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Stock Market Review: January 31, 2023

Ruth Ibikunle

The stock market on Monday closed on a Bullish note with 0.95% growth. Year to date, the market has returned 3.72% with the All Share Index and the Market Capitalisation at 53,157.83 points and N28.954 trillion respectively.

In a stock market review with the MD/CEO of Global View Capital Limited, Aruna Kebira, the following were discussed:

Excerpts:

The market on Monday closed on a bullish note with 0.95% growth. What is driving this growth?

The driver of the current bullish close of the market is not far fetched. The market’s expectation of the release of Q4 2022 earnings report by issuers and the performances of those that have released theirs so far.

Even when dividend declaration does not come with the release of unaudited reports, they clearly show the direction of the movement of the company. They indicate whether there is hope or not and for that reason, the market will for the meantime continue to close in the green zone.

What is driving the price of Geregu Power and Airtel?

The market has not been able to price Geregu correctly, it is yet to have track record on the bourse, as a result, the price gyrates in relations to the demand and supply around it.

The Q4 2022 and the associated news thereof will determine the price band the stock would trade, for now investors ride with the tempo and momentum to benefit from it.

Airtel Africa has established a 52-week high price of N2.040, as one of the major network providers in the country, and present in major Africa Countries, and because we are close to their release of their Q4 2022 earnings report, the price of the stock can not rest at anything lower than its 52-week high price.

 So, the reason the price is looking up is the market’s expectation and also the stock track record in both growth in earnings and the quality of dividend declared.

Is Geregu a good buy at N176?

Geregu just established its 52-week price at N176.00, discerning investors would be warring of taking position at this price.

Can this price still do another 10% up, will it be sticking around this price, would there be a decline after testing this height? The quality of the earnings report and the attendant benefits will determine answers to these questions in the coming days.

Unilever gained 16.23% last week. How sustainable is this growth? Is it a good BUY at the current price?

Unilever released their Q4 2022 to the market and the market was appreciative of it. It moved to compensate it and the price rose from about N12.20 to about N13.35.

The 52-week high price of the stock is N15.50, suggesting that there is still an upward potential movement for the price of the stock.

Currently trading at N13.55, an investors should still have a leverage of the movement of a clear 13% of the 52-week high price.

The other traction that the price of the stock may depend upon is the quantum of the dividend they may be declaring. If that beats the market expectation, the stock can set a new 52-week high price in the coming days.

Why is Nigerian Breweries trending down? Is it a good BUY at N41.95?

The case of NB is a clear indication of whatever goes up must come down. NB moved from N40.00 to N48.85 just recently and as the market awaits the release of their Q4 earnings, those that don’t have the patience to wait for that long and those who have found interest in other stocks, are suppressing the price of the stock by divesting from it.

I think at the current price, NB would be a good buy.

Japaul Gold grew its profit after tax by 111.91% from a negative earnings of N1.29 billion in 2021 to N154 million. How sustainable is this growth? Is this capable of pushing the price further?

The profit making efforts of Japaul Gold may be sustainable base on the new industry they belong but it will take them a long while to catch up with doing the right and necessary things in the market.

From the current report of the company, it has a negative retained earnings of about N19.7bn which must essentially be recovered before they can talk about the declaration of  any dividend. The market may appreciates the current move in their earnings but it will not go far as there would be nothing at the back of the growth in the bottom line.

NEM Insurance achieved growth in its top line and bottom line figures in Q4. Is NEM likely to increase dividend payout?

The issue of dividend payout is exclusive of the Board of Directors and is subject to their policies. Except for those that pay a fixed percentage of their eps as dividend, then the possibility of dividend rising commensurate to a rise in eps is there.

But in a situation where they pay a fixed amount, the increase in their bottom-line may not necessarily lead to increase in the dividend declared

Eternal Plc grew its bottom line by 260.82% to N1.76 billion from a negative earnings of N1.1 billion. How far will this price of Eterna go based on this impressive result?

The market like I said earlier may move to appreciate and reward increase in performance but the appreciation may not last if the market is not expecting any benefit at the end of the appreciation. Yes it was an impressive performance, recovering from past losses but the quantum of the dividend they will declare will further determine to what extent the price will move.

Berger Paints, CAP Plc and NPF Microfinance Bank achieved growth in their top line and bottom line Figures in Q4 2022 results. What are the possibilities in these stocks?

Definitely the market will move to reward their performance and NPF, trading at N1.65 is a sure candidate of price increase.

The prices of Berger Paints and CAP will naturally respond to the market demand for their stocks and there would be upward ticks in their prices.

There is still ample space for price growth in the three stocks

Guinness declined in Profit after tax by 54.37% in its Q2 earnings. Is the market likely to punish Guinness for this result?

Guinness would have made a fantastic outing in their Q2 result but for the finance cost of N6.7bn as against N1.25 in the corresponding prior period.

The market punishes for lack lustre earnings but because this is for Q2 and not final, the punishment may be mild. There is definitely going to be a decline in the price of the stock, but the magnitude may be controllable and before you know, that would be discounted and the market may then begin to look at Guinness price in anew light.

University Press also declined in Profit after tax by 13.7% in its Q3 earnings. How will this impact on its price?

The decline in the earnings of University Press is mild and it relates to their Q3, there would be punishment of price but it would also be mild as they have the opportunity of a quarter to turn the table around.

What are the stocks to watch?

May& Baker, Nigerian Breweries, Presco, Flour Mills and Fidson

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