Dear Valued Investor,
In the outgone week, the NSEASI maintained its positive steam although ended with a marginal loss of 0.03%. The marginal cool-off comes after 4 weeks of straight gains back-to-back. The benchmark index ended at 41, 228.65 points. At this level, the Nigerian bourse has delivered 0.24% negative return for the year-to-date. The current market mood clearly suggests strong profit taking sentiment amongst most market participants.Recall that positive sentiment following the inclusion of ETI and FO in the MSCI Emerging Market Index, stable monetary environment, mixed corporate earnings, impressive dividends and yields were key drivers of the market equities in May despite heightened security concerns.

We would expect the equities market to see some decent level of zigzag trading over the next three months as both profit takers and bargain hunters slug it out. Bargain hunters will be taking position for second quarter/first half corporate results while profit takers will linger to close existing positions in the market. Notwithstanding, we believe there is still value. The Nigerian basket of equities is valued at price-to-earnings (P/E) ratio of 13.37x which we find attractive relative to peers within the SSA basket priced at 25.13x P/E ratio. The recent inflation numbers which shows a pick-up in the consumer price index to 8.00% from 7.9% in April might be begin to be a source of concern for fixed income traders over the medium-term. This should be a positive catalyst for the equities market.
Our basket of recommended stocks reflect the current mood in the market. While there are currently no “Sell” recommendations in our coverage universe, 53.8% of the stocks within the basket commands “Hold” rating while 46.2% is rated “Buy”. This shift in our coverage universe is reflective of the tight range within which the overall market is currently valued. Within the banking sector, DIAMONDBNK, FIDELITYBK, and SKYEBANK enjoys “buy” rating. Traditionally, we favour names such as GUARANTY, ZENITHBANK, FBNH, ACCESS. However, we will recommend a “Hold” on this names pending when we see a modest correction in their share prices. These names already are trading at our target prices.

In the consumer goods sector, DANGSUGAR offers the highest potential at current market price, alongside FLOURMILL, NASCON, NESTLE and UNILEVER. Nigeria’s demography in terms of population size, purchasing power, cash economy, changing consumer taste are key drivers of the consumer goods sector. We continue to see sustained earnings and margins growth in the sector.

The growth potential in Nigeria’s industrial (cement and building) sector is captured by CCNN, WAPCO, and DANGCEM.
Warm Regards,
Research & Strategy
Elixir Investment Partners Limited
Eleganza Building,
9th Floor, 634 Adeyemo Alakija,
Victoria Island Lagos