Monday, August 31, 2020
ZENITH: 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: MTNN continues to remain the market leader in the telecommunications sector, accounting for 38.47% of the market share. It remains a fundamentally sound stock, with impressive growth in previous years. Reviewing the second quarter earnings, despite the prevailing economic headwinds coupled with the impact of COVID-19, we saw service revenue grow 12.6%, on the back of revenue from digital (121.8%) and growth in the data subscription (57.6%). Consequently, we foresee a better performance in the third quarter due to continuous investment in its operations (Improvement in its 4G rollout). In addition, the company recently declared dividend of N3.5 kobo with a dividend yield of 2.95%.
UBA: 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. Reviewing 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. With a P/E ratio of 2.6x compared to its industrial average of 2.76x, this shows the stock is currently undervalued. Hence, UBA remains a BUY with Target Price of 12.90.
FBNH: First Bank has showed resilience in its H1 2020 earnings, despite the economic disruption caused by the pandemic. Accordingly, Gross Earnings mainly supported by the Non-Interest Income, expanded by 5.8% to N296.4bn, with its bottom-line firming at N49.5bn, indicating as 56.3% increase. Asset quality remained strong amid economic uncertainties and high credit risk, as NPL ratio declined to 8.8%, as against 9.9% in the previous year, due to management’s effort to recover previously written off loans.
Cost efficiency strengthened, with Cost to Income ratio printing at 65.1%, compared to 70.3% in H1 2019. This was due to expansion in operating income and stable operating expenses. FBNH’s balance sheet remains strong, with total assets expanding by 14.9% to N7.13trn. Consequently, we maintain our BUY rating on FBNH, on the back of its strong performance and resilience.
GUARANTY: 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.
BUA CEMENT: BUA Cement delivered a strong performance, despite uncertain economic environment and disruption of economic activities triggered by the pandemic. Accordingly, revenue and PAT expanded by 12.69% and 13.74% to N101.26bn and N34.81bn respectively. Operational activity expanded, causing EBITDA to increase by 5.8% to N47.37bn, with EBITDA margin printing at 46.77%. We expect continuous growth, as BUA Cement intends to grow its foothold in new markets, take advantage of operational synergies resulting from the merger and its ongoing expansion of its Kalabmiana production line.
DANGOTE CEMENT: Dangote Cement filed its H1 2020 earnings, with revenue and PAT increasing by 2.0% and 5.8% to N466.9bn and N126.bn respectively. Despite the economic disruption caused by the pandemic, Dangote Cement’s profitability remained strong. However, we expect significant revenue growth in the coming months, as majority of the Federal Government capital project would commence later this year.
NESTLE: Nestle Plc. has continued to report modest growth over the years, amidst the competitive environment of the food industry. Although its revenue decreased marginally 0.3% in Q2:20, a smaller decline than anticipated, on flip side we highlight growth in food revenue by 4.1% y/y, improving from the negative outing of 8.7% in its Q1. we recommend a buy rating on the back of its product portfolio and cost efficiency.
GUINNESS: The brewer released its first quarter earnings which showed weak performance with revenue declining 18% and its operating expenses growing 11% to N9.43bn in Q1’20 from N8.46bn in Q3’19 pressuring the operating profit to decline 38% to N1.66bn in Q1’20 from N2.69bn in Q3’19. We anticipate the downturn in earnings to persist in Q2’20, largely due to the impact of the COVID-19. In addition, the temporary close down of bars, hotels, and other major sales point is expected to pressure topline growth and future cash flows bounded with the sustained land border closure. We also note the rising debt coupled with low liquidity position of the company, hence at current prices, the Price-to-earnings (P/E) multiple of the Company stands at 15.00x. We revise our recommendation to a SELL.
UNILEVER: Unilever Nigeria Plc. unaudited Q2’20 results showed a deterioration, as revenue declined 0.40% from 0.31% recorded in the last quarter and a significant loss of 181.9% decline in its EPS, making it the seventh quarter of Y-o-Y revenue decrease. Specifically, the home and personal care segment reported a revenue decline of 45.6% from 41.0% in Q1, stimulated by competition of discounted prices from alternative products to its various products. Following lower material costs and improved cashflow. Looking ahead, we still expect the recent currency depreciation to put further suppress revenue. We hereby recommend a SELL
By Lead Capital Research