Top 9 Stocks Equity Analysts Recommend for Investors
Equity research analysts at CSL Stockbrokers Limited have indicated intention betting large on these 9 stocks that have scored its buy ratings.
As investors are scouting for high yield in the fixed income, flurry of funds have been re-directed into the equity market.
Followings its unprecedented trajectory amidst weak macroeconomic condition, some analysts think the market is overbought but then these 9 stocks have strong upside potential.
And guess what? Investing equations appears well-balance in the stock market at the moment.
Though, trading sessions appear to be on the balance as bear and bull struggle to get hold of the market.
It may be recalled that in 2020, NSE gained more than 50% which means based on different stock beta; meaning that some stocks could have double down their returns.
In a new report, investment experts at CSL Stockbrokers show interest in these 9 companies with buy recommendations.
Analysts reasons are based on some sorts of technical and fundamental conjoined, which they believe will translates to improve returns.
Equity analysts are hoping for a large bet on these 9 stocks
ACCESS Bank: COMPELLING VALUATIONS
Access Bank is paying heavily for its balance sheet growth. The financial services bouquet buys its ways out to become the largest in Nigeria.
The bank recently announced it is adopting a holdco structure which analysts at CSL Stockbrokers believe will be broadly positive for earnings.
The investment firm said the bank has seen a marginal improvement in funding cost, down to 3.6% as at 9M 2020 from 5.9% in 9M 2018.
This happened on the back of an improvement in its deposit mix and the general low yield environment.
Then, its capital adequacy remains modestly above regulatory minimum at 18.09.
CSL Stockbrokers explained that lender is trading at price to book value (PBV) of 0.49x, price earnings (PE) 3.03x.
Analysts stick to believe that valuations are still compelling, thus post BUY rating on the stock at a target price of N16.45/s as against reference market price of N9.35/s as at 28January 2021.
ZENITH BANK: COMPELLINGVALUATIONS; RATED BUY
Zenith bank still remains one of the leading financial service operators, competing directly with the GTBank for profit performance.
In its equity note, CSL Stockbrokers said they find the valuation of the shares still compelling, trading a price to book value of 0.80x, PE: 3.82x).
“In our view, the bank rates well relative to peers based on capital sufficiency, cost efficiency and sustainable long-term dividend yield”, analysts said.
The investment firm sticks to estimates that project lender’s asset quality among the strongest with an NPL ratio of 4.8%.
Zenith bank’s annualized cost of risk 1.3% and coverage ratio of 126.8% as at 9M-2020.
“We do not expect any risk to capital”, CSL Stockbrokers said in the report, following its BUY rating at a price target of N34.19 against reference price of N27.2.
GUARANTY TRUST BANK: EFFICIENTLY RUN; INVESTORS’ TOAST
By performance, GTB leads the banking sector retail segment with strong earnings profile.
But the year of the pandemic brought credit disaster into its doorstep, causing lender’s impairment charge on credit losses skyrocketed to level never seen before.
“At current levels (PE 4.83x, PBV 1.32x), we still find valuation attractive and see limited risk to the bank’s capital from potential provisions”, analysts said.
CSL said lender is one of the higher capital adequacies among its overage.
In its financial statement for 9-month 2020, GTBank capital adequacy ratio printed at 23.85% with the full impact of IFRS 9.
“In the event of deterioration in asset quality, we see little impact on the bank’s capital adequacy”, CSL Stockbrokers said.
The firm believes that Guaranty has greater capacity to absorb cost of risk in its P&L than other Nigerian banks.
Analysts explained this is due to its best-in class cost/income ratio which pegged at 38.8% at the end of the 9-month 2020 result.
Analysts indicate that Guaranty’s asset quality remains strong as cost of risk settled at 0.63%.
“We also expect the bank’s adoption of the holdco structure to be positive for earnings.
“We maintain a BUY rating on the stock with a price target to N47.74/s against reference price of N34/s”.
UNITED BANK OFAFRICA: BUY RATING REITERATED
On United Bank for African, analysts reiterated their buy recommendation, citing; healthy asset quality ratios with annualised Cost of Risk (COR) of 0.7% for 9M 2021.
Lender’s annualized return on average equity (ROAE) printed at 16.4% in 9M-2020, which was a marginal improvement over 16.2% for FY 2020.
Growing contribution from its Pan African subsidiaries gives some versatility to the business and valuations remain compelling (PE 3.82x, PBV 0.52x).
“We have a BUY rating on the stock and a price target of N16.00/s as against reference price of N9.05/s”, CSL Stockbrokers stated.
FIRST BANK OF NIGERIA: CONCERNS REMAIN BUT VALUATIONS COMPELLING
The bank’s asset quality ratios are at acceptable levels with 9M-2020 cost of risk (COR) moderating to 3.1% and NPL ratio of 8.8%.
Also, 9M-2020 annualised RoAE rose to 13.2% compared with 12.4% for financial year 2019.
Analysts noted that lender reported CAR of 15.7%, moderately above the regulatory limit of 15.0%.
“Without significant deterioration in asset quality, we think the bank can remain above water without any capital raise if strong capital retention is maintained”, analysts position.
CSL Stockbroker said despite a strain in capital which caps analysts near-term growth outlook, the firm still find valuations compelling at price to book value of 0.38; and price earnings of 3.66.
“We have a price target to N12.13/s and retain our BUY recommendation as against reference market price of N7.60/s”, CSL Stockbrokers stated.
Highly capitalized Dangote cement recorded impressive performance supported by both volume and price growth on the back of resumption in construction activities in Q3-2020 following the removal of movement restrictions.
Analysts at CSL Stockbrokers forecast an improvement in sales volumes to support growth in earnings in Q4 2020.
This is expected to be driven by the continued improvement in private sector participation and favorable weather conditions.
At current levels, analysts believe Dangote Cement is steeply discounted, trading at 2020 enterprise value to earnings before interest tax, depreciation and amortization (EV/EBITDA) of 9.70x.
This is lower when compared to its emerging market peers (EM) peers average of 12.16x.
”We have a Buy rating on the stock with a price target of N255.97/s”, analysts said.
MTN Nigeria Plc. is also considered among top stocks to pick as analyst consider its strong footing in the Nigerian telecoms market.
MTN Nigeria has market share 40.14% as of October 2020, coupled with its aggressive efforts at retaining existing customers whilst also attracting new ones through improved technology and superior service offerings.
“We believe the company is well positioned to benefit from further growth in mobile and data penetration in Nigeria’s fast growing telecommunications industry.
“We have a Buy rating on the stock with a price target of N190.02/s”, CSL Stockbrokers explained.
DANGSUGAR’s performance improved considerably in 2020, with annualized topline growth of 32.90% year on year.
Similarly, the company’s net income grew by 7.5% year on year.
This coupled with an EV/EBITDA of 3.84x makes the stock an attractive proposition given it trumps peer average at 8.05x.
“Also, our target price of N28.45 implies an upside of 37.44% in 2021. Thus, we rate the ticker a BUY”, CSL Stockbrokers stated.
FLOUR MILLS OF NIGERIA:
FMN recorded a steep rise in annualized topline performance in 2020, up 34.60% year on year.
Also, the company reported significant increase in net income, up 1,871% year on year.
Analysts said the firm’s performance was on the back of reduced infiltration of the market by smuggled alternatives following the Q3-2019 border closure.
In expectation that this would continue albeit slower in the latter half of 2020, analysts said they have revised target price to N46.79, indicating an upside of 38.80%.
“As of today, EV/EBITDA for the firm printed 3.44x signifying how good the business is being sweated relative to peers at an average EV/EBITDA of 8.05x.
“Hence; we rate the ticker a BUY”, CSL Stockbrokers stated.
Top 9 Stocks Equity Analysts Recommend for Investors