline. The terminal remained under force majeure for the remainder of the year meaning operators reliant on that system were faced with an unprecedented level of disruption in 2016.

Financial Highlight of SEPLAT

The company’s revenue fell by 43%, from a high of N112b in 2015 to N63b in 2016 which is not unconnected to the suspension of oil export via the Forcados terminal following incessant attacks by militant. As you would also expect gross profit figure in the same period declined from a high of N49b to N16b. The huge loss on the foreign exchange market was another major driver of the N45b loss after tax in 2016.

The company had been adopting an alternative strategy to limit the impact of a possible lower price by expanding its gas business aggressively and also avoid imminent production output cut by constructing alternative export routes.

The gas business has been the single factor for consistent revenue stream throughout the period.

Current outlook and future prospect of SEPLAT:

SEPLAT is poised to deliver impressive performance in 2018 as the global oil market recovered significantly in third quarter 2017 which is responsible for the positive full year revenue growth.

Let me take you through the numbers so you will understand the continuous progress SEPLAT has made and why you should jump in now for a bumper 2018, at least the 6 months return is estimated at 48-50%.

Quarterly Report:

The company reported a decline in revenue from $83.4m to $47.3m but a significant reduction in the cost of sales, general and administrative expenses, finance cost and tax helped limit the loss after tax position from $22m in 2016 to $19m in 2017.

Financials reflect lower oil exports via the Warri refinery route whilst jetty upgrades and repairs were undertaken – Revenue US$47.3 million and gross profit US$19.1 million; 22% year-on-year reduction in G&A helped narrow operating loss to US$1.3 million; loss for the period after net finance costs US$18.3 million and loss after tax US$19.1 million – Cash generated from operations US$51.6 million versus capex incurred of US$4.9 million – Average oil price realisation US$48.34/bbl (2016 :US$35.4/bbl); average gas price US$3.05/Mscf (2016: US$2.98/Mscf)

First Quarter Opportunity in 2018

At a current estimated average oil price of $60 in the first quarter of 2018 which far better than $35 in 2016 and $48 in 2017, I believe SEPLAT will record a minimum revenue growth of 20% and stronger profit figure against the loss recorded in the same quarter last year. This should naturally drive the stock price higher.

Second Quarter Opportunity in 2018

The company grew revenue by 27% to N40.3b in 2017 but recorded loss after tax in the same period. On a half-year comparison, there was an improvement in gross and operating profit which also supported the reduced loss recognised against the previous year.

If the average oil price for 6 months remains steadily above $55, I am also forecasting a better revenue figure that will be better than the N40.3b reported in 2017. Assuming a modest 20% growth driven by a higher oil, improved production output and growing gas business, SEPLAT should deliver an estimated N48b revenue in 6 months. The planned sales of Eurobond which the company will use to finance its long-term debt at a lower interest is also a profit booster in the future as it will help lower interest repayment.

Third & Fourth Quarter 2018

If the company also maintains the level of growth recorded in Q3 and Q4 2017, then revenue for the full year 2018 should beat that of 2017.

Profit for the period before tax adjustments was US$44 million, compared to a full year loss before tax of US$173 million in 2016. This return to profitability was driven by performance in the third and fourth quarters where net quarterly profit before tax of US$24 million and US$46 million respectively offset the US$26 million loss before tax recorded at mid-year. Net tax credits of US$221 million, owing primarily to the deferred tax credits of US$224 million, increased the overall profit after tax for the year to US$265 million. The resultant EPS for 2017 was US$0.47 compared to an LPS in 2016 of US$0.29.

Maintaining the same growth in Q3 and Q4 2017 for 2018 on the basis of a $55-$60 average oil price signals a positive prospect for SEPLAT.

Estimated value:

Using the simple formula I shared on how I value growth stocks before buying again, SEPLAT is undervalued by 48%. The company reported an EPS of N144 which when divided by the 10-year average bond yield of 13% revealed an estimated share price of N1,107. What is the market price of SEPLAT? As of this writing, the oil stock is N740.

Besides, the current price-earnings of 5.34 and an assumed minimum 15% growth present a PEG ratio of 0.35 which is another indicator that SEPLAT is a good buy.

Technical Analysis:

On the chart, SEPLAT stock just surpassed the high of N700, the price it last reached before the sell-off began; this is not far from the positive investors’ sentiment towards the oil company as its return to profitability.

All my key indicators are also pointing to an uptrend; though there might be a sell-off as short-term traders take profit that should be an opportunity to buy more.

As of this writing, SEPLAT stock is part of my current portfolio.

4 Growth Stocks That Made Investors Money Last Week Ended 2nd March, 2018

The NSE All-Share Index and Market Capitalization appreciated by 0.72% and 0.82% to close the week at 42,876.23 and N15.403 trillion respectively. Similarly, all other indices finished higher during the week with the exception of the NSE ASeM, NSE Banking and NSE Pension Indices that depreciated by 1.14%, 0.59% and 0.09% respectively.

Here are stocks that made investors good money last week with my analysis of their potential move:

Japaul Oil & Maritime Service Plc

The stock increased by 50% to close at 63k from N42k. This is not unconnected to the $350 million private equity injection (by Milos Global) into the oil and maritime company as the management seek to make it less reliant on the oil sector by diversifying into other revenue centres. The stock has suffered massive sell-off from the oil price dip and is now staging a comeback.

Let’s take a look at the chart for a potential move:

Technically, Japaul oil stock is bullish on all our four key trading signals but because of the sharp positive price increase so far, I would recommend you wait for a pullback from an imminent sell-off/profit takers, then buy the stock. As of this writing, the stock is currently on a full bid, no offer which means price may rise further this week.

Unity Bank Plc

The stock increased by 18.79% to close the week at N1.77 from N1.49. Just as we shared on Japaul Oil, Unity Bank stock may enjoy more patronage if the rumour of a potential buyout, which is driving the stock, turns out positive.

Technically, Unity stock had just reversed its previous downtrend after the news broke out but there isn’t a solid bullish signal on major tools except for the relative strength index.

Recommendation: Wait for a buy signal on all technical indicators.

NEM Insurance Co

This is one of my best insurance stock to watch this year. As investors sentiment turns positive after an impressive result, I am currently waiting for a buying opportunity after sell-off.

NEM insurance stock gained 35k to close the week at N2.25; a key driver of this stock is investors sentiment. The company grew its gross premium by 22%, profit before tax by 35.42%, and profit after tax by 35.47% in Q3 2017 which is better than the figures reported in 2016. I expect the company to post a better full-year result.

Technically, the stock has more upside potential and is fast approaching the level investors will sell off to take price as all indicators point to an overbought region.

Recommendation: Wait for sell-off after a full-year report and buy; insurance sectors will benefit from this year’s growth.

Cement Company of Northern Nigeria

This stock is also on my radar this year. I had already shared a full analysis of the company’s fundamental, go check it out here. CCNN share increased by 17.80% to reach N19,85, the company is already trading at an all-time as investors await 2017 financial report.

Technically, the stock has risen too high, all indicators already signal an overbought stock so expect the price to retreat shortly after the full year result is released expect the EPS beats expectations.

Recommendation: Wait for a major reversal before buying.

Nigerian Banking Stocks – 2018 Sector Outlook & Key Growth Driver

Best Nigerian Banking Stocks To Buy – 2018 Outlook & Forecast – Learn How To Trade Nigerian Stock Markets Online, & Pick Top Performing Shares

I read a very interesting article on Bloomberg website, one of the top global financial news. The review covers everything you need to know about the Nigerian banking sector, performance in 2017, outlook and key profit drivers in 2018.

find the analysis and forecast for this year as culled from Bloomberg:

The spring in the step of Nigeria’s economy is likely to show up in the results of the country’s banks when they start reporting 2017 earnings from this month.

 An improvement in unpaid loans, higher interest income from holding government debt and a rise in profit will have helped lenders bolster their capital buffers, according to Renaissance Capital analysts including Olamipo Ogunsanya and Ilan Stermer.

The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017. An increase in crude prices and the introduction of a new foreign-exchange system that ended a crippling shortage of dollars helped attract more investment flows into the country, while improving liquidity for the nation’s lenders. 

Here’s a closer look at some of the major drivers and points of interest that investors will keep an eye on as they assess the outlook for banks. 

Yield Benefit

Record high-interest rates of 14 percent since July 2016 means there is no shortage of yield for banks, many of which parked their funds to profit from the safety of Treasury bills and other fixed-income securities rather than lending, where there is more risk.

A drop in those yields from a record highs in August means that 2018 will be more challenging for lenders, despite the positive macro backdrop, according to Ogunsanya and Stermer. Volatility in foreign-exchange related gains, limited scope for cost efficiencies and rising political risks before elections in early 2019 also cloud the outlook for this year, the RenCap analysts said.

Lenders Lending

Banks will be able to close the revenue gap created by declining interest rates by lending more into a strengthening economy, according to Stanbic IBTC Holdings Plc analyst Muyiwa Oni. Some banks may boost loan growth to 15 percent this year compared with 10 percent in 2017, he said.

“Credit growth will be a big driver” in 2018, Oni said. While lower rates may reduce the cost of funding for banks, net interest margins may still narrow by anything from 100 basis points to 200 basis points this year, he said.

Fewer Sour Loans

The recession in 2016 hampered the ability of companies to meet their obligations to lenders, prompting a surge in bad debts. Non-performing loans as a percentage of overall credit peaked at 26 percent for FBN Holdings Plc, the country’s largest lender by revenue. NPLs will continue to trend downward after improving to 20 percent in the nine months through September, Adesola Adeduntan, the chief executive officer of FBN’s First Bank of Nigeria, said on Feb. 22.

An improvement in operating conditions, the restructuring of loans, recoveries and some write-offs will see the pace of unpaid loans ease into 2018, Fitch Ratings said in October.

Capital Challenges

At least three small- to medium-sized banks will run into difficulties with their capital levels this year and will need to raise cash, said Robert Omotunde, the head of investment research at Afrinvest West Africa Ltd., without naming the lenders. “A lot of tier two banks have issues with NPLs and it’s eating into their capital buffers.”

Stanbic IBTC’s Oni predicts that the capital adequacy ratio across the industry will probably drop by 100 to 200 basis points, mainly because of the introduction of IFRS 9 reporting standards, which will require higher provisioning.

Bigger lenders including Zenith Bank Plc, United Bank for Africa Plc and Access Bank Plc were able to raise funding in the Eurobond market last year, while smaller ones struggled to boost their buffers. Stress tests showed that the capital adequacy ratio across the banking industry worsened to 12.8 percent in April from 13.6 percent in February, according to the central bank.

Taking Stock

There is still some room for shares to rally even after the Nigerian Stock Exchange Banking 10 Index surged by a record 73 percent in 2017, according to Lekan Olabode, a bank analyst at Vetiva Capital Management Ltd. in Lagos, although the pace won’t match that seen last year. Smaller lenders may also show faster earnings growth and biggest share-price gains.

“The banking sector is significantly undervalued,” he said. “This year, it is the small banks that we expect to do more.”

What you should expect this year:

While banks that were badly hit by non-performing loan will enjoy increased loan repayment this year and improved asset quality,  tier two banks that have a lower cost of risk and higher capital adequacy ratio will benefit from increased credit to the private sector. The unrestricted dividend payout rating assigned to these banks will attract lots of institutional interest from income investors.

Top picks based on positive sentiments and earnings expections for 2017 and 2018 outlook:

  • Zenith bank
  • UBA
  • GTB

I had already shared tips to pick the best banking stocks to buy, read here.