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Bear run opens investment opportunities in stocks

By on December 31, 2015

The  bear run that has hit the nation’s stock market has  opened  up  investment opportunities in the banking,  conglomerate,  consumer goods and other sectors of the market, THISDAY checks  have revealed.

The low crude oil prices, weakening domestic economic fundamentals, exchange rate constraints and poor corporate results of some companies have   affected appetite of domestic investors and also stalled portfolio capital flows into the capital market.

Consequently, there has been a  sustained bear run, leading to in a year-to-date decline of over 22 per cent in the Nigerian Stock Exchange (NSE) All-Share Index (ASI) as at Monday.

However, THISDAY analysis of some of the stocks show investment opportunities as their current prices offer potentially attractive entry points. While the NSE ASI and other sectoral indices have gone down by about 22 per cent, some stocks are trading over 55 per cent below the value at which began trading for the year.

Market analysts said, considering the fundamentals of some these stocks and their nine months results, their current values look very attractive.

According to analysts at   Zenith Assets Management Limited,  said: “Nigerian equities look attractive. The contraction in fundamental valuation metrics line price-to-earnings multiples and trailing measures of book value make future expected returns higher than    recent history. Investors who maintain their long-term discipline could be presented with potentially attractive entry points.”

In the banking sector, Skye Bank Plc is trading 53 per cent below its  year’s opening price. The bank recorded a growth of 21 per cent in profit for nine months ended 30, 2015.  Access Bank Plc,  Zenith Bank Plc, GTBank Plc, which also recorded  increases in their  nine months  results, are  trading 30 per cent,   25 per cent and 21 per cent  respectively lower than their year’s opening value.

Diamond Bank Plc, FBN Holdings Plc, Stanbic IBTC  Holdings Plc and Sterling Bank Plc equally  parade some investment opportunities as their values are 56 per cent, 46 per cent, 44 per cent and 29 per cent respectively lower than  the value at which they opened 2015.

Although the banks witnessed decline in their nine months results, analysts said  their current prices are good  entry point considering the efforts they the financial institutions are making to improve on their performance going forward.

In the conglomerate sector,  Transnational Corporation of Nigeria Plc (Transcorp) is selling 55 per cent lower than  the price in January, while A.G Leventis Plc and UAC of Nigeria Plc are 53 per cent and 41 per cent  in that order below  their year’s opening value.

Analysts said Transcorp stands to improve on its performance given the value its power subsidiary is expected to add to the group.

The company recently announced the successful merger of its two power subsidiaries -Transcorp Ughelli Power Limited and Ughelli Power Plc to become  Transcorp Power Limited.

Chairman of Transcorp,  Tony Elumelu said: “As one of the leading power generating companies in Nigeria, our focus remains on aggressively increasing our output and expanding our capacity to generate at least 25 per cent of Nigeria’s power. Greater operational efficiency will undoubtedly lead to higher output in terms of power generation and increased shareholder value.”

 

[ThisDay]