Equity Analysts Upbeat on DANGCEM, Nestlé, Zenith, GTB Stocks
Equity research analysts at ARM Securities are bullish on Dangote Cement, Nestle, Zenith and GTBank stocks, having recommend that they would help investors enjoys sizzling portfolio performance in 2020.
As the second half of the year began on a tepid note, analysts observed that certain stocks will go vertical, thereby they raised price target based on improved outlook in the year.
Dangote Cement Plc is rated with STRONG BUY as analysts set fair value estimate of ₦201.05.
“DANGCEM remains our best pick in the cement sector”, analysts at ARM stated.
The firm explained that a culmination of its adjustments brings Dangcem’s fair value estimate to ₦201.05.
This was a lower price when compare to ₦240.87 previously estimated; which is a 45% upside from current market price.
Dangcem’s 2020 and 2021 estimates forward price to earnings of 15x and 11.5x are a premium to Lafarge’s of 11.3x and 8.4x.
Relating the stock to others, ARM Securities in comparison said Middle East and North Africa (MENA) peer average print at 14x and 13x.
“Dangcem continues to deliver superior ROE (23%) and margins relative to WAPCO’s 4% ROE, and as such Dangcem remains our preferred pick of the two players”, analysts said.
Nestle Plc is rated OVERWEIGHT with fair value sets at ₦1404.4.
ARM’s analysts said this year, incessant competition in the seasoning market informs relative stability in prices, particularly in the food segment.
However, ARM Securities believes the brand loyalty enjoyed thus far, lower seasoning price relative to the closest peer “Knorr”.
Also, it records modest growth in the beverage segment will keep sales afloat.
Also, efficient cost management, low exposure to foreign debt and tax rate normalization informs fair value estimate of ₦1,404.4 which translates to a BUY rating.
For ARM Securities, Zenith Bank is also STRONG BUY as it fair value estimate sets at ₦28.
ARM said, “Despite pressures surrounding the banking sector, we however see some level of comfort particularly with Zenith bank given its capacity to withstand the pressures relative to other banks”.
Specifically, analysts said with a capital adequacy ratio (CAR) of 20%, Zenith bank has more room to absorb severe economic distraught.
To buttress, with cost of risk at 10%, CAR would print at about 16%, higher than the minimum requirement of 15%.
In addition, analysts said Zenith bank has better operating efficiency relative to other banks, which should help provide support in a time of pressured earnings.
“As a matter of fact, we expect Cost to Income ratio to moderate by 2.5 percentage points to 44%”, ARM Securities stated.
Elsewhere, Zenith bank net long dollar position of $1.7 billion puts it in a comfortable position to record FX revaluation gain this year.
GTBank STRONG BUY comes at a fair value estimates of ₦37.
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ARM explained that 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.
Also, 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% compare with 0.3% in 2019.
“We also see GTB’s plan of a Holdco as positive given that the current CEO (Segun Agbaje) would retain the helm of affairs thus ensuring a continuation of growth strategy in the group.
“Possible moves into the asset management business and payments services sector would offer a diversification away from the heightened regulations in core banking”, ARM Securities said.
Equity Analysts Upbeat on DANGCEM, Nestlé, Zenith, GTB Stocks
