Dear esteemed clients,
Welcome once again to 2022! 🔥
The new year is finally here, with a whole host of new and exciting opportunities to make the most of the Capital Market.
Our Research team has been busy studying and analysing market trends and signals as we enter the new year, and we are glad to present our top Stock Recommendations for 2022!
3 stocks we are watching 👀
- FLOURMILL – In its most recent financial report, H1:2022, the company recorded a 47.23% growth in revenue which trickled down to a 6.00% increase in profit after tax. In November, the company announced its acquisition of a majority stake in its competitor, HONYFLOUR, sealing its position as the largest flour miller in the country. We, therefore, expect an expansion in EPS to NGN8.13 from NGN6.42, given the anticipated synergies from the acquisition. Coupled with a target PE ratio of 5.00, we anticipate a target price of NGN40.65, leaving room for investors to enjoy capital gains.
- GTCO – In 2021, Guaranty Trust Bank completed its transition from a core banking structure into a Holding Company structure, allowing its legroom to delve into various business segments its banking structure would have ordinarily prohibited. Although its growth in revenue and earnings tapered by 3.47% and 9.05% in Q3:2021, the company remained the second most profitable bank in the industry and the most operationally efficient bank with a best-in-class cost-to-income ratio. The post-transition effects are expected to be fully reflected in the company’s books post 2021. We can expect to see a more robust expansion in EPS to NGN6.99 as newly introduced income streams strengthen the bottom line. With its price currently trading at a low point of NGN25.90, coupled with an expected PE ratio of 4.90x, the counter has a 29% upside potential.
- ZENITH BANK – Zenith Bank has continued to retain its position as Nigeria’s most profitable bank with a profit after tax of NGN160.59bn as of Q3:2021. With the second-largest asset base, NGN8.75trn, and an asset turnover of 0.06, the bank still has significant headroom to sweat its assets further and generate more revenue. The bank has also maintained a consistent dividend payout history which we expect to continue in the medium to long term. With a current price of NGN24.40 and an expected dividend of NGN2.70 by FY2021, investors can expect to enjoy an 11% return from dividend payouts. With a target EPS of NGN7.63 and a target PE ratio of 3.85x, investors also stand to enjoy capital gains on the counter, considering the expected upside of about 15%.
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That’s all from us. We will see you later.
