Analysts Discuss: Where Would Nigerians Invest in Second Half?
Investors seeking alpha were mostly disappointed in the first half of 2021 after a tepid economic growth despite improvement recorded in the global oil market. Alternative investment window had witnessed bloodbath across, worse been the cryptocurrency space.
Due to an unimpressive outturn in the gross domestic product (GDP) result in Q1, the monetary policy authority could not alter the benchmark interest rate. Again, in its July meeting, the policy authority kept rates.
The decision, according to some analysts will keep a margin on lending tight while fixed income investors could continue to grumble as they earned below the average inflation rate.
Godwin Emefiele led CBN has largely remained pro-growth, well okay if you have to serve the progressives. However, the monetary equation did not balance, resulting in foreign investors exits from the economy.
In the second quarter of 2021, foreign investors’ participation in the Nigerian economy plunged by more than half as the largest economy in Africa attracted less than $1billion
Nigeria is still feeling a dollar shortage as remittance inflow jerked down and external reserves tumbled below the $34 billion mark – covering 5.8 months of imports.
However, there is a specific catalyst, maybe one or two return on investment drivers amidst a raft of projections in the second half.
GDP is projected to rise. Nigeria’s headline inflation rate is expected to decline further -lowering stagflation pressure but unemployment keeps tightening – looking at purchasing managers index.
But Nigeria will likely stay negative in terms of trade balance and capital importation. Poor country’s comparative advantage remains a nightmare for the largest economy in Africa.
The level of joblessness is alarming high but Federal Government says 100 million people will be lifted out of poverty.
Signal: Corporates are making a fresh foray into solid earnings records as the Nigerian economy begins the healing process. This may not happen so quickly, though as the numbers of reports from listed companies are not to cheer about.
Big names on the local bourse maintained dominance in the first half part of the year even when retail investors rebalanced portfolios following a ‘marginal uptick’ in yields.
On Nigerian exchange at the week, the top 10 companies have a total valuation of N16 trillion, translating to 80% of the local bourse –questioning the deepness of the local market.
In the fixed income market, 2021 has been great for yields repricing. However, this trend slowdown in the second quarter after the CBN policy committee kept key policy rates.
While 10 leading companies accounted for 80% of the market capitalisation in the local bourse, surprisingly, these trillion cap stocks are not the best performers.
If Total Plc.’s is anything to go by, Seplat will be another stock to watch plus Oando – with a caveat though.
Access Bank is deepening its African footprint and its marks are becoming feasible – acquisition strategy gives the Pan-African lenders speed and some sort of agility too.
Its solid market deepening strategy and the success thereof is a plus for the brand. Analysts often see an acquisition as a costly strategy but it with the while thus far for Access Bank. The move had quickened the easy demise of some banks and created ‘en Banca rota’ that are struggling to survive.
Zenith is collecting space in the retail segment and the cash-rich bank appears to have manoeuvred its ways to the heart of the market.
Dangote cement intends to make the company’s share price less volatile and I bet few people will be holding the stocks afterwards – the Nestle Nigeria way.
If you have money, buy Dangote stock as share buyback will keep its market price on the ascendancy. This stock continues to record gain, crossed the N4.2 trillion market.
This will make the management pay more except there is a sort of price lockdown arrangement – unlikely though. The stock will still maintain its floating rate.
MTN Nigeria will kill it compare with Airtel Africa after it shed 10% a day – it has not recovered.
BUA and Lafarge are running a supremacy race now but I see BUA returning better than Lafarge – I daresay Lafarge does not like competition, really.
Surprisingly, in its first half, WAPCO delivered more than 20% year on year profit growth and analysts at PAC Capital are already saying this could raise dividend payments in 2021.
There have been some sorts of strategic assaults against the elephant from the cement oligarchs.
BUA is becoming the second-largest cement company in Nigeria after increased Capital expenditure intensity while Lafarge sold its South Africa trouble child – a margin dilutive subsidiary.
In terms of revenue size, Dangote Cement already laid claim over more than 60%, left less than 40% of the market share to be shared by BUA, Lafarge.
In the banking space, GTCO will create value from top-down with its retail culture and growing deposits based that has kept funding cost low. This bank’s cost profile provides a competitive edge to negotiate big tickets transactions.
What would it lose dropping a few basis points for cash-rich clients? Others may grumble – I presume this explains its deep exposure in the oil and gas space.
A seamless change of leadership baton is ratings positive for the bank, it would provide a new drive for earnings growth.
In a Moody’s talk on emerging market, looking at banks in sub-Saharan Africa, it rated Nigeria higher saying it is less affected by NPL which still trend below 10-years average despite the pandemic shock.
Spotted though, Nigerian banks have their specific issues – mostly internal – a kind of Boardroom game.
Many of them have breached obligor limits casting doubt on banking ethics and ‘collecting from the poor to help the rich businesses syndrome’. Keeping a tab on the regulators, the future will tell how the stock market will survive without Dangote Industries Limited.
Read Also: Lafarge Africa Bolsters Earnings as First Half Profit Jumps
Analysts Discuss: Where Would Nigerians Invest in Second Half?
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