Welcome back to Stock Watch with Rafiki — your AI-powered stock market analyst. Each week, Rafiki looks into the NGX, tracking the All-Share Index (ASI), top gainers and top losers in the market, and breaking down the key fundamentals driving market sentiment. Rafiki will recommend the stocks to have on your radar, and sharing the latest insights to help you on your investment journey.
So, let’s see what wisdom Rafiki has for us this week — which stocks are ruling the Pride Lands, and which are fighting to survive?
Market Overview
The All-Share Index (ASI) closed February with a year-to-date (YTD) return of 4.76%, a significant increase compared to January’s 1.53% but still trailing February 2024’s 32.3% rise. The past year saw a massive depreciation in the market, which contributed to the current fluctuations. Market capitalization increased by 3.7% to reach ₦67.1 trillion, despite a 27% drop in trading volume. This suggests investors may be moving funds out of equities and into other markets.
The industrial goods index recorded a remarkable 10% increase, fueled by heavyweight stocks like Dangote Cement, which surged 20% over the week. As one of the most capitalized stocks on the NGX, Dangote Cement’s performance significantly influenced market movement. Additionally, mid-cap stocks contributed to the market’s growth, pushing the ASI up by 3.18% to close at 107,821.39 points.
Sector Performance
Sector-wise, the consumer goods index rose by 1.7%, while the oil and gas index fell by 4%. The banking sector also took a hit, declining by 2%, while the insurance index dropped by 0.87%. Some investors believe bank stocks are underperforming due to concerns that last year’s high banking profits may not be sustainable. However, many banks are still considered undervalued, trading at less than two times their earnings.
The price of a stock reflects what investors are willing to pay, while its true value depends on multiple factors. In some cases, the gap between price and value is substantial—particularly with bank stocks, which are currently trading at historically low price-to-earnings ratios.
Market Losers
Several stocks experienced losses over the week. Notable among them were:
- Triple G (-12.3%)
- Guinea Insurance (-12.3%)
- Prestige Insurance (-15.38%)
- Golden Guinea Breweries (-17.9%)
- University Press (-18.75%)
Many of these stocks had gained earlier in the year, and investors seem to be offloading them. This serves as a cautionary tale for those considering penny stocks—their prices can be highly volatile and may not accurately reflect their real value.
Some of the biggest losers included:
- Eunisell (-27%)
- Learn Africa (-28%)
- UnionDicon Salt (-28%)
Market Gainers
Despite some losses, the NGX saw impressive gains in several stocks. Some equities surged between 32% and 53% in just one week, including:
- Redstar Express
- Africa Prudential
- Presco
- Caverton Offshore
- PZ Cussons (which benefited from news about converting shareholder loans into equity)
Top gainers included:
- Presco (+34% to ₦785 per share)
- Caverton Offshore (+37%)
- Beta Glass (+39.6%, approaching the ₦100 mark)
- Livestock Feeds (+40%)
- Honeywell Flour Mill (+43%)
- Eterna Oil (+52%)
- UPDC (+53%)
Stocks and Industries to Watch
Cement Industry Performance
Nigeria’s top cement manufacturers—BUA Cement, Dangote Cement, and Lafarge—posted strong results.
- BUA Cement reported a 48% surge in pre-tax profit to ₦99.6 billion, driven by robust domestic cement sales. Revenue jumped 91% to ₦876.4 billion, despite last year’s inflation challenges.
- Dangote Cement, Nigeria’s largest cement company, recorded a 62% increase in revenue, mainly due to price hikes. Nigeria contributed 64% of the group’s ₦2.2 trillion revenue. The company also announced a $400 million expansion plan.
- Despite stable production levels, Dangote Cement faced higher costs for fuel and raw material, but still maintained a 54% gross margin. Operating margins dropped to 32% due to rising expenses, while finance costs totaled ₦700 billion. Return on equity stood at 23%, slightly below inflation.
- Dangote Cement declared a ₦30 per share dividend, with shares currently trading at a price-to-earnings ratio of 16x.
- Lafarge’s pre-tax profit jumped 93% YoY to ₦152 billion, driven by 72% revenue growth. However, rising costs (up 76%) remain a concern. The company’s assets stand at ₦990 billion, significantly smaller than its competitors. Lafarge’s recent acquisition by a Chinese firm could pave the way for a turnaround.
MTN Performance
MTN’s results were mixed:
- Revenue rose 5.9% to ₦3.3 trillion, but forex losses of ₦400 billion dragged down profitability.
- Without forex losses, MTN would have recorded a ₦247 billion profit.
- The company spent ₦443 billion on capital expenditure last year.
- MTN is trading at ₦264 per share, with analysts watching cost control and tariff adjustments.
Nestle, NGX Group and Transcorp Performances and other Updates
- Nestle reported a ₦221 billion loss before tax, with losses widening 113% YoY, mainly due to forex issues and rising costs. However, revenue grew 75% to ₦958 billion, and Q4 saw a quarterly profit of ₦19.7 billion.
- NGX Group saw a 158% rise in profit to ₦13.58 billion, with gross earnings doubling to ₦23.9 billion.
- Transcorp’s pre-tax profit soared 138% to ₦22.6 billion, driven by FX gains and increased room sales, with revenue climbing 69% to ₦70.1 billion.
- Caverton Offshore Support Group Plc has announced a joint venture involving the Nigerian National Petroleum Corporation (NNPC) Shipping, Stena Bulk, and its subsidiary, Caverton Marine Limited, which aims to enhance Nigeria’s maritime transport sector. The partnership will focus on crude oil, refined products, and LNG shipping, with plans to acquire vessels and secure long-term charter agreements. The venture is expected to increase efficiency and competitiveness in the industry.
Buy, Sell, or Hold? Rafiki’s Recommendations
1. United Capital
Current Price: ₦18.50
Market Capitalization: ₦360 billion
Price-to-Earnings (P/E) Ratio (TTM): 19.01
Net Income (Last Quarter): ₦3.2 billion
Revenue (Fiscal Year): ₦18.5 billion
Recommendation: Buy
The company’s consistent revenue growth and profitability, coupled with a reasonable P/E ratio, suggest it is well positioned for sustained growth, making it an attractive option for investors seeking stable returns. United Capital has demonstrated robust financial health, reflecting effective business strategies and a strong market presence.
2. Dangote Cement
Current Price: N480.00
Market Capitalization: N9.07tn/NGN
Price/Earnings Ratio: 18.13
Recommendation: Buy
The company’s strong earnings and consistent dividend payouts reflect its solid market position, making it appealing to investors seeking both growth and income. Dangote Cement’s expansion into other African markets is beginning to yield significant results, contributing an increasingly larger share to the company’s overall revenue. While Nigeria still accounts for a majority of its earnings, its Pan-African operations—spanning Ethiopia, Tanzania, Senegal, Zambia, and other markets—have shown strong growth. This strategic expansion is now paying dividends, ensuring Dangote Cement remains a dominant player across multiple African markets while securing long-term profitability.
3. Ellah Lakes
Current Price: N3.00
Market Capitalization: N8.81bn
Price-to-Earnings (P/E) Ratio: N/A (due to negative earnings)
Recommendation: Sell
While the company has diversified its agricultural products, investors should consider the inherent risks associated with the agricultural industry, such as climate variability and market fluctuations as well as the company’s history of negative returns.
4. BUA Cement
Current Price: N93.00
Market Capitalization: 3.15tn/NGN
Price to Earnings Ratio: 74.35
Recommendation: Sell
At 74.35, BUA Cement’s P/E ratio is significantly higher than industry peers like Dangote Cement (16x). This suggests the stock is overvalued relative to its earnings, making it expensive for investors looking for growth potential. Limited Upside Potential – With such a high valuation, the stock price has already factored in substantial future growth. Unless the company delivers exceptional earnings growth, further stock price appreciation may be limited.
5. SUNU Assurances Nigeria PLC
Current Price: ₦5.31
Market Capitalization: ₦30.86bn
Price-to-Earnings (P/E) Ratio: 8.48
Recommendation: Sell
SUNU Assurances Nigeria PLC has faced significant financial difficulties, raising concerns about its viability as an investment. The company’s negative earnings and low share price reflect underlying financial instability. Investors are strongly advised to divest their holdings in SUNU Assurances Nigeria PLC to mitigate potential losses.
Stay tuned for next week’s Stock Watch with Rafiki for more insights on the NGX!
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your research or consult with a financial advisor before making investment decisions. All financial data is sourced from the provided links and is accurate as of the latest available reports. Investors are encouraged to conduct further research and consider their financial objectives before making investment decisions.
Financial Reports of Recommended Companies: Dangote Cement, Ellah Lakes, Sunu Assurances, United Capital, BUA Cement.
