Nigerian Stock Market Review and Stock pick for the week ahead 28th June – 3rd July 2020

After a 4-day straight run of loses, gains in AIRTEL and NESTLE Stocks on Friday secured a marginal positive close for the Nigerian Stock Exchange.

The All-Share Index rose by +0.01%, while the market capitalization increased by N1.15 billion. The market index closed at 24,829.02, and the market capitalization closed at N12.952 trillion.

A total turnover of 739.375 million shares worth N8.563 billion in 17,248 deals were traded this week by investors on the floor of the Exchange, in contrast to a total of 1.050 billion shares valued at N10.125 billion that exchanged hands last week in 19,576 deals.

The Financial Services industry (measured by volume) led the activity chart with 457.851 million shares valued at N3.773 billion traded in 8,062 deals; thus contributing 61.92% and 44.06% to the total equity turnover volume and value respectively.

The Consumer Goods industry followed with 66.668 million shares worth N2.015 billion in 3,486 deals. The third place was the Oil and Gas industry, with a turnover of 63.255 million shares worth N380.146 million in 963 deals.

Trading in the top three equities namely FBN Holdings Plc, Guaranty Trust Bank Plc and Zenith Bank Plc. (measured by volume) accounted for 211.351 million shares worth N3.042 billion in 3,623 deals, contributing 28.59% and 35.52% to the total equity turnover volume and value respectively.

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The activity level continued to trend downwards, portraying a holding position being taken by most investors. The volume of shares traded decreased by 29.5% while the value of traded shares decreased by  15.4%.

The no of deals being done on the Market has maintained a straight trend line, despite the continued reduction in trade volumes and value.

At the end of trading on Friday, the NSE ASI losses moderated to -7.5% loss YTD. Below is the performance of the 5 indices under our watch, YTD;

• NSE Insurance Index: +2.90%
• NSE Oil & Gas Index: -24.37%
• NSE Banking Index: -18.92%
• NSE Consumer Goods Index: -26.98%
• NSE Industrial Good Index: +11.10%

Eighteen (18) equities appreciated in price during the week, higher than Fourteen (14) equities in the previous week. Forty three (43) equities depreciated in price, lower than Forty-seven (47) equities in the previous week, while One hundred and two (102) equities remained unchanged, same as One hundred and two (102) equities recorded in the previous week.

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The top gainers and losers were;

Going into the last days of the second quarter, we anticipate the activity level to remain subdued. We also expect Investors to sell off on many bellwether stocks, ahead of the commencement of the earning season.

With restricted economic activity for the most of the second quarter, it is expected that the H1 Earnings report by companies will reflect a reduction in revenue and subsequently net income.

Stock Pick for the week ahead

All the stocks on our watchlist this week are currently trading above our estimated fair value prices. We have subsequently marked 8 out of the 10 stocks as SELL because of this.

Some resilient stocks like NESTLE, PRESCO and OKOMUOIL are unlikely to drop as much as the estimated fair value, we will review the recommendations after the earnings season.

WAPCO low valuation is attributed to the poor financial performances of the recent years, the company has addressed the fundamental causes of the poor performances. It has reported impressive profit growth in the past couple of financial reports. We expect the profit growth to continue, hence the BUY recommendation.

Written by;

Nnamdi M.