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Greenwich Trust LimitedPlot 1698A Oyin Jolayemi StreetP.M.B. 80074Victoria IslandLagos.Tel: 234-1-2715937Fax: 234-1-2700613E-mail: [email protected]: www.greenwichtrustgroup.com
Global EconomyIn the United States (US), the Institute of Supply Manage-ment (ISM) released a report after a survey that the U.Sservice sector grew for the 22nd successive month in Sep-
tember, although with a decline in the pace of development.The Organization said the activities recorded in the service
sector fell to 53.00% in September from 53.30% recorded inAugust. Figures recorded above 50.00% indicates a sign of
growth in the sector. The report revealed a group within thebusiness sector recorded an increase to 57.10% in Septem-
ber in contrast to 55.60% recorded in August. Figures re-corded in the employment index showed a drop to 48.70%in September from 51.60% in August indicating a tightening
in employment, following three consecutive months of in-crease.
In the United Kingdom (UK) the Office for National Statistics,
disclosed an increase in the level of output from the servicesector. The service sector grew by 0.20% in the second
quarter (Q2), in contrast to 0.50% recorded in the previousmonth. The Treasury pointed to these figures as a proof that
the UK economy was still growing and said it would be main-taining its deficit reduction programme. The Bank of Englandsaid it would inject an additional 75 billion into the economy
through quantitative easing, earlier the Bank injected 200billion into the economy through the purchase of assets such
as government bonds, in an effort to stimulate lending bycommercial banks.
In another development, activity in the UK construction sec-
tor slowed to near stagnation in September, indicated by aclosely monitored survey. The Purchasing Managers Index(PMI) fell to 50.10% in September from 52.60% recorded in
August, a fraction above 50.00% no change mark whichseparates expansion from contraction.
In the Eurozone, the International Monetary Fund (IMF) ad-
vised European Union to inject 200 billion into its banks andcautioned of a freeze in lending and a subsequent recession if
the unions leaders failed to reassure anxious investors.French policy makers have been nervous by anxiety that itstop banks are too exposed to Greece, whose debt is projected
to end in 2011 at 357 billion. In addition, the recent di-lemma affecting the Franco-Belgian bank Dexia, have wors-
ened the situation affecting the region. The European Com-mission confirmed in a recent report that the level of confi-
dence in the European sector had taken a toll for the worsesince the 27-nation bloc offered more than 80 banks a clean
bill of health during the summer in tests that investors re-garded were sub-standard.
In another development in the Eurozone, manufacturingactivities declined as new orders shrank at their fastest pace
since mid-2009. Even though the regions leaders have man-aged to control the regions debt crisis which may lead to a
financial catastrophe, as recent data indicated a worseningeconomic fortune across the union.
A recent survey revealed a notable decline in Industrial pro-
duction in Greece. Industrial output in the troubled nation fellby 11.70% on a Year on Year (Y-o-Y) basis in August, signifi-cantly faster than Julys 2.60% decline. On a Month on Month
(M-o-M) basis, the level of production declined by 17.40%within the month, annulling the 13.50% growth observed in
the previous month. In the first eight months of 2011, indus-trial output dropped by an average of 8.40% from the same
period in 2010.
Executive Summary
STOCKRECOMMENDATIONSOctober 1014, 2011
Greenwich Research Team
Opeyemi Tella
Oladipupo Adekanmbi
Olukayode Aladejebi
Dennis Okolie
Awobiyi Oluyinka
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Executive Summary (Contd)Recent construction activities in Germany rose in September,According to Markit Economics a global data agency. The firms
index of German construction activity grew to 50.50%, whencompared with 49.80% in August. An index above 50.00% indi-
cates the number of construction companies whose businessesexpanded was higher than those whose businesses contracted.
In addition, the Economic ministry in Berlin revealed that theIndustrial output for Germany dropped than forecasted in Au-
gust . Production dipped by 1.10% when compared to a growthof 3.9% recorded in the previous month. A 2.00% decrease wasanticipated, according to a survey carried out recently.
Global rating agency (Fitch) recently cut Italys sovereign rating
by a notch, compounding to the regions existing crisis and arisk of fiscal slippage. Fitchs rating for Italy dropped to the
same rates with countries like Malta and Slovakia are rated. The
agency based its downgrade on market confidence in Italy,which had been battered by the governments initial delay torespond to the rise in yields. Analyst believe the coalition of thegovernment is feeble and divided and efforts to introduce re-
forms would be abortive. However, the agency believes thecountry is solvent, but urged Italy which is one of the slowest
growing economy in the region, to implement a more radicalapproach to maintaining a sustainable economy.
According to data released by the Federal Statistics Office the
unemployment rate of Switzerland remained the same in themonth of September. The nations jobless rate remained un-
changed at 3% throughout the month, whilst unemployed fig-ures dipped by 28,696 people from the previous level recordedin August. However, the countrys retail sales declined for the
second successive month in August. Retail sales fell by 3.90%in August compared to a 2.70% decrease recorded in July, food,
beverages and tobacco declined by 2.20 per cent, while non-food items excluding fuel fell 6.70 per cent.
In Australia the International Monetary Fund (IMF) disclosed it
anticipates the nations economy will grow by 1.80% in 2011,accelerate by 3.30 per cent in 2012 and increase by 3.4 percent in 2013, backed by a fast-growing Asia. The IMF explained
that a high demand by the Asian economies could lead to theconstruction of several large iron ore and Liquefied Natural Gas
projects (LNG), which in turn would boost the level of privatebusiness investment in the future.
Asia, activities within the non-manufacturing sector in China
witnessed an increase in September, reducing fears of a declinein the countrys economic growth. The Purchasing ManagersIndex (PMI) for the non-manufacturing sector gained 1.7points
from the previous months figure of 59.30%. A reading above50 indicates an expansion, while a reading below 50 indicates a
contraction. In addition, the Asian Development Bank (ADB)reduced its economic outlook for China, as a result of the de-
cline in demand from advanced countries along with the bat-tered level of investors confidence. The Bank now anticipates a
rise in the countrys Gross Domestic Product (GDP) by 9.30 percent in 2011 and 9.10 per cent in 2012.
The Indian Ministry of Commerce and Industry recently revealeda 42.5 per cent decline in the level of exports from previous
year to $24.31billion recorded in the second quarter (Q2), whilethe annual growth in imports came in at 41.82 per cent during
the month of August. In addition, exports and imports rose by54.21 per cent and 40.37 per cent respectively, within the
month of April to August. The ministry also stated an increase indeficit, from $10.09billion recorded last year to $14.04billion in
the second quarter (Q2).
Major World Stock Market Indices (October 4 7, 2011)
IndexCurrentValue
1 WeekChange YTD Change
Dow Jones (DJA) 3,814.42 4.71% -5.42%
S&P 500 1,150.26 4.64% -8.54%
Nikkei 225 8,605.62 0.70% -15.87%
FTSE 100 5,303.40 4.49% -10.11%
GSE CompositeIndex 1,014.15 -7.46% 1.44%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Inflation Rates Across Countries
InflationRates
96.00
98.00
100.00
102.00
104.00
4-Oct-11 5-Oct-11 6-Oct-11 7-Oct-11
Price Movement of Crude Oil (Oct 4- 7, 2011)
OPEC Basket
Country
Quaterly
GDP Growth
Rate (Q2,
2011)
Interest
Rate
(Aug/
Sep)
Inflation
Rate
(Aug/
Sep)
Current
Jobless
Rate
China 9.10% 5.65% 6.20% 6.10%
Nigeria 7.72% 13.33% 9.30% NA
Japan -2.10% 0.15% 0.20% 4.30%
Singapore NA 0.38% 5.70% 2.10%
United
States 1.00% 0.15% 3.80% 9.10%
Germany 0.50% 1.56% 2.60% 6.90%
Euro A rea 0.60% 1.56% 3.00% 10.00%
Britain 0.40% 1.00% 4.50% 7.90%
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Executive Summary (Contd)On the local scene, the Central Bank of Nigeria (CBN) has re-leased a statement that it will no longer allow oil companies buy
US dollars at the bi-weekly auctions, to fund importation ofproducts. The CBN criticized oil companies for the recent up-
ward trend in the demand pressure of the U.S. dollar, leading toa depreciation in value of the local currency. In addition, the
National Bureau of Statistics (NBS) anticipated a growth 0f 8.84per cent in the non-oil sector for 2011 compared to 8.49 re-
corded in 2010. On accumulation, the economy when measuredby the Gross Domestic Product (GDP) is projected to grow by7.98 per cent in the current year, as against 7.85 per cent re-
corded in the previous year.
The 2012 fiscal year may usher in the end of fuel subsidy, theFederal government recently re-evaluated its plans to eliminate
fuel subsidy beginning from January 2012. Research analysthave estimated that the removal of the subsidy is expected to
save the government about N1.20 trillion. A section of the fundwould be utilized for the provision of safety nets for low incomeearners.
Liquidity pressure tightened in the financial system in the week
under review, as the Nigeria Interbank Offer Rates (NIBOR)increased across all tenors. This was as a result of the outflow
of funds for FX funding at the CBN Wholesale Dutch AuctionSystem (WDAS), amidst Open Market Operations (OMO) of the
Central Bank of Nigeria (CBN).
During the week under review, average bond yields rose, justas their prices decreased. This was as a result of reduced de-mand amidst the liquidity pressure at the interbank market.
On a Week-on-Week basis, the Naira depreciated against the
dollar by 0.52 per cent at the official window and 2.91 per centat the inter-bank forex to close at N155.40/$ and $164.25/$,
respectively. In the same vein, it depreciated by 3.09 per centat the parallel window and 3.11 per cent at the Bureau de
Change to close at N166.00/$ and N167.00/$, respectively.
The Nigerian Stock Exchange (NSE) closed the last trading day
of the week on a negative note. The All-Share Index and MarketCapitalization plunged by 138 basis points (1.38 per cent) each
to close at 20,225.02 and N6.45 trillion, respectively, whencompared to their previous trading figures. Consequently, the
Year-to-Date (YTD) change in the ASI fell to 18.35 per centcompared to 17.75 per cent recorded in the preceding week.
OUTLOOKWe are of the view that equity investors may remain wary onthe floor of the NSE, on the back of the decision of the Monetary
Policy Committee (MPC) of the CBN to increase the MonetaryPolicy Rate (MPR), as investorsappetite may drift towards theMoney and Fixed Income Markets, despite the survival of the
rescued banks which drove market activities during the first twotrading days of the week under review.
19,900.00
20,000.00
20,100.00
20,200.00
20,300.00
20,400.00
20,500.00
20,600.00
20,700.00
20,800.00
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
4-Oct-11 6-Oct-11
Movement of All Share Index Against Volume
Traded (Oct 4 - 7, 2011)
V OLUME INDEX
3.00%
5.00%
7.00%
9.00%
11.00%
13.00%
15.00%
3 5 7 10 20
Nigerian FGN Bond Yield Curve
Av er ag e We ig hte d (07 /1 0/11) A ve ra ge We ig hte d ( 30/ 09 /11)
96.00
98.00
100.00
102.00
104.00
4-Oct-11 5-Oct-11 6-Oct-11 7-Oct-11
Price Movement of Crude Oil (Oct 4- 7, 2011)
OPEC Basket
Ec onomic I ndic a t or s Cur r e nt P r e v ious
YoY Inf lat ion (Aug'11) 9.30% 9.40%
MPR (Sep '11) 9.25% 8.75%
Ext ernal Reserves (October
6'11) 31.36 32.53
GDP Growt h Rat e YoY (Q2,
2011) 7.72% 7.43%
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FORECAST PERFORMANCE FOR LAST WEEK
Security Base Price Forecast Weeks High
Forecast as aPercentage of
ActualLast Weeks Rat-
ing
ZENITHBANK 12.41 12.46 12.85 103.13% BUY
GUARANTY 12.85 12.89 12.90 100.08% BUY
FIRSTBANK 9.77 9.81 9.80 99.90% BUY
GTASSURE 1.01 1.012 1.17 115.61% BUY
ASHAKACEM 16.8 16.86 17.85 105.87% BUY
ACCESS 5.62 5.64 5.70 101.06% BUY
SKYEBANK 5.10 5.12 5.19 101.37% BUY
NAHCO 5.88 5.90 6.13 103.90% BUY
FCMB 4.25 4.26 4.60 107.98% BUY
DIAMONDBNK 3.50 3.51 3.67 104.56% BUY
DANGSUGAR 7.00 7.03 7.56 107.54% BUY
DANGFLOUR 6.81 6.84 7.19 105.12% BUY
OANDO 22.99 23.07 26.57 115.17% BUY
FIDELITYBK 2.01 2.02 2.05 101.49% HOLD
86.00% 93.00% 100.00% 107.00%
ZENITHBANK
GUARANTY
FIRSTBANK
GTASSURE
ASHAKACEM
ACCESS
SKYEBANK
NAHCO
FCMB
DIAMONDBNKDANGSUGAR
DANGFLOUR
OANDO
FIDELITYBK
Percentage Forecast Achieved
Percentage Forecast Achieved
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Recommendation using fundamentalis based on analysis of the companys financial statements.
Recommendation using technicalis based on analyzing the stock price and volume trends.CAPM Capital Asset Pricing Model. See the Appendix for definitions of the technical tools used in this report.
YTD Year-to-date.
SUMMARY
SecurityCurrentPrice (N)
OneYear Price TargetRange (N)
5-10 Trading DaysForecast (N) Rationale
Buy List
ZENITHBANK 12.10 14.30 - 19.86 12.14 Fund-Tech
GTASSURE 1.17 1.52 - 1.66 1.17 Fund-Tech
CUSTODYINS 2.31 3.14 - 4.28 2.32 Fund-Tech
GUARANTY 12.30 16.67 - 17.90 12.34 Fund-Tech
FIRSTBANK 9.07 16.01 - 18.69 9.10 Fund-Tech
ASHAKACEM 16.17 19.17 - 24.03 16.23 Fund-Tech
NAHCO 6.13 7.40 - 11.42 6.15 Fund-Tech
FCMB 4.16 8.39 - 10.88 4.17 Fund-Tech
ACCESS 5.23 8.16 - 9.53 5.25 Fund-Tech
DANGSUGAR 7.24 12.43 - 17.48 7.27 Fund-Tech
DIAMONDBNK 3.39 5.44 - 8.53 3.40 Fund-Tech
OANDO 25.50 35.10 - 60.30 25.59 Fund-Tech
Hold List
FIDELITYBK 2.01 2.34 - 3.90 2.02 Fund-Tech
Sell List
SecurityCurrentPrice (N) Fair Price (N)
OASISINS 0.50 0.50 Tech
CAPHOTEL 3.05 3.13 Tech
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ZENITH BANK PLCThe banks business location strategy and infrastructure
deployment show its commitment to customer enthusi-
asm at all times, in all business offices across Nigeria.
The uniqueness of the Banks brand of financial services
has actually made it one of the top choices in banking, to
most multinational companies in Nigeria, and this ac-
counted for its wide customer base.
As part of its vision to become a global leader in the in-
dustry, the Bank carries out its operations through a
number of subsidiaries, namely; Zenith General Insur-
ance Company Limited, Zenith Securities Limited, ZenithRegistrars Limited, Zenith Bank Ghana Limited, Zenith
Pension Limited, Zenith Bank (UK) Limited, Zenith Trust
Limited and Zenith Medicare Limited to offer a wide
range of financial services.
Zenith Banks growth and performance has continued to
earn excellent ratings from both local and international
rating agencies. The Bank was rated Aaa in Nigeria con-
secutively for six (6) years by Agusto & Co. Ltd. The
bank has consistently recorded impressive performance
on several parameters and this demonstrates the rising
customer patronage and an excellent approval and en-
dorsement all over the world.
The banks Turnover declined by 30.58 per cent from
N277 billion recorded in 2009 to N192 billion in 2010.
However, Profit After Tax (PAT) increased by 81.59 per
cent from N20.60 billion in 2009 to N37.41 billion in
2010. The bank declared a dividend per share of N0.85k.
The banks half year result for 2011 saw PAT stand at
N30.67 billion, from N21.31 billion recorded in the same
period in 2010.
Our technical analysis seems to indicate that the stock is
attractive for long term investors, as the 200-day MA is
below the 100-day MA. The graph of the stock price
against the NSE ASI at the top right corner also show
that the stock is currently below the signal line, and it
seems that the price may witness an upward movement
in the next couple of trading sessions.
The one-year Standard Deviation decreased to 2.16%
from 2.21% recorded last week. The beta of the stock
price is 1.47, which is higher than the banking sectors
beta of 1.06. The alpha of the stock which explains the
return in excess of the compensation for the risk borne is
0.04%, compared to the sectoral average of 0.02%. The
expected one year return of the stock as estimated with
the Capital Asset Pricing Model (CAPM) is 16.69%.
A weighted average of all the valuation metrics pro-
duced a reviewed final fair price of N14.30. This indi-
cates that the stock is 18.18% undervalued at the
current market price of N12.10. We therefore main-
tain our BUY recommendation on Zenith Bank. In
the medium to long term, we expect the share price
to trend towards our target price range of N14.30
N19.86.
Cur r ent P r i ce 12.10
Year H igh 16.70
Year Low 11.75
EP S 1.49
P/ E Rat i o (x) 8.12
Out standi ng Shar es 31,396,493,786
Di vi dend Yi el d 7.02%
Pr o f i t Af t er Tax '000 (Ful l Year ) 20,603,000
Year E nd December
Z E N I T H B A N K P L C
2 0 1 0 ( '0 0 0 ) 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 192,488,000 277,300,000 -30.58%
Net P r of it A f ter T ax 37,414,000 20, 603,000 81.59%
Net P of i t Mar gi n 19. 44% 7.43% 161.61%
Shar ehol der s ' Funds 363, 561,000 337,793, 000 7.63%
Total Assets 1, 895,027 1,659,703, 000 -99.89%
ROSH 10. 67% 12.20%
ROA 4. 50% 2.48%
Z E N I T H B A N K P L C
Valuation Weight Estimated Value
Earnings Basis 10 11.76
Forward Earnings Basis 30 22.90
Dividend Basis 30 15.09
Price to Book Basis 30 5.75
Estimated Fair Value 100 14.30
ZENITH BANK PLC
R = 0.0748
0.00
50.00
100.00
150.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All -Share Index Vs ZENITHBANK-Jan '10 -Date
N SE Reba se d Ze nit hba nk Reba se d Poly . ( Ze nit hba nk Reba se d)
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GTBANK PLC
A weighted average of our valuation metrics gives a
fair value of N16.67. Thus, the stock is trading at a
discount of 35.53% at the current price of N12.30
We maintain our BUY recommendation on Guaranty
Trust Bank Plc. In the medium term, we expect the
share price to trend towards a target price range of
N16.67 N17.90.
Guaranty Trust Bank Plc has built up an impressive cor-
porate image for itself as a strong growth, customer
friendly, dependable and high performance institution.
The Bank is associated with high levels of professional-
ism and has a reputation for high quality service deliv-
ery. Growing at a strong pace over the years, it has es-
tablished itself among the most efficient and profitable
banks in the industry.
In 2006/2007 financial year, the Bank received a credit
line of $40million from African Development Bank, taking
total investments by international finance institutions in
the Bank to over $400million. Also in the same period,the Bank signed an asset management joint venture
agreement with Morgan Stanley Investment Management
to meet part of the requirements for managing portions
of Nigerias external reserves.
The Bank floated a $350million Eurobond issue which
recorded a substantial oversubscription. The issue has
been listed on the London Stock Exchange. Similarly, the
Bank raised $750m to fund its growth programmes,
$500m from international investors by selling Global De-
positary Receipts (GDR) and the rest from Nigerians. The
GDR, which was fully subscribed has also been listed on
the London Stock Exchange.
The Bank recently released full year result indicated that
its Turnover declined by 5.32 per cent from N162.55
billion in 2009 to N153.91 billion in 2010. However,
Profit After Tax (PAT) increased by 60.07 per cent from
N23.69 billion in 2009 to N37.92 billion in 2010. The
banks 2011 half year result saw PAT grow to N25.25
billion, from N18.22 billion recorded in the corresponding
period in 2010.
Our technical analysis seems to indicate that the stock is
attractive for long term investors, as the 200-day MA is
below the 100-day MA. The graph of the stock price
against the NSE ASI at the top right corner also showthat the stock is currently below the signal line, and it
seems that the price may witness an upward movement
in the next couple of trading sessions. The one-year
Standard Deviation marginally fell to 2.51% from 2.52%
recorded last week. The beta of the stock price is 1.05,
which is higher than the banking sectors beta of 1.06.
The alpha of the stock is 0.03%, which is higher than
the sectors 0.02%, explaining the return in excess of the
compensation for the extra risk. The expected one year
return of the stock as estimated with the Capital Asset
Pricing Model (CAPM) is 15.68%.
Valuation Weight Estimated Value
Income C apitalization Mode 10 26.67
Earnings Model 20 18.55
Discounted Cashflow (DCF) 20 14.66
Dividend Model 30 22.05
Price to Book Basis 20 3.72
Estimated Fair Value 100 16.67
GUARANTY TRUST BANK PLC
Cur r ent P r i ce 12.30
Y ear Hi gh 20.50
Y ear Low 11.64
E PS 1.54
P / E Rat i o (x) 7.99
Outs tandi ng Shar es 29,431,179,226
Di v i dend Y i el d 8.13%
P r of i t Af ter Tax '000 (Ful l Year ) 23,686,000
Y ear E nd December
G U A R A N T Y T R U S T B A N K P L C
D e c . 2 0 1 0 ( '0 0 0 ) D ec . 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 153,908,000 162,550,418 -5.32%
Net P r of it A f ter T ax 37,916,000 23, 686,843 60.07%
Net P of i t Mar gi n 24. 64% 14.57% 69.06%
Shar ehol der s ' Funds 210, 826,000 192,245, 928 9.66%
Total Assets 1, 152, 002,000 1,006,503, 718 14.46%
ROSH 18. 81% 13.32%
ROA 3. 51% 2.72%
G U A R A N T Y T R U S T B A N K P L C
R = 0.2494
0.00
50.00
100.00
150.00
200.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs GUARANTY- Jan '10 -Date
NS E Re base d Guarant y Re ba se d Poly . ( Guara nty Re ba se d)
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FIRST BANK OF NIGERIA PLC
First Bank of Nigeria Plc (FBN) offers commercial banking
services and a variety of other financial services through
its subsidiaries, which include FBN Capital Limited, FBN
Mortgages Limited, First Funds Limited, First Trustees
Limited, First Pension Custodian Limited, First Registrars
Nigeria Limited, FBN Insurance Brokers Limited and FBN
Bank (UK) Limited.
It currently operates through 536 branches in Nigeria.
The branch network which cuts across all parts of Nige-
ria, gives the bank access to large market share, and
cheap funds.
The Bank has been in existence for about 115 years and
over the years, it has maintained a strong brand name,
solid capital base and high market share. Its experi-
enced, dynamic and competent management team, as
well as, its consistent dividend and bonus policy has
made it possible for the bank to distinguish itself as the
leading financial institution and a major contributor to
the economic advancement and development in Nigeria.
First Bank has international presence through its subsidi-
ary FBN Bank (UK) in London and Paris. It also has of-
fices in Johannesburg and Beijing. The Bank is quoted on
the Nigerian Stock Exchange and currently has anunlisted Global Depository Receipt (GDR) Programme.
In the banks 2010 Full Year Report, Turnover rose by
5.64 per cent from N218.29 billion in 2009 to N230.61
billion in 2010. The Profit After Tax (PAT) increased to
N33.41 billion at the end of 2010, as against N12.57
billion recorded in 2009. The banks 2011 half year result
saw PAT grow to N31.26 billion, from N25.35 billion re-
corded in the same period in 2010.
Our technical analysis shows that the stock price is at-
tractive for long term investment, as the 100-day MA is
slightly above the 200-day MA. The graph of the stock
price against the NSE ASI at the top right corner also
show that the stock price is currently below the signal
line and may experience an upward rally in the next cou-
ple of trading days. The trailing Price to Earnings (P/E)
Ratio of the company stood at 7.50x, compared to its
sectoral P/E Ratio of 11.66x. The one-year Standard
Deviation decreased to 2.41% from 2.45% recorded last
week. The beta of the stock price is 1.22, which is higher
than the banking sectors beta of 1.06. The expected one
year return of the stock as estimated with the Capital
Asset Pricing Model (CAPM) is 16.09%.
The weighted average final fair price of First bank is
N16.01 This indicates that First Bank is undervalued
by 76.52%. We therefore maintain our BUY recom-
mendation on First Bank Plc. In the medium to long
term, we expect the share price to trend towards our
target price range of N16.01 N18.69.
Cur r ent P r i ce 9. 07
Y ear H i gh 16. 12
Y ear Low 8. 50
E P S 1. 21
P / E Rat i o (x ) 7. 50
Out s tandi n g Shar es 32, 632,084, 358
D i v i dend Y i el d 6 .62%
P r of i t Af t er T ax '000 (Ful l Y ear ) 33, 411,000
Y ear E nd December
F I R S T B A N K O F N I G E R I A P L C
2 0 1 0 ( ' 0 0 0 ) 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 230,606,000 218,287,000 5.64%
N et P r of it Af ter T ax 33, 411, 000 12,569,000 165.82%
N et P of i t Mar gi n 14.49% 5. 76% 151.62%
Shar ehol der s' Funds 340,626,000 337,405,000 0.95%
T otal A ssets 2,305,258,000 2,009,914,000 14.69%
R OSH 9.86% 5. 97%
R OA 1.55% 0. 86%
F I R S T B A N K O F N I G E R I A P L C
R = 0.2731
0.00
50.00
100.00
150.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs FIRSTBANK- Jan '10 - Date
NS E Re ba se d F ir st ba nk Re ba sed P oly . ( Fi rst ba nk R eba se d)
Valuation Weight Estimated Value
Earnings Basis 10 9.81
Forward Earnings Basis 30 31.46
Dividend Basis 30 13.80
Price to Book Basis 30 4.83
Estimated Fair Value 100 16.01
FIRST BANK OF NIGERIA PLC
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9
ASHAKA CEMENT PLC
A weighted average of all the valuation metrics pro-
duced a final fair price of N19.17. This indicates that
the stock is currently trading at a discount of
18.55% at the current market price of N16.17. We
therefore maintain our BUY recommendation on the
stock. In the medium term, the market price is likely
to oscillate around our target price range of N19.17
N24.03.
Ashaka Cement Plc (Ashakacem) became a subsidiary of
Lafarge Group, the world leader in building materials in
July 2001 after the acquisition of Blue Circle Industries
Plc. The companys principal activities are the manufac-
turing and marketing of cement products. The company
has maintained a reputation of consistent dividend and
bonus history. Consequently, investors expectation of
bounty returns at the end of their financial year will trig-
ger the demand for the stock.
The company believes that ongoing advances in building
materials must integrate respect for people, their differ-
ent needs and their environment. This strong convictionis reflected in a strategy that combines industrial know-
how with performance, value creation, respect for em-
ployees & local cultures, environmental protection and
conservation of natural resources & energy.
The companys full year result ended December 31,
2010, shows that Turnover increased by 11.40 per cent
from N17.19 billion in 2009 to N19.15 billion in 2010.
Profit After Tax (PAT) surged by 218.35 per cent from
N943.62 million to N3.00 billion when compared to the
same period in the preceding year. Net Profit Margin
(NPM) also increased from 5.49 per cent in the corre-
sponding period of 2009 to 15.68 per cent in the 2010,indicating an increase of 185.61 per cent.
The increase in earnings has been attributed to the rise
in cement prices during the financial year as a result of
increased public projects in terms of infrastructural de-
velopment. It was also noted that the impact of the
global financial crisis, which crippled the economy in
2008 is beginning to ease.
Meanwhile, the strength of the Company resides in its
ownership of a completed power project for production,
the advantage it derives from the technical alliance with
other leading companies in the sector, its domineering
status in some regions of the country, and its capability
to expand and take advantage of emerging opportuni-
ties.
The beta of the stock is 0.97, while the one-year Stan-
dard Deviation of the stock marginally fell to 2.63% from
2.64% recorded last week. The long term return pros-
pect of the stock estimated with the Capital Asset Pricing
Model (CAPM) is 15.49%.
Cur r ent P r i ce 16. 17
Y ea r H igh 30. 00Y ea r Low 16. 00
E P S 1. 35
P / E R at i o (x ) 11. 98
Out st andi ng Shar e s 2, 239, 453, 125
Di v i dend Yi el d 1.86%
P r o f i t Af t er T ax '000 (Ful l Ye ar ) 3, 004, 000
Y ea r E nd D ecember
A S H A KA C E M E N T P L C
Valuation Weight Estimated Value
Earnings Basis 10 10.32
Forward Earnings Basis 20 14.06
Dividend Basis 30 33.80
Price to Book Basis 40 12.95Estimated Fair Value 100 19.17
ASHAKA CEMENT PLC
2 0 1 0 ( '0 0 0 ) 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 19,153,000 17,193,000 11.40%
Net P r of it A f ter T ax 3,004,000 943,618 218.35%
Net P of i t Mar gi n 15. 68% 5.49% 185.77%
Shar ehol der s ' Funds 16, 146,000 13,141, 000 22.87%
Total Assets 28, 123,249 25,618, 025 9.78%
ROSH 20. 51% 14.36%
ROA 11. 18% 7.37%
A S H A K A C E M E N T P L C
R = 0.6620.00
50.00
100.00
150.00
200.00
250.00
300.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs ASHAKACEM-J an '10 -Date
NSE Rebased Ashakacem Rebased
Pol y. (As ha ka ce mRe ba se d) P ol y. (As ha ka ce mRe ba se d)
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10
ACCESS BANK PLC
The weighted average valuation of the stock is
N8.16 indicating that the stock is trading at a dis-
count of 56.02% at the current market price of
N5.23. We therefore maintain our LONG TERM BUY
rating on the stock. We expect the share price to
trend towards our target price range of N8.16
N9.53.
Access Bank operates through a network of 130 branches
located in all major commercial centers and cities across
Nigeria, and in eight other African countries, as it is
geared towards developing a world class retail banking
franchise in Nigeria.
The Bank has undergone a transformation process which
has positively impacted its every area of business and
propelled it into one of Nigeria's leading banks, with
Shareholders Funds in excess of N185billion, Assets and
Contingents in excess of N850 billion, and a deposit base
in excess of N450 billion.
The Bank is well positioned in a high growth market, withconsistent growth in all key performance indicators over
the past 7 years. It acquired Capital Bank and Marina
Bank during the 2005 Banking Reform. In 2011 and as
part of the banking sector recapitalization process,
shareholders of Access Bank and Intercontinental Bank
unanimously granted the necessary approvals for the
proposed business combination of both banks. The
emerging entity retain Access Banks name.
The Banks profitability index measured by Return on
Asset (ROA) increased to 1.50 per cent in 2010 from a
decline of 0.82 per cent in 2009, and the Return on Eq-
uity (ROE) increased to 6.54 per cent in 2010, from a
decline of 4.26% in 2009. The Banks smoothed annual-
ized return using the 5-year compound annual growth
rate (CAGR) stood at 16.14% at the end of 2010.
In the banks 2010 full year report, the banks Turnover
increased by 7.25 per cent from N84.98 billion in 2009 to
N91.14 billion in 2010. The Profit After Tax (PAT) also
surged by 368 per cent from a loss of N4.19 billion re-
corded in 2009 due to provision for bad loans in 2009 to
a profit of N11.24 billion in 2010. Total assets increased
by 16 per cent from N694 billion in 2009 to N805 billion
in 2010. The bank declared a dividend per share of
N0.30k in the year ended December 2010, recording a
dividend yield of 4.21%. The banks result for the first
quarter of 2011 saw PAT stand at N4.17 billion, from
N3.99 billion recorded in the same period of 2010.
The return prospect of the stock estimated with the one-
year Capital Asset Pricing Model (CAPM) is 15.23%. The
graph of the stock price against the NSE ASI at the top
right corner shows that the stock price is currently trad-
ing below the signal line, thus a price rally may soon be
witnessed. Also, the 100-day MA is currently below the
200-day MA. The one year standard deviation of the
stock fell to 2.41% from 2.46% recorded last week. The
beta of the stock price is 0.86, which is lower than the
banking sectors beta of 1.06. However, the alpha of the
stock is 0.08%, which is also higher than the sectors
0.02% alpha, making the stock attractive for investors.
Valuation Weight Estimated Value
Earnings Basis 10 8.69
Forward Earnings Basis 30 9.29
Dividend Basis 30 10.14
Price to Book Basis 30 4.89Estimated Fair Value 100 8.16
ACCESS BANK PLC
2 0 1 0 F Y 2 0 0 9 ( 9 M O N T H S) C H .
Tur nover 91,142,064 84,980,554 7.25%
Net P r of i t A f t er T ax 11,244,563 (4,194, 582) 368.07%
Net P of i t Mar gi n 12. 34% -4.94% 349.95%
Shar ehol der s ' Equi ty 175,370,457 168,346, 048 4.17%
Total As s ets 804,823,772 693,783, 938 16.00%
ROSH 6. 54% -4.26%
ROA 1. 50% -0.82%
A C C E S S B A N K P L C
Cur r ent P r i ce 5.23
Y ear Hi gh 11.10Y ear Low 4.90
E PS 0.70
P / E Rat i o (x) 7.47
Outs tandi ng Shar es 17,888,251,479
Di v i dend Y i el d 5.74%
P r of i t Af ter Tax '000 (Ful l Year ) -
Y ear E nd December
A C C E S S B A N K P L C
R = 0.4276
0.00
50.00
100.00
150.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs ACCESS- Jan '10 - Date
Acc ess Rebased NS E Reba sed Poly. (Ac cess Rebased)
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11
CUSTODIAN & ALLIED INSURANCE PLC
Custodian & Allied Insurance Plc (CAI) is a wholly owned
Nigerian Company, which arose from the combination of
Custodian and Allied Insurance Company Limited and
Signal Insurance Company Limited in a bid to meet the
stipulated capitalization requirements and provide an
inorganic growth opportunity to achieve their strategic
objective of being one of the top three insurance compa-
nies in the industry.
Custody Insurance's sole purpose is to develop, package
and deliver innovative insurance products that best sat-
isfy customer needs, whilst operating a highly profitable,
efficient, resourceful and ethical organization that will
survive into the future and be a valuable asset to its
shareholders.
The uniqueness of the companys service delivery is in
their ability to provide fast, efficient and highly profes-
sional service to the market in which it operates. This it
is able to achieve through the automation of its various
lines of operation, thereby reducing processing time and
ultimately acquiring the much desired competitive edge.
In addition, their products and operations are essentially
market-driven with emphasis on providing a wide menu
of option on policies, having paid due regard to produc-tion processes employed in various industries.
The company has emerged as one of the fastest growing
insurance companies in the Nigeria. Post consolidation,
the new entity has been able to efficiently leverage on
the unique features of the two old institutions, yielding
an attractive industry positioning and emergence as a
genuine competitor for industry leadership.
With an EPS of 0.38, the trailing P/E Ratio of the com-
pany stood at 6.08x. The company gave an interim divi-
dend of N0.60 and a final dividend of N0.17, resulting in
a dividend yield of 9.96%. The companys result for thesecond quarter of 2011 saw Profit After Tax (PAT) stand
at N1.29 billion, from N1.21 billion recorded in the corre-
sponding period in 2010.
In 2010, the Company carried out a Share Buy Back and
delisted a total number of 37,924,787 ordinary shares
from its listed shares.
Our technical analysis seems to indicate that the 100-
day MA is trending above the 200-day MA. This suggests
the stock is attractive for long term investors. The one
year return prospect of the stock as estimated with the
Capital Asset Pricing Model (CAPM) is 15.53%.
The stock is currently trading at a discount of 66.53%
at the current market price of N2.31 when compared
to the estimated fair price of N4.28. The average
weighted value of all our valuation models was
skewed towards the Forward Earnings Metric. We
therefore maintain our BUY recommendation on the
stock. In the medium term, the market price is likely
to oscillate around our target price range of N3.14
N4.28.
Valuation Weight Estimated Value
Earnings Basis 10 5.19
Forward Earnings Basis 30 7.41
Dividend Basis 20 4.23
Price to Book Basis 40 1.73
Estimated Fair Value 100 4.28
CUSTODIAN AND ALLIED INSURANCE PLC
2 0 1 0 ( ' 0 0 0 ) 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 13,724,000 5,277,000 160.07%
Net P r of it Af ter T ax 2, 041, 000 1,886,000 8.22%
Net P of i t Mar gi n 14.87% 35. 74% -58.39%
Shar ehol der s' Funds 15,772,000 14,159,000 11.39%
T otal Assets 15,771,850 14,157,753 11.40%
ROSH 13.64% 26. 64%
ROA 13.64% 26. 64%
C U S T O D I A N A N D A L L I E D I N S U R A N C E P L C
Cur r ent P r i ce 2.31
Y ear Hi gh 3.51
Y ear Low 2.30
E P S 0.38
P / E Rat i o (x) 6.08
Out standi ng Shar es 5, 100,846, 808
Di v i dend Y i el d 9.96%
P r of i t Af t er Tax '000 (Ful l Y ear ) 1, 886,903
Y ear E nd December
C U S T O D I A N A N D A L L I E D I N S U R A N C E P L C
R = 0.2288
0.00
50.00
100.00
150.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs CUSTODYINS-Jan '10 -Date
NS E Re ba sed Cus tody ins Re ba sed Po ly .( Cus tod yi ns Reba se d)
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12
NAHCO PLCNAHCO was incorporated on December 6, 1979 as a pri-
vate limited company and converted to a public limited
company on August 4, 2005. The company operates in
the Airline Services Sector, and is ranked as a top indus-
try player in the sector.
Despite the challenges faced in the business environ-
ment during the year under review, the companys turn-
over increased from N6.01 ibillion in the previous year to
N6.35 billion in 2010. However, Profit After Tax de-
creased by 5.61%, when compared to the same period in
2009, declinig from N1.25 billion to N1.18 billion. Net
Profit Margin also declined from 20.56% in 2009 to18.55% in 2010.
The companys result for the first quarter (Q1) of 2011
saw Turnover rise by 5.14 per cent from N1.52 billion
recorded in Q1 2010 to N1.60 billion in Q1 2011. How-
ever, PAT dipped by 51.37 per cent from N396.00 million
recorded in Q1 2010 to N192.56 million in Q1 2011.
The companys half year result for 2011 saw Turnover
increase by 12.18 per cent from N3.08 billion recorded in
Q2 2010 to N3.45 billion in Q2 2011. However, Profit
After Tax dropped by 39.90 per cent from N677.17 mil-
lion in 2010 to N484.04 million in 2011.
With an EPS of N0.80, the trailing P/E Ratio of the com-
pany stood at 7.66X. The P/E Ratio for the sector stood
at 5.74x. The company proposed a final dividend of
N0.40k and its dividend yield stood at 6.53%. The divi-
dend yield for the sector stood at 5.83%.
In order to remain solidly afloat in the midst of the
emerging competitions from new entrants into the avia-
tion ground handling sector in June 2011, the company
announced its plans to divest into power sector, which is
expected to be one of the companys new strategies to
boost its revenue base.
The Standard Deviation of the stock price increased to
2.74% from 2.71% recorded last week. This indicates
that the stock volatility increased during the week. Thebeta of the stock price is 1.33, which is higher than the
Aviation sectors beta of 0.74. The alpha of the stock is
0.13%, which is higher than the sectors 0.05%, explain-
ing the return in excess of the compensation for the risk
borne. The long term return prospect of the stock esti-
mated with the Capital Asset Pricing Model (CAPM) is
16.35%, signifying that the stock may be attractive for
long term investment.
A weighted average of the valuation models gave a
final fair price of N7.40. This seems to indicate that
NAHCO Plc is undervalued by 20.72% at the current
market price of N5.88. We therefore maintain our
LONG TERM BUY recommendation on the stock.
We also expect the share price to trend towards our
target price range of N7.40 N11.42 in the medium
term.
Valuation Weight Estimated Value
Earnings Basis 10 4.63
Forward Earnings Basis 20 4.26
Dividend Basis 30 10.46
Price to Book Basis 40 7.37
Estimated Fair Value 100 7.40
NAHCO PLC
C ur r ent P r i c e 6.13
Y ear H i gh 11.75
Y ear Low 5.40
E P S 0.80
P / E Rat i o ( x) 7.66
Outs tandi ng Shar es 1,230,468,750
D i v i dend Y i e l d 6.53%
P r of i t A f te r T ax '000 (Fu l l Y ear ) 1 ,247,334
Y ear E nd Dec ember
N A H C O P L C
2 0 1 0 ( '0 0 0 ) 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 6,345,000 6,066,000 4.60%
Net P r of it A f ter T ax 1,177,000 1, 247,000 -5.61%
Net P of i t Mar gi n 18. 55% 20.56% -9.76%
Shar ehol der s ' Funds 4,992,000 4,676, 000 6.76%
Total As s ets 7,287,800 6,761, 543 7.78%
ROSH 24. 35% 45.09%
ROA 16. 76% 28.37%
N A H C O P L C
R = 0.4822
0.00
50.00
100.00
150.00
200.00
250.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs NAHCO- Jan '10 - Date
NSE Reba sed N AH CO Rebas ed Po ly. (NAH CO Reba sed )
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13
DIAMOND BANK PLC
The Dividend and Book Value Models seem to indi-
cate that the stock is underpriced. The fair value
from the weighted average of the valuation models
is N5.44 per share. We therefore maintain our LONG
TERM BUY rating on Diamond Bank Plc. In the me-
dium to long term, we expect the share price to
trend towards our target price range of N5.44
N8.53.
Diamond Bank Plc began as a private limited liability, but
became a public quoted company following a highly suc-
cessful Private Placement share offer in 2005. The Banks
shares were consequently admitted to the daily official
list of The Nigerian Stock Exchange. During the recapi-
talization exercise, the bank acquired Lion Bank and Afri-
can International Bank (AIB).
The Bank in 2008 became the first bank in Africa to be
listed on the Professional Securities Market of the London
Stock Exchange, with the admission of its Global Deposi-
tary Receipts (GDR) on the Exchange.
The Bank has developed relationships with various multi-
nationals and international financial organizations, such
as the U.S. Eximbank, The Netherlands FMO and the
World Banks International Finance Corporation (IFC).
The Bank currently partners Citibank, HSBC Bank, ANZ
Banking Group, ING BHF Bank AG, Standard Chartered
Bank, Belgolaise Bank S.A, Deutsche Bank, Commerz-
bank, and Nordea Bank Plc in order to provide a bouquet
of world class banking services to its clients.
Diamond Bank Plc is a pioneer in the use of cutting edge
information technology. The bank has a strong brandname and reputation, strategic branch network and ex-
cellent IT infrastructure, which has helped the bank in-
crease its market share in the Industry.
The banks full year (FY) result for 2010 shows a 34.38
per cent increase in Turnover from N67 billion in 2009 to
N91 billion in 2010. The Profit after tax (PAT) increased
by 615.24 per cent from a loss of -N8.17 billion in 2009
to N1.33 billion in 2010. The bank declared a dividend
per share of N0.15k. The banks 2011 half year result
saw PAT decline to N1.20 billion, from N4.60 billion re-
corded in the same period in 2010.
The 100-day MA is crossing over the 200-day MA, sug-
gesting long term investment opportunities in the stock.
The stock price is more volatile than the market, given a
beta of 1.37. The one-year Standard Deviation fell to
2.92% from 2.96% recorded as last week. The graph of
the stock price against the NSE ASI at the top right cor-
ner shows that the stock price is below the signal line,
and it seems that the price may reverse upwards in the
short term. Using the Capital Asset Pricing Model
(CAPM), the one-year return prospect of the stock is esti-
mated at 16.45%.
Valuation Weight Estimated Value
Earnings Basis 10 4.34
Forward Earnings Basis 30 3.21
Dividend Basis 30 6.85
Price to Book Basis 30 6.63Estimated Fair Value 100 5.44
DIAMOND BANK PLC
Cur r ent P r i ce 3. 39
Y ea r H igh 9. 27Y ea r Low 3. 39
E P S 0. 06
P / E R at i o (x ) 56. 50
Out st andi ng Shar e s 14, 475, 243, 105
Di v i dend Yi el d 4.42%
P r o f i t Af t er T ax '000 (Ful l Ye ar ) -
Y ea r E nd D ecember
D I A M O N D B A N K P L C
D e c 2 0 1 0 ( '0 0 0 ) D e c 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 91,022,288 67,735,695 34.38%
N e t P ro f i t A f te r Tax 1,328,655 ( 8,174, 413) 615.24%
N e t P o f i t Ma rg in 1. 46% -12.07% 826.75%
Shar ehol der s ' Funds 107,084,863 106,093, 071 0.93%
Total Assets 594,795,137 650,395, 601 -8.55%
ROSH 1. 25% -15.41%
RO A 0. 21% -2.51%
D I A M O N D B A N K P L C
R = 0.594
0.00
50.00
100.00
150.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs DIAM ONDBNK- Jan '10 - Date
N SE R eba se d Di amo ndbnk Re ba se d Pol y. ( Di amondbnk Re ba se d)
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DANGOTE SUGAR REFINERY PLCDangote Sugar Refinery (DSR) operates in two key busi-
ness areas which include: Refining Process and Market-
ing & Distribution. A total of 10 billion shares of N0.50
per share were listed on the 8th of March 2007. The
company whose offer was 139.5% over subscribed, re-
turned over N20 billion, with 10% per annum interest to
investors whose application were invalid.
The company intends to diversify into the upstream seg-
ment of the sugar business by acquiring and developing
Savannah Sugar Company Limited (SSCL), a subsidiary
of Dangote Industries Limited (DIL), to create synergiesand increase overall capacity. SSCL currently produces
white sugar from own grown sugarcane.
On successful combination, the potential synergies be-
tween DSR and its intended merger partner, SSCL, will
see it become a formidable institution within the Sugar
industry in Nigeria and beyond. The company expanded
its production capacity by 75% in the first quarter of
2008, through the production of 2.55 million metric
tones per annum from 1.44 million metric tones.
DSR has relied mainly on retained earnings to support itsgrowth in the past, and this strategy accounted for the
non-payment of dividend for some years. This has
helped the company to maintain consistent growth.
Meanwhile, the Board of Directors of the company that
earlier promised quarterly dividend in 2009, resolved to
change the quarterly dividend policy of the company as a
result of difficulty in the payment process, and failure of
the policy to impact noticeably on the market valuation
of the shares of the company.
With an EPS of 0.71, the trailing P/E Ratio of the com-
pany stood at 10.20x, lower than the sectors 17.18x.
The company proposed a dividend per share of N0.60,
resulting in a dividend yield of 8.29%, compared to the
sectoral average dividend yield of 2.47%.
Our technical analysis shows that the stock price is at-
tractive for long term investment, as the 100-day MA is
slightly above the 200-day MA. The one year Return
prospect of the stock as estimated with the Capital Asset
Pricing Model (CAPM) is 16.23%. The estimated one-
year Standard Deviation of the stock price decreased to
2.56% from 2.60% recorded last week.
The fundamental value of DSR is tilted towards the
Earnings Metric, as the weighted average of all our
valuation metrics produced a final fair price of
N12.43. This indicates that the stock is trading at a
discount of 71.69%. Therefore, we maintain our
recommendation on the stock as LONG TERMBUY.
We also expect the share price to trend towards our
target price range of N12.43 N17.48 in the medium
to long term.
Cur r ent P r i ce 7. 24
Y ea r H igh 16. 20
Y ea r Low 6. 99
E P S 0. 71
P / E Rat i o (x ) 10. 20
Out st andi ng Shar e s 12, 000, 000, 000
Di v i dend Yi el d 8.29%
P r o f i t Af t er T ax '000 (Ful l Year ) 11, 282, 000
Y ea r E nd Dece mber
D A N G O T E S U G A R R E F I N E R Y P L C
2 0 1 0 ( '0 0 0 ) 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 89,980,000 82,395,000 9.21%
Net P rof it A f ter T ax 11,282,000 13, 185,000 -14.43%Net P of i t Mar gi n 12. 54% 16.00% -21.65%
Shar ehol der s ' Funds 40,895,000 41,612, 000 -1.72%
Total As s ets 62,291,340 77,562, 125 -19.69%
ROSH 27. 35% 39.03%
ROA 16. 13% 20.65%
D A N G O T E S U G A R R E F I N E R Y P L C
Valuation Weight Estimated Value
Earnings Basis 10 22.36
Forward Earnings Basis 20 6.12
Dividend Basis 30 15.97Price to Book Basis 40 10.44
Estimated Fair Value 100 12.43
DANGOTE SUGAR REFINERY PLC
R = 0.7726
0.00
50.00
100.00
150.00
4-Jan-10
NSE All-Share Index Vs DANGSUGAR - Jan '10 - Date
N SE R eb as ed Da ng su ga r Re ba se d Po ly. (Dan gs ug ar R eb as ed )
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OANDO PLCOando Plc (formerly Unipetrol Nigeria Plc) is the second
largest oil marketing company by revenue in Nigeria.
The Company is an integrated energy solutions provider
as its operations scale across gas, international supply,
trading and energy services to its petroleum marketing
business. The Company is currently incubating explora-
tion, production and power initiatives. The company has
an upgraded terminal operations, massive modernization
and large number of trucking fleet, significant pump de-
ployment and forecourt improvement, across the coun-
try.
Oando is the first Nigerian company to accomplish across-border listing on the Johannesburg Stock Exchange
(JSE) in South Africa. Oandos drive into the refinery
business provides an advantage for further improving
and sustaining earnings growth over the medium-term.
The company recently declared its commitment to the
completion of the 128km South East natural gas pipeline
project, which is set for first gas in August 2011.
The Company commenced the execution of its long-term
strategy with a Rights Issue of 301,694,876 Ordinary
Shares of N0.50k each at N70 per share to rank pari
passu with the existing share capital of the company.
The Companys audited result for 2010 showed an incre-
ment in Profit After Tax (PAT) by 42.37 per cent to
N14.37 billion, when compared to N10.10 billion re-
corded in the corresponding period in 2009. Turnover for
the year also grew by 12.49 per cent from N336.86 bil-
lion in 2009 to N378.93 billion in 2010. The Board of
Directors of the company proposed a dividend of N3.00k
and a bonus of one ordinary share for every four held as
at 29th of April 2011. The companys 2011 half year
result saw PAT grow to N6.68 billion, from N5.33 billion
recorded in the corresponding period in 2010.
The technical analysis of Oando indicates that the stock
has become more attractive for long term investors, as
the 100-day MA is currently trading above the 200-day
MA. The estimated one-year Standard Deviation of the
stock rose to 2.62% from 2.56% recorded in the previ-
ous week. With an EPS of 6.91, the trailing P/E Ratio of
the company stood at 3.69x, compared to its sectoral
EPS and P/E Ratio of 3.25 and 10.56x, respectively.
The stock has a relatively high long term return pros-
pect, given the one year expected return of 15.02% esti-
mated with the Capital Asset Pricing Model (CAPM).
A final fair value of N60.98 after adjustment for bo-
nus issue and dividend payment indicates that
Oando is trading at a huge discount of 136.47%. We
therefore maintain our LONG TERM BUY recom-
mendation on the stock. We also expect the share
price to trend towards our target price range of
N35.10 N60.30 in the medium term.
Valuation Weight Estimated Value
Earnings Basis 30 39.26
Forward Earnings Basis 10 38.45
Dividend Basis 30 48.79
Price to Book Basis 30 100.16
Estimated Fair Value 100 60.30
OANDO PLC
2 0 1 0 ( '0 0 0 ) 2 0 0 9 ( ' 0 0 0 ) C H .
Tur nover 378,930,000 336,859,000 12.49%
Net P r of it A f ter T ax 14,374,000 10, 096,000 42.37%
Net P r of i t M ar gi n 3. 79% 3.00% 26.57%
Shar eholder s' Funds
Net A ss ets 95, 004,000 53,319, 000 78.18%
ROSH
RONA 19. 38% 9.35%
O A N D O P L C
C ur r ent P r i c e 25.50
Y ear H i gh 78.97
Y ear Low 20.99
E P S 6.91
P / E Rat i o ( x) 3.69
Outs tandi ng Shar es 2,828,390,000
D i v i dend Y i e l d 11.76%
P r of i t A f ter T ax '000 (Ful l Y ear ) 10,096,000
Y ear E nd D ecember
O A N D O P L C
R = 0.70190.00
50.00
100.00
150.00
200.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs OANDO- Jan '10 -Date
NSE Rebased Oando Rebased Poly . (Oando Rebased)
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FIDELITY BANK PLC
The current enlarged Fidelity Bank was a result of the
merger with the former FSB International Bank Plc and
Manny Bank Plc (under the Fidelity brand name) in De-
cember 2005 during the consolidation era. The Bank is
ranked amongst the top 10 in the Nigerian banking in-
dustry, with presence in the major cities and commer-
cial centers of the country.
The Bank has partnership with various off-shore institu-
tions, such as ANZ London, Afri-eximbank Cairo, Egypt,
ABSA South Africa, Commerce Bank, Frankfurt, Citi-
bank, N.A. London and New York, FBN Bank, UK Ltd,SCB, London, HSBC, US Ex-im Bank, USAID, etc. The
Bank has international access to correspondent bank-
ing, confirmation lines, credit and other relationships
with multinationals and financial organizations.
The Bank has an experienced and stable management
team, reputed for integrity and professionalism. The
Bank, having operated as an investment bank for 11
years, has a leverage on its pedigree in its structures
and service offerings for a retail populace.
The audited result of the Bank for the year ended De-
cember 31, 2010 showed a turnover of N56.05 billion,
as against N34.72 billion in the previous year, indicating
a growth of 61.45 per cent. Profit After Tax surged by
292.10 per cent from N1.56 billion in 2009 to N6.11
billion in 2010. The Banks first quarter result ended
March 31, 2011 indicated a decline of 62.23 per cent in
Turnover and Profit After Tax also decreased by 5.78
per cent, when compared to the same period in 2010.
However, Net Profit Margin (NPM) rose from 10.62% to
26.50%.
Our technical analysis seems to indicate that the stock
price trend strengthened in the week under review, as
the 100-day MA is now above the 200-day MA, which
suggests that the stock is attractive for long term in-
vestment. The graph of the stock price against the NSE
ASI at the top right corner also show that the stock is
currently below the signal line, and it seems that the
price may witness an upward movement in the next
couple of trading sessions. The trailing P/E Ratio of the
company stood at 10.05x, compared to its sectoral P/E
Ratio of 11.66x.
The one year Standard Deviation of the stock price fell
marginally to 2.50% from 2.53% recorded last week.
The expected one year Return of the stock as estimated
with the Capital Asset Pricing Model (CAPM) is 16.00%.
All our fundamental valuation models seems to indi-
cate that the stock is 16.42% underpriced at a fair
value of N2.34. We therefore maintain our HOLD
recommendation on Fidelity Bank Plc. Furthermore,
the stock may likely rally within our target price
range of N2.34 N3.90 in the medium term.
Valuation Weight Estimated Value
Earnings Basis 10 2.37
Forward Earnings Basis 30 1.99Dividend Basis 30 2.77
Price to Book Basis 30 2.24
Estimated Fair Value 100 2.34
FIDELITY BANK PLC
Cur r ent P r i ce 2. 01
Y ea r H igh 3. 20
Y ea r Low 1. 67
E P S 0. 20
P / E Rat i o (x ) 10. 05
Out st andi ng Shar e s 28, 974, 797, 023
Di v i dend Yi el d 6.97%
P r o f i t Af t er T ax '000 (Ful l Year ) 6, 105, 000
Y ea r E nd December
F I D E LI T Y B A N K P L C
2 0 1 0 ( '0 0 0 ) 2 0 0 9 ( ' 0 0 0 ) C H .
Turnover 56,048,000 34,716,000 61.45%
Net P r of it A f ter T ax 6,105,000 1, 557,000 292.10%
Net P of i t Mar gi n 10. 89% 4.48% 142.87%
Shar ehol der s ' Funds 136, 052,000 130,691, 000 4.10%
Total Assets 481, 614,000 435,666, 000 10.55%
ROSH 4. 58% 1.94%
ROA 1. 33% 0.48%
F I D E L I T Y B A N K P L C
R = 0.148
0.00
50.00
100.00
150.00
4-Jan-10 4-Jul-10 4-Jan-11 4-Jul-11
NSE All-Share Index Vs FIDELITYBK - Jan '10 - Date
N SE Reba sed F idel ity bk Reb as ed Pol y. (F idel ity bk Reba sed)
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APPENDIX
DEFINITION OF TECHNICAL ANALYTICS TERMS
Moving Average - MAThis is an indicator frequently used to measure momentum and to define areas of possible supportand resistance. It shows the average value of a security's price over a set period. Moving averagesare used to emphasize the direction of a trend and to smooth out price and volume fluctuationsthat can confuse interpretation.
IMPORTANT DISCLOSURES
Information SourceThe data used in this report were sourced from the audited accounts of the companies for theirvarious financial year ends. Other sources included the Central Bank of Nigeria (CBN) monthly re-ports, the Nigerian Stock Exchange (NSE) Price List, Greenwich Research Database, and Nationaldailies.
Valuation Models and Methodology Applied in this Report
The equity analysis was conducted using a combination of valuation models, namely: Earnings(Historical), Forecasted Earnings, Dividends Basis, and Price to Book Basis. A weighted average ofall these valuation methods was taken as the final estimated fair value of the stock. The weightsapplied were based on our perceived applicability of the models to the different sectors of the Nige-rian economy.
The forecasted earnings were derived using CAGR as a forecast factor over a period of time. Themost recent profit after tax, which was used as the base, was forecasted five years into the futureand the average of these five years was taken as the normalized earnings in the forecasted valua-tion model after discounting for present value equivalent. A five year time horizon was used inmost cases in order to smoothen the returns as much as possible, so as to generate a realistic re-turns. Despite the five year forecast horizon, adjustments were still made where estimates seemedunrealistic. Good judgment and objectivity were displayed in deriving the estimates.
CAPM, which is the Capital Asset Pricing Model, was used in this report to derive the expected in-vestment returns for one year investment timeframe. Note that this is an expectation and that re-turns may be significantly higher or the expected returns may be achieved over a time periodmuch less than one year. The risk-free rate of return was the current yield on the 20-year FGNBond recently issued with a coupon rate of 10%, while market return is the weighted average ofthe sector returns on the Nigerian Stock Exchange. The betas of the stocks were calculated usingmarket data covering 36 months.
The price forecasts in the Report are for time horizon between 5 to 10 trading sessions. However,the forecasts may be achieved in a period less than 5 trading sessions. The forecast was based onan average of the CAGR for a 10-day trading period and the daily average growth rate of the stockprice for the corresponding period. Good judgment was exercised in determining the current mar-ket trend and adjustments were made when we felt that the observed trend might not be attain-able for the forecast horizon.
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IMPORTANT DISCLOSURES CONTD
Sector Basis of Projection
AGRICULTURE Earnings
AIRLINE SERVICES Earnings
AUTOMOBILE & TYRE Book Value
AVIATION Earnings
BANKING Historical Dividends / Book Value / Earnings
BREWERIES Historical Dividends
BUILDING MATERIALS Book Value
CHEMICAL & PAINTS Book Value
COMMERCIAL/SERVICES Book Value
COMPUTER & OFFICE EQUIPMENT Earnings
CONGLOMERATES Book Value
CONSTRUCTION Historical Dividends / Book Value
ENGINEERING TECHNOLOGY Book Value
FOOD/BEVERAGES & TOBACCO Earnings
FOOTWEAR Book Value
HEALTHCARE Earnings
HOTEL & TOURISM Book Value
INDUSTRIAL/DOMESTIC PRODUCTS Book Value
INFORMATION, COMMUNICATION & TELECOM-MUNICATIONS Book Value
INSURANCE Earnings
LEASING Earnings
MACHINERY(MARKETING) Book Value
MARITIME Earnings
MEDIA Book Value
MORTGAGE COMPANIES Earnings
OTHER FINANCIAL INSTITUTIONS Historical Dividends / Book Value
PACKAGING Book Value / Earnings
PETROLEUM(MARKETING) Historical Dividends / Earnings
PRINTING & PUBLISHING Book Value
REAL ESTATE Earnings
REAL ESTATE INVESTMENT TRUST Book Value
ROAD TRANSPORTATION Book Value
SECOND-TIER SECURITIES Earnings
TEXTILES Book Value
THE FOREIGN LISTINGS Book Value / Earnings
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Investment Timeframes
We refer to long term investment timeframe to be a period greater than one year and short terminvestment timeframe to be a period less than one year. We give a Buy recommendation when thestock has good technicals and strong fundamentals, implying that the stock can be used for specu-lating the market, and for fundamental investing where growth and income are the investment ob-jectives.
Hedge Clause
The report was prepared by Greenwich Research, and it is for information purposes only. Green-wich Trust Limited is under no obligation to accept any liabilities that may arise from the use of anypart of this report, as no representation is made on the accuracy of the sources used in preparingthe Report.
The price projections for the financial year in the report were generated based on the perceivednature of business of the respective sectors. In some cases, where more than one estimates werestated, the average of the estimates was taken as the price. Analyzed below is tabularized bases ofestimating the forecasts.