Following the massive run stocks have mounted in the last two weeks, it’s normal for the market to correct on profit-taking. But here is the good news, the correction in stock prices witness today offers another opportunity to buy into the dip before All-Share Index reverses back to an uptrend. After all, a lot of analysts believes the low-interest rate that had forced money managers to seek better returns from the stock market will likely remain at that level for a long period.
And as N567bn worth OMO bills matures next week, a slice of this fund should find their way to the stock market.
Going by my predictions, the bulk of the cash invested into the equities market will no doubt chase high-yielding dividend stocks.
Aside from dividend stocks, I’d also advise anyone that has some idle cash to look into agric-stocks that are benefiting from the current pandemic and government policies via increased local demand.
Presco Plc produces specialty fats and oils. The company specializes in the cultivation of oil palm and in the extraction, refining and fractioning of crude oil into finished products. It possesses oil palm plantations, a palm oil mill, a palm kernel crushing plant and a vegetable oil refining plant in Nigeria.
In its recent Q2 result, revenue grew by +29.3% to N13.45bn from N10.40bn in the previous quarter while profit before and after-tax expended significantly to N5.77bn and 4.39b against N3.4b and N2.5bn in the previous comparable period (2019). This represents a double-digit growth of 67.7% and 70.5% respectively.
On a quarter by quarter basis, Presco generated revenue of N8.1b, 62% higher than N4.9bn in the 3-month period to June 2019. Pre-tax and after-tax figure print at N3.49bn and N2.66bn compared to N1.2bn and N831m respectively- that’s a whopping growth of 190% and 220%.
Despite the nationwide lockdown, Presco did deliver on top-line which means that there was a strong demand for crude palm oil.
As of this analysis, Presco stock is up by 27.37%, 33.7% and 65.98% on a year to date, 3 and 6-month period respectively. It’s so obvious that investors have been mopping up the consumer goods stock in large quantities and this isn’t going to stop, atleast not before year end.
One easy way to know when to buy or sell is to look at a stock’s cycle – bullish or bearish – using the MACD on a monthly chart. To a very large extent, you’d see where the stock is coming from and anticipate a possible direction. The best time to take action is on a confirmed MACD bullish crossover like we are seeing at the region marked E.
In spite of the impressive run-up in stock price, Presco seems to be at the early stage of its bullish cycle as its current market price (of N60.50) needs to move up by 24% to reach its potential resistance of N74.
Is this target price achievable?
I think the increased demand for crude oil palm will support Presco’s top line in Q3 which should add impetus to its short term bullish trend.
Disclaimer: Kindly do your due diligence as the analysis shared here is my personal opinion based.