FSDH Bullish

FSDH Bullish on Top Names in FMCG, Banking, Telecom Sectors

Analysts at FSDH is showing love to top names in the banking, FMCG and Telecommunication sectors in addition to United Africa Company of Nigeria (UACN) Plc in its top stocks pick.

In its review, analysts at the firm are betting on GTBank, Zenith, UBA and Stanbic IBTC. Meanwhile, MTN Nigeria remains its favourite in the Telcos industry while UACN name came up from the real estate segment.

In its review, FSDH advises investors to consider the macroeconomic condition and industries fundamentals.

In the FMCGs, analysts see a bag of mixed fortunes.

FSDH stated that the impact of the pandemic on the Nigerian fast moving consumers’ goods (FMCGs) has been a mixed bag of fortunes for the sector.

On the positive, analysts stated that the lockdown induced significant stockpiling by consumers in the final week of Q1 2020 and at beginning of Q2.

The financial service firm explained that this will support revenue for many listed FMCG names in the second half (H2) of 2020

On the negative, it stated that many of the FMCG players suffered supply chain disruption across international and domestic markets during the lockdown.

In addition, analysts note specific segments of the FMCG sector are more affected than others.

For brewers, Nigerian Breweries, Guinness & International Breweries and on-trade channels (bars, nightclubs & restaurants) that continue to remain shut while social gatherings remain banned.

Meanwhile, companies in the beverage and food segment (Nestle, Dufil, WAMCO etc.) will continue to see fairly stable demand,

This is because their products remain at the top of every average Nigerian consumer’s budget.

In the health & pharmaceuticals, FSDH sees a bright light in the new normal.

The significant stimulus plan put in place by the CBN to support operations in the health and pharmaceutical industry, as the sector remains at the forefront of fighting the coronavirus pandemic.

One such measure is the N100 billion credit support fund targeted at the healthcare sector to aid working capital and support research

FSDH said the stimulus announcement has spurred interest in Nigerian pharmaceutical stocks listed on the stock exchange.FSDH Bullish

By end of May, the top traded healthcare stocks had rallied significantly.

NEIMETH surged +104.3% leading the way while GLAXOSMITHKLINE rose +86.9%, MAYBAKER did +57.7% and FIDSON +33.9% trailed.

Banking:

The recently published May purchasing managers’ index (PMI) data from the Central Bank of Nigeria (CBN) puts Manufacturing & Non-Manufacturing PMI at 42.2 and 25.3 respectively.

This signifies that most sectors are currently in deep contraction.

It is expected that while economic activities will continue to recover, analysts at FSDH said they see business and consumer confidence remaining subdued through 2020.

FSDH stated that performance of the Banking sector may no longer be that resilient.

Overall, FSDH advises investors who maintain interest in banking stocks to buy banks with strong non-interest income generation, quality history of trading & FX Income, quality risk management and history of quality dividend payment.

Considering the above metrics, FSDH’s analysts said the firm retain interest in its quality names and they include; GTBank, Zenith Bank and Stanbic IBTC.

Telecommunications: Lockdown measures position sector as biggest beneficiary

Lockdown measures put in place to curb the spread of the Coronavirus puts the telecoms sector as the biggest beneficiary of the pandemic, FSDH stated.

Most formal businesses have now moved to working from home, which requires increased data consumption on the part of employees.

“We note that with individuals sitting at home all day, social media activities have received a significant boost while visits to streaming platforms have become a norm in a bid to provide some sort of entertainment”, FSDH stated.

FSDH Bullish on Top Names in FMCG, Banking Telecom Sectors

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