Analysts see mixed market performance this week, but advise caution

It is one market day gone in the new week at the Nigerian Stock Exchange. But never mind the outcome if you have or are yet to take a position. The news is that projecting from last week’s performance, analysts at Lead Capital are suggesting that the week will post a mixed outcome at the end of trading on Friday.

They hinged their position on the fact that the market posted one bearish week after two weeks of market upturn. This position is taken against what they say is an expectation that there would be “renewed buying fueled by bargain hunting sentiment for the first few days.”

However, they say that investors need to maintain caution. “We continue to emphasize caution for traders and encourage a long-term outlook on equities baring suppressed valuation below intrinsic value pending market rebound,” they said.

Perhaps like to influence market behaviour, they point to expectation of the release of key data by the National Bureau of Statistics this week, especially inflation numbers, releases which results might change the mood of the market.

On the back of this the Lead Capital analysts made calls of the following companies as stocks worth watching:

LEAD CAPITAL STOCKS TO WATCH:

Zenith Bank: CP:15.45) With a moderate growth in its first quarter earnings by 0.6% and stellar performances over the years, Zenith Banks remains a buy for recommendation for investors.  Asset quality remains strong with an NPL ratio of 4.3%, and we do not expect a significant depreciation in near term, as its loan books have been diversified to reduce exposure to high risk sectors i.e. oil and gas sector to 14.6%.
However, we expect growth to be pressured this year, due to the outbreak of COVID 19, but with a CAR of 20%, liquidity of 41.8% and sustained cost efficiency, Zenith bank would still remain in good standing.

MTNN: (CP:N109.50) MTNN continues to remain the market leader in the telecommunications sector, accounting for 38.47% of the market share. Its first quarter earnings was impressive, with 5.6% growth in the bottom line, on the back of revenue from voice (6.14%) and significant growth in the data subscription (59%). Consequent to the outbreak of the pandemic, we expect a significant growth in profit in the next quarter, on the back of increase in revenue from voice and data subscription.

UBA: (CP:N6.25) United Bank for Africa remains one of the fundamentally sound banks in Nigeria with strong branch network within Nigeria and its presence in some Africa Countries, the UK, USA and France. It recently released its Q1’20 result, as the bank recorded double-digit improvement across all its major income lines. Consequently, the bank grew its Gross earnings by 11.8% year-on-year growth to N147.2 billion as against N131.7 billion recorded in Q1’19. The bank’s total assets and shareholders’ funds also advanced by 13.4% and 2.46% respectively, to N6.4 trillion and N612.6bn in the period under review, compared to N5.6 trillion and N597.9 billion recorded in Q1’19. The Bank’s PBT and PAT climbed 8.5% and 5% respectively to N32.7 billion and N30.1 billion, it also sustained strong profitability recording an annualized 20% Return on Average Equity. UBA remains a BUY with Target Price of 12.90

FBNH: (CP:N4.95) We maintain our BUY recommendation for FBN Holdings with Target Price of 8.65, following a positive set of Q1’20 results, with 47% year-on-year and 6% quarter on quarter increase in net profit. Fundamentally, the bank which represents a strong portion of the holding company has shown recovering NPL levels in its recent earning fillings. we for see value over the medium to long term.

GUARANTY: (CP:N22.50) GTB’s Q1’20 earnings grew modestly with PAT growing only 1.55% year-on-year to N112.86 billion and 8% growth in assets respectively.  Although, we expect a slower growth in EPS over the next quarter. Given its stronger capitalization level and higher operational efficiency, the bank remains the toast of investors across investment horizon and orientation spectrum. GUARANTY remains a buy recommendation, on the back of strong performance over the past years, sustained growth alongside remarkable cost efficiency.