Nigeria stocks to watch This Year

Nigeria stocks to watch This Year – Equities had a roller-coaster year in 2021, with eight months of positive returns and four months of negative results. The market closed with a 6.7 percent gain, thanks to a spectacular last-minute surge that increased the value of listed equities by N1.23 trillion.

Interestingly, local institutional and individual investors drove market liquidity and the record surge, underscoring Nigerian investors’ ability to stabilize and build the market.

Nigeria stocks to watch This Year

Despite the approaching challenges to the equity market surge in 2022, Nigerian equities remain appealing and should remain resilient this year.

The major issue today is: which stocks should investors purchase in 2022? Many analysts’ BUY lists for 2022 include Dangote Cement, MTN Nigeria, Lafarge Africa, GTCO, Nestle Nigeria, Zenith Bank, BUA Cement, BUA Foods, UBA, Fidelity Bank, Access Bank, Stanbic IBTC Holdings, and Flour Mills of Nigeria, which investors should actively consider in their equities portfolio this year.

Many of these companies are now cheap in the Nigerian market and give appealing BUY chances for investors seeking both capital appreciation and long-term profits.

“Our top selections, Dangote Cement, MTN Nigeria, GTCO, Nestle, and Zenith Bank, are robust bellwethers with a history of maintaining earnings growth across political cycles,” says Isaac Olorungbon, CEO of Deep Trust and Investments Limited.

He is optimistic about the Nigerian stock market in 2022, stating that “our cautious optimism confirms our prediction of another favorable return for Nigerian equities investors in the new year.”

Unilever Nigeria, Okomu Oil Palm, Presco, Vitafoam, Berger Paints, Ardova, Seplat, and Total Energies Marketing Nigeria are among the others. Dangote Sugar Refinery, Guinness Nigeria, Conoil, FCMB Group, May & Baker, Fidson Healthcare, and Neimeth International Pharmaceuticals is also on analysts’ buy lists.

A predicted moderate rise in the interest rate environment may hinder funds flow to equities in 2022, but solid earnings forecast across most substantially capitalized value businesses could support investment possibilities in these stocks.

Dangote Cement  _ Nigeria stocks to watch This Year

Dangote Cement is Africa’s top cement maker, with operations in ten African nations with a yearly production capacity of 48.6 million tons. The company’s share price on January 10, 2022, was N260 per share; year-to-date (YtD) change (+1.2%), whereas the stock grew by +4.9% in 2021.

Meristem analysts’ target price (TP) for Dangote Cement is N287.81; Vetiva analysts’ TP is N280, and United Capital analysts’ TP is N270.3. The stock has upside potential and should be rated a BUY based on these analysts’ 2022 target price for the cement company.

A BUY recommendation is given to a company that is seen to be very cheap yet has excellent fundamentals, and where a potential return of more than or equal to 15% is predicted to be realized between its present price and analysts’ target price (TP).

Prior to the release of its full-year (FY) 2021 results, the company’s unaudited interim financial statements for the nine months ended September 30, 2021, revealed that sales increased to N1.022 trillion from N761.44 billion in 2021. The nine-month pre-tax profit was N405.487 billion, compared to N271.960 billion in 9M’2020.

Earnings per share rose from N12.2 in 9M’20 to N16.23 in 9M’21. The Company and its subsidiaries’ primary business is to run operations that prepare, produce, and distribute cement and associated materials. Shares Outstanding, Sector (Industrial Goods), Sub-Sector (Building Materials), Market Classification (Premium Board), and Shares Outstanding (17,040,507,405 units).

MTN Nigeria _ Nigeria stocks to watch This Year

MTN Nigeria Communications (MTNN) is a company that builds and operates Global System for Mobiles (GSM) cellular network systems as well as other associated services.

From December 1 to December 14, 2021, Nigeria’s largest telecom had a public offering of its shares, allowing ordinary investors to acquire up to 575 million shares at N169 per share—a price lower than its share price on the secondary market.

As of January 10, 2022, its share price of N185.5 per share represented a negative return of 5.8 percent YtD. The stock rose by 16 percent in the year 2021. In November 2021, the Central Bank of Nigeria gave it in approval-in-principle to operate a payment service bank (PSB).

“Going into 2022, we believe that MTNN’s 4G coverage will continue to be expansive, as it strives to meet the ever-growing data needs of Nigeria’s population. Thus data revenue is projected to come in at N647 billion, up 25 percent year-on-year (y/y).

“Given that the NCC has lifted the suspension of new SIM card registrations, and with the company also hinting that it is actively ramping up new registration centers, which will support the FG’s NIN enrolment program, we expect to see some gains in MTNN’s subscriber base going forward. Thus, we expect this to somewhat provide a support system for voice revenue through 2022. However, we also bear in mind that voice services are subject to stiff competition, given the growing preference for internet-driven cheaper substitutes.

“With the company now underway to getting a PSB license, product offerings are up for a full-blown scale-up, and we might start to see the considerable impact on MTN’s top-line performance,” according to Victoria Ejugwu, oil & gas, telecom analyst at Lagos-based Vetiva.

“Going forward into 2022, we are guided by our recent Nigerian telecom sector report ‘Delivering a Digital Future,’ December 30, in which we recommend a BUY for MTNN with a target price of N266.17/share and a Sell for Airtel Africa with a target price of N793.84/share,” according to Coronation Research analysts in their January 4 note.

The unaudited condensed consolidated interim financial statements of MTNN for the nine months period ended September 30, 2021, showed that its revenue grew to N1.206 trillion from the 9M’2020 level of N975.764 billion, up by 23.62 percent.

Its profit before tax (PBT) in 9M’21 went up to N321.352 billion from N211.594 billion in 9M’2020, up by 51.87 percent; while its basic/diluted earnings per share increased to N10.82 from N7.09 in 9M’2020, up by 52.74 percent.

Sector: (ICT); Sub Sector (Telecommunications Services); Market Classification (Premium Board) and Shares Outstanding (20,354,513,050 units).

Seplat Energy _ Nigeria stocks to watch This Year

Seplat Energy is a leading Nigerian independent energy company listed on both the Nigerian Exchange Limited and London Stock Exchange. The company believes that the greatest opportunity ahead of it is to supply the right mix of energy for Nigeria’s young and rapidly growing population and drive Nigeria’s transition to cleaner, more affordable energy that is accessible to all. Seplat closed the year 2021 at N650 per share, up by 61.6 percent 2021.

As of January 10, the stock price at N665 represents an increase of 2.3 percent YtD. In its unaudited results for the nine months ended September 30, 2021, it grew revenue to N182.7 billion from N135.6 billion in 9M’2020.

Gross profit went up to N58.1 billion in 9M’21 from N31.7 billion in 9M’20. Pre-tax profit grew to N38.6 billion from a loss before tax of N45.5 billion in 9M’2020. For Seplat, the ANOH project remains on track for the first gas in H1 2022.

“A strong step forward will be when we bring on stream the ANOH project in 2022 delivering more transition gas to an energy-poor market, over-reliant on expensive, high carbon-emitting electricity generated from small-scale diesel and PMS generators,” said Roger Brown, CEO of Seplat Energy.

United Capital’s target price for Seplat is N770.4 with a BUY rating. Meristem’s target price is N754.42 supported with a BUY rating. Vetiva also rated the stock a BUY with a 2022 target price of N796.57.

“Recently, Seplat announced that the company was in discussions for a possible acquisition of some shallow water assets from ExxonMobil. Given that details of the acquisition are yet to be released to the public, we have not included the potential impact on the valuation of Seplat.

“However, should the deal materializes, we expect to see an increase in crude output, while we expect cost synergies to result from the integration of administrative operations for the combined entity,” said Luke Ofojebe, Vetiva’s head of research.

Sector (Oil & Gas); Sub Sector (Exploration and Production); Market Classification (Premium Board); and Shares Outstanding (588,444,561 units).

Flour Mills of Nigeria _ Nigeria stocks to watch This Year

Flour Mills of Nigeria, one of Nigeria’s leading food and agro-allied groups, remains committed to executing its overall long-term strategy aimed at maintaining growth and sustaining profitability.

Recently, Flour Mills of Nigeria and Honeywell Group Limited agreed to combine operations of FMN through its affiliates and Honeywell Flour Mills (HFMP), a portfolio company of HGL, at a total enterprise value of N80 billion, which will make Honeywell Group dispose of a 71.69 percent stake in HFMP to FMN.

The proposed transaction will combine two businesses with shared goals and create a more resilient national champion in the Nigerian foods industry, ensuring long-term job creation and preservation.

A combination of FMN and HFMP will bring together two trusted and iconic brands, creating a food business that is better positioned to benefit the growing Nigerian population, further enhance national food security objectives, and leverage opportunities stemming from the African Continental Free Trade Area (AfCFTA).

Flour Mills was among the best-performing stocks in 2021 (+183.3%). In the trading week ended January 7, 2022, the share price of Flour Mills of Nigeria closed at N29 per share, representing an increase of 2.3 percent YtD.

In half-year (H1) (2021/2022), the Group revenue was N522.8 billion, compared to N355.1 billion in H1 2020/21, which represents 47 percent year-on-year (YoY) growth. Performance was consistent across all key business segments in the group with agro-allied and support segments, in particular, showing impressive growth by as much as 35 percent. In the review H1 period, the Group’s profit before tax (PBT) was N15.5 billion, compared to N14.6 billion in H1 2020/21 (6% – YoY growth).

This performance was underpinned by continued strong operating performance in the food segment; continuous improvement in agro-allied and support segments. The Group’s PAT was N10.5 billion, compared to N9.9 billion in H1 2020/21 (6% – YoY growth). The Group’s solid operational performance was stimulated by strong organic growth, supported by product innovation, and continued momentum in retail sales.

The stock had on January 10 decreased this year by 0.9 percent. United Capital research analysts say Flour Mills is a BUY considering their target price of N46.6 for the stock. Meristem also wants investors to buy Flour Mills considering their target price of N40.63.

Meristem research analysts in their January 10 stock recommendation urged investors to “BUY” Flour Mills of Nigeria Plc shares. Also, Vetiva’s price target for Flour Mills is N44.34,” said its consumer goods analyst, Chinma Ukadike.

“We note that the company’s volume growth strategy has been quite successful so far, across its Food and Agro-allied segments. In line with this, we remain positive on the impact of newer product roll-out expected in the coming quarters,” the analysts said.

Sector (Consumer Goods); Sub Sector (Food Products); Market Classification (Main Board); Shares Outstanding (4,100,379,605 units).

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