Though the Nigerian equities market recovered from previous week’s loss last week, with investors resorting to bargain hunting in stocks that had depreciated in prior trading sessions, analysts see profit taking ruling the market in the first few days of this week.
Last week’s performance at the bourse saw the benchmark index climbing 3.1% weak-on-week close at 33, 3117.48 points, bumping YTD gain to 23.2%. But market analysts see the gains being impacted by profit taking this week.
“Whilst we reckon that the performance of the equities market will remain largely driven by the positive macroeconomic developments in the past three months, we do not eliminate the possibility of some profit taking in the early trading sessions this week,” analysts at Afrinvest said.
The Afrinvest’s analysts specifically said their weekly sentiment indicator strengthened to 3.0 points from 2.7 points last week due to improved market breadth.
They specifically advised that investors take advantage of fundamentally sound stocks that have fallen to attractive entry prices while picking Zenith Bank Plc as their top stock for the week
Zenith is one of the largest banks in Nigeria by Total Asset (N4.7 trillion).
In FY: 2016, the bank’s gross earnings expanded 17.4 percent to N508.0bn from N432.5 billion in prior year while profit after tax grew 22.7 percent to N129.7bn from N105.7 billion in prior period and EPS settled at N4.14.
Zenith Bank also paid a total dividend of N2.02 for the year. The company’s cost to income ratio (CIR) moderated to 48.0 percent in FY:2016 from 54.3 percent in FY:2015 despite the 4.0 percent jump in OPEX, which settled at N174.5 billion.
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The positive trend was sustained in Q1: 2016 as gross earnings and PAT improved 48.6 percent and 41.4 percent to N147.7 billion and N37.5 billion respectively.
“We continue to see value in Zenith based on its inherent fundamentals as we project a forward EPS of N4.47 while the Banks sustains its dividend payment history,” the analysts noted.
The stock has an RSI of 57.5 and currently trades at N20.89 (30/6/2017) relative to Afrinvest’s 12-month target price N21.94.
“Our outlook on forward earnings remains impressive hence we recommend a BUY on the counter,” they concluded.