People & Money

5 of the Best Stocks to Watch or Buy in Nigeria

In the few weeks since April 3, the Nigerian stock market has bounced back from its lowest levels in over five years posting a gain of around 22% since that time.

What this means is that if you had put N200,000 in the market to track the All Share Index, you would have N244,000 today plus extra on dividend-paying stocks.

Picking the right stocks would have earned you more, for example, Unilever has a 62% gain in the last one month to May 25. Mobil is 33% higher and big names like BUACement, Zenith Bank and Dangote Cement have more than 15% capital gain.

The truth however is that picking the right stocks isn’t easy, otherwise every stock investor would be rich. But that has not stopped Arbiterz from employing the best fundamental and technical analysis in suggesting stocks you can watch or buy in May.

MTN Nigeria
Asides being one of two listed telecommunications companies, MTN is the biggest player in its industry with almost 40% of the GSM market in Nigeria.

MTN Nigeria shares is currently trading at N115 per share which is around 22% less than its 52-week high of N146.80 and at a healthy P/E of 11.43X comparable to many of its continental peers.

Consensus estimate a 12-Month Target Price range of N125-  N170, which is an upside of 9% – 48% percent. Arbiterz, based on its analysis, believes N130 is more likely.

This is justified by a favourable outlook for the Information and Communication sector which grew 7.65% in Q1 versus 1.87% for the entire economy. During the quarter, MTN’s data business grew 42.4% year-on-year while voice grew by 8.4%.

Since much of the lockdown was in Q2, data is expected to surge in the period even though voice might grow tepidly or remain flat. Overall data service providers will be less hit by the rest of the economy in Q2.

As foreign stock investors return, MTN which is currently expanding its 4G reach, will remain among favorite non-banking stocks.

Even though the banking space is facing threats from the coronavirus pandemic there are always names that have proven to be resilient and consistent – GTBank is one of such.

GTBank is cost-efficient and deploys technology to lower operating expense and payroll size, which is proving wise as some other banks are burdened with higher labour costs even though they are operating below their pre-COVID-19 capacity.

Currently the bank is trading at N23.75 per share compared to a 52-week high of N34.4. Despite a 3.39X Price to Earnings, which is above 2.73X for tier-one banks, Analysts 12-Month Price Target ranging N26-N30, roughly 8%-16% upside.

GTBank also has a dividend yield of 11.67% which compares favorably.

Nestle sells some of the most essential household food items including Maggi seasoning, Milo Beverage, Nestle Pure Life water etc.

Sales declined less than 1% to N70.33bn in the first three months of the year. The lockdown might affect Q2 but Nestle trading at N 995.00 remains a good pick on account of the deep price discount from N 1,469.90, its 52-week high set in January this year.

The stock hit N1,094.50 in intra-day trade on Tuesday, May 26, and analysts’ consensus is around N1,250, over 20% upside.

Health and Pharmaceuticals stocks are on steroids right now, and it is understandable since we are in the middle of a health crisis. In the last one month, Neimeth has gained 43%, GSK has gained 34% and Fidson has risen 31%. Fidson turned the corner to profitability as seen in its 2019 full-year report posted on NSE this month.

The pharmaceutical company is benefiting from the attention of the government on the health sector and N2.5 billion out of N100bn facility for the health sector has been approved for Fidson Healthcare to expand its plant into the production of ethical drugs and intravenous, according to the CBN on May 11.

Currently trading at N3.2 per share, Fidson is around N2 lower than its 52-week high of N5.05. Analysts’ average target price is N4 which is an upside of 25%. One thing to watch for local pharmaceuticals is the follow-up of WHO’s halting chloroquine testing for treating COVID-19.

Okomu Oil
Okomu oil has good fundamentals and its product is an essential item in every household.

The oil palm and rubber maker recorded a 65.5% spike in revenue to N6.9bn and 101.4% rise in Profit After Tax to N2bn despite lockdowns affecting local and domestic markets.

In the last one month, the stock has gained 17% to N64.4 but is likely to reach N69/N70, which is an upside of roughly 10%.

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