This week, we are pledging to make the most out of the Capital Market.
Thinking about joining in, our Research team have shared their most recommended stocks this week.
Take a quick look 👀
1. FISDSON
Fidson is a leading pharmaceutical company specializing in the manufacturing and distributing of pharmaceutical and healthcare products across Nigeria and Sub-Saharan Africa. The firm currently produces over 150 products that target a variety of therapeutic and treatment classes common amongst Nigerians.
In 2021, the company grew its revenue and earnings by 68.22% and 155.52%, respectively, following a surge in demand for its products amidst the global pandemic. We expect the improving fundamentals of the company and solid projections for the healthcare sector to further stir positive sentiments towards the company in the mid to long term.
In our opinion, FIDSON is well-positioned to further expand its revenue and earnings given its large product base and its strategy to grow its market share. We estimate an EPS of NGN1.78 and a target P/E of 5.64x, giving a target price of NGN10.05. This represents an upside potential of 22.56% from its closing price of NGN8.20 at the close of trading on the 18th of February 2022.
2. STANBIC IBTC
2021 proved a challenging year for Stanbic IBTC Holdings, as reflected by the respective declines of 12.22% and 31.52% in gross earnings and Profit After Tax (PAT). The drag in their performance was induced by a significant decline in two key income streams – investment interest (-38.70%) and trading revenue (-74.48%). We believe these were black swan events and will not persist in the 2022 financial year.
In furtherance of its drive to diversify its revenue base, the company recently announced the establishment of a wholly-owned Financial Technology subsidiary, Stanbic IBTC Financial Services Limited, to serve as a Payment Service Solution Provider (PSSP). We believe that in the mid to long term, the newly established subsidiary will contribute to gross earnings and serve the purpose of further expanding the company’s revenue streams.
In recent periods, the company has maintained a record of making the largest dividend payouts in the sector (interim and final). It is poised to maintain the trend in the medium term, leaving room for investors seeking out dividend plays.
We estimate an EPS of NGN5.75 and a target P/E of 7.62x, giving a target price of NGN42.8. This represents an upside potential of 23.67% from its closing price of NGN34.65 at the close of trading on the 18th of February, 2022.
3. TOTAL
Total Energies Marketing Nigeria Plc recorded a significant improvement in its financial performance in the 2021 financial year compared to 2020 following a strong rebound in oil prices and a return to normal business activities after the COVID-19 pandemic slowed down its operations. In 2021, oil prices rebounded strongly, averaging USD70.68 per barrel from USD41.96 per barrel in 2020.
This, coupled with the return of business activities to normal operations, enabled the company to grow its revenue by 66.65%, which trickled into a 710.58% spike in PAT from NGN2.06bn to NGN16.73bn. With oil prices now hovering around USD100 per barrel, we expect even better performance for the company in 2022, barring any unforeseen challenges.
The company also has a history of dividend payments with an average payout ratio above 50% and is expected to maintain this trend in the medium to long term.
In our opinion, TOTAL is set to enjoy the strong uptick witnessed in oil prices and the reversion of business activities to normal. We estimate an EPS of NGN55.65 and a target P/E of 5.28x, giving a target price of NGN293.68. This represents an upside potential of 10.86% from its closing price of NGN264.90 at the close of trading on the 18th of February, 2022.
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