19 June 2019

Nigerian Equities Now Cheapest in Africa

Long term investors now have very good opportunity to invest in the Nigerian equities market and reap significant capital gains as the market parades some of cheapest prices among capital markets in Africa and beyond.

The sustained bearish trading at the stock market has depressed the prices of many stocks to very affordable level compared to other markets. THISDAY checks showed that as at Monday, the Nigerian Stock Exchange (NSE) All-Share Index recorded a year-to-date (YTD) stood at 4.7 per cent, lower than that of Ghana which stood at 5.7 per cent. This implies that most stocks in both markets are trading significantly lower than their year's opening values.

Apart from having recorded a YTD of 4.7 per cent, the Nigerian equities market has an average price earnings ratio multiple of 8.1x, while Ghana has 19.3x, indicating low valuation compared to their peers in Africa.

For instance, Egyptian market has a YTD gain of 9.2 per cent as at Monday, its PE multiple stood at 15.5x per cent. Kenya posted YTD growth of 6.9 per cent and PE multiples of 11.8x. South Africa market (JSE Securities Exchange) has YTD growth of 4.6 per cent and PE multiples of 17.5x. Frontier markets has YTD gain of 9.8 per cent and PE multiples of 13.6 per cent, just as emerging markets has YTD appreciation of 5.1 per cent and PE multiples of 13.2 per cent.

While the NSE ASI has depreciated by 4.7 per cent, some companies have suffered higher price depreciation despite their strong fundamentals.

In the banking sector, for instance, Ecobank Transnational Incorporated has depreciated by 29.6 per cent as at Monday, while United Bank for Africa Plc, Fidelity Bank Plc, Zenith Bank Plc and Guaranty Trust Bank Plc shed 20 per cent, 17.2 per cent, 13.2 per cent and 10 per cent respectively.

The banks had reported improved results for the first quarter ended March 31, 2019 and are also expected to record better performance in first half of the year ending June 30, 2019.

UBA grew its Q1 profit after tax (PAT) by 21 per cent to N28.665 billion up from N23.736 billion in the corresponding period of 2018. Profit after tax (PAT) rose 10.37 per cent N44.67 billion in 2018 to N49.302 billion in 2019.

GTBank Plc's PAT rose 10.37 per cent from N44.67 billion in 2018 to N49.302 billion in 2019, while Zenith Bank Plc's PAT rose seven per cent to N50.2 billion, compared with N47.79 billion in 2018. Also, despite a 235 per cent in Q1 PAT, the share price of Cement Company of Northern Nigeria Plc has declined by 30 per cent.

In the breweries sector, International Breweries Plc has shed 39 per cent, Champion Breweries Plc (34 per cent) and Nigerian Breweries Plc (32 per cent). In the consumer goods sector, Flour Mills of Nigeria Plc has lost 39 per cent, Dangote Sugar Refinery Plc (30 per cent), NASCON Industries Plc (17.7 per cent) Honeywell Flour Mills Plc (15.6 per cent).

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