Equity Analysts Upgrade Dangote Cement, Nestle, Zenith, GTB Target Prices
Equity research analysts at ARM Securities Limited have handed strong buy recommendation for Dangote Cement, Nestle; Zenith and GTBank stocks om account of strong upside opportunities.
The affected stocks future prices were effectively lifted having reviewed both the technical and fundamental factors of the stocks.
In its week call, its ARM research put Dangote Cement fair value at ₦201.05, said DANGCEM remains the firm’s best pick in the cement sector.
Explaining its choice, ARM said culmination of the firm’s adjustments brings Dangcem’s fair value to ₦201.05 as against ₦240.87 peg previously which is a 45% upside from current market price.
Dangcem’s 2020 and 2021 estimates forward price earnings of 15times and 11.5times are a premium to Lafarge’s of 11.3times and 8.4times.
Its Middle East and North Africa (MENA) peer average print at 14times and 13times.
“Dangcem continues to deliver superior return on equity (ROE: 23%) and margins relative to WAPCO’s 4% ROE.
“As such Dangcem remains our preferred pick of the two players”, ARM Research explained.
Analysts also set Nestle Plc future price target at ₦1404.4.
In its explanatory note, ARM said this year, incessant competition in the seasoning market informs relative stability in prices, particularly in the food segment.
However, equity analysts believe the brand loyalty enjoyed thus far.
Lower seasoning price relative to the closest peer “Knorr” as well as modest growth in the beverage segment will keep sales afloat, analysts said.
Also, efficient cost management, low exposure to foreign debt and tax rate normalization informs the fair value estimate of ₦1,404.4 which translates to a BUY rating.
Similarly, ARM sees Zenith Bank fair value climbing to ₦28 despite pressures surrounding the banking sector.
Analysts said they however see some level of comfort particularly with Zenith bank given its capacity to withstand the pressures relative to other banks.
“With a capital adequacy ratio (CAR) of 20%, Zenith bank has more room to absorb severe economic distraught”, analysts stated.
ARM Securities explained that with cost of risk at 10%, CAR would print at about 16%, higher than the minimum requirement of 15%.
In addition, Zenith bank has better operating efficiency relative to other banks, which should help provide support in a time of pressured earnings, analysts stated.
ARM Securities said, “As a matter of fact, we expect Cost to Income ratio to moderate by 2.5 percentage point year on year to 44.0%”.
Elsewhere, Zenith bank net long dollar position of $1.7 billion puts it in a comfortable position to record FX revaluation gain this year.
For GTBank, equity research analysts at ARM Securities estimate lender’s stock future price to hit ₦37.
“Amid heightened regulatory overhang, impact of covid-19 pandemic on economic activities and lower oil price, we like GTB given its impressive Cost to Income ratio relative to peers as well as proven strategies”, analysts said.
ARM’s analysts said with a CAR of 22.5%; on a stress test, GTB would still be in a good position assuming Cost or Risk go as high as 10%.
It had printed at 0.3% in financial year 2019.
ARM Securities said it sees GTB’s plan of a Holdco as positive given that the bank’ Chief Executive Officer, Segun Agbaje would retain the helm of affairs thus ensuring a continuation of growth strategy in the group.
For GTBank, ARM Securities said possible moves into the asset management business and payments services sector would offer a diversification away from the heightened regulations in core banking.
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Equity Analysts Upgrade Dangote Cement, Nestle, Zenith, GTB Target Prices
