This week, we are pledging to make the most out of the Capital Market.
Thinking about joining in, our Research team have shared their most recommended stocks this week.
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1. FISDSON
Fidson is a leading pharmaceutical company
specializing in the manufacturing and distributing of pharmaceutical and
healthcare products across Nigeria and Sub-Saharan Africa. The firm currently
produces over 150 products that target a variety of therapeutic and treatment
classes common amongst Nigerians.
In 2021, the company grew its revenue
and earnings by 68.22% and 155.52%, respectively, following a surge in demand
for its products amidst the global pandemic. We expect the improving
fundamentals of the company and solid projections for the healthcare sector to
further stir positive sentiments towards the company in the mid to long
term.
In our opinion, FIDSON is well-positioned to further expand its
revenue and earnings given its large product base and its strategy to grow its
market share. We estimate an EPS of NGN1.78 and a target P/E of 5.64x, giving a
target price of NGN10.05. This represents an upside potential of 22.56% from its
closing price of NGN8.20 at the close of trading on the 18th of February 2022.
2. STANBIC IBTC
2021 proved a challenging year for Stanbic IBTC Holdings, as reflected by the
respective declines of 12.22% and 31.52% in gross earnings and Profit After Tax
(PAT). The drag in their performance was induced by a significant decline in two
key income streams – investment interest (-38.70%) and trading revenue
(-74.48%). We believe these were black swan events and will not persist in the
2022 financial year.
In furtherance of its drive to diversify its revenue
base, the company recently announced the establishment of a wholly-owned
Financial Technology subsidiary, Stanbic IBTC Financial Services Limited, to
serve as a Payment Service Solution Provider (PSSP). We believe that in the mid
to long term, the newly established subsidiary will contribute to gross earnings
and serve the purpose of further expanding the company’s revenue
streams.
In recent periods, the company has maintained a record of making
the largest dividend payouts in the sector (interim and final). It is poised to
maintain the trend in the medium term, leaving room for investors seeking out
dividend plays.
We estimate an EPS of NGN5.75 and a target P/E of 7.62x,
giving a target price of NGN42.8. This represents an upside potential of 23.67%
from its closing price of NGN34.65 at the close of trading on the 18th of
February, 2022.
3. TOTAL
Total Energies Marketing Nigeria Plc recorded a significant improvement in its
financial performance in the 2021 financial year compared to 2020 following a
strong rebound in oil prices and a return to normal business activities after
the COVID-19 pandemic slowed down its operations. In 2021, oil prices rebounded
strongly, averaging USD70.68 per barrel from USD41.96 per barrel in
2020.
This, coupled with the return of business activities to normal
operations, enabled the company to grow its revenue by 66.65%, which trickled
into a 710.58% spike in PAT from NGN2.06bn to NGN16.73bn. With oil prices now
hovering around USD100 per barrel, we expect even better performance for the
company in 2022, barring any unforeseen challenges.
The company also has a
history of dividend payments with an average payout ratio above 50% and is
expected to maintain this trend in the medium to long term.
In our opinion,
TOTAL is set to enjoy the strong uptick witnessed in oil prices and the
reversion of business activities to normal. We estimate an EPS of NGN55.65 and a
target P/E of 5.28x, giving a target price of NGN293.68. This represents an
upside potential of 10.86% from its closing price of NGN264.90 at the close of
trading on the 18th of February, 2022.
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