While the NSE all share index has been more volatility lately compared to their counterparts in emerging markets, I still believe that there is still short to medium term growth potential for a patient, risk-tolerant investors that pick stocks at the bottom before they rally.
One key secret of such investor is that they no longer wait for final results before picking actual stocks to buy but uses “growth numbers posted on the first quarter, to spot growth stocks that are already on track to beat previous full year’s result“, then buy ahead of the anticipated market rush.
Today, I have picked two (2) sure stocks you can buy on dip and are clearly on track to deliver better than expected result in 2019.
Chams PLC offers smartcard technologies. The Company offers a public access retail billing and collection system with Internet access. Chams also offer home office products.
Last year, the technology stock broke its record of a 3-year consecutive loss as its reported a profit after tax of N380m, a 131% growth compared to a loss of N1.26b declared in 2017. Interestingly, this is the highest profit posted by the company in 5 years.
The highlight of Chams’ financials in the previous full year shows that sales grew from N1.9b to N3 (57%), while the cost of sales expanded by 83% but didn’t deter the company from posting a high gross profit of N785m compared to N742m.
A reduction in administrative expenses and write back of VAT provisions contributed to the company’s shift to positive territory, from an operating loss of N1.2b to a profit of N31m. With shareholders equity of N1.95b, return in equity for the year was 19.4% compared to a loss.
Chams plc has also proved that the growth in the previous year’s result could be sustained as it reported an impressive Q1 2019 result.
- Sales grew by 62% to N1.2 (from N739million recorded in Q1 2018)
- Gross profit increased from N324 million to N410m
- Profit after tax, which was largely boosted by a reduction in the tax provision, increased by 52% to N182 million (from N119million).
The ICT’s PAT in Q1 already covers 47% of the previous’ year profit of N380 million which means the stock is on track to deliver impressive result.
- Chams stock closed the week at 45k and up by 125% on year to date basis. With RSI at 74 and Price-earnings ratio at 6.45, it means the stock may be overbought right now.
- Using a risk-adjusted discount of 17% on 7k EPS, I think a buy below 35k is perfect entry strategy on Chams.
Cadbury Nigeria Plc manufactures and markets sugar confectionery, food drinks, and food products. The Company also processes cocoa and exports cocoa products via its subsidiary Stanmark Cocoa Processing Company Ltd.
The company’s FY 2018 showed significant growth in key figures. Revenue grew from N33b to N35 (9%), operating profit followed the same path as its ballooned by 139% to hit N1.69b from N711 million while profit for the year increased by 174% (from N229 million to N823 million).
The growth in topline figures also rubbed on the profit attributable to each shareholder (represented by EPS): 44k vs 16k, 17″ growth year on year.
Return on Equity expanded significant to 6.5%, from 2.5% in the previous comparable period.
Down to the Q1 result, you need no analyst to tell you that Cadbury is way ahead of its peers when you look at the growth numbers.
Sales increased by 13% to N9.2b while operating profit followed the same path with 236%. This is supported by an increase in sales of by-product.
Bottomline figures like profit after tax and EPS quadrupled by 2,201% to N506 million (from N22 million) and 27k (from 1k) respectively. Both numbers are 61% and 51% of the previous year’s result which are early signs that the 2019 result will be far better.
- Cadbury closed the session at N11.80, up by 18% on year to date basis.
- PE ratio at 26 means it may be overvalued right now
- With RSI at 68.65, the stock may go up a bit before dipping on profit-taking
- Wait for a dip before buying.
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The recommendations share here are my opinion on stocks I think will rally before year end, you are advised to do your due diligence.
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