Nigeria Strategy Report (H2 2020 Excerpts) – Crude Oil – Cast in COVID-19 Shadows

In what would seem like ages ago, we had started the year with some optimism for oil markets, following the resolution of the 2-year US-China trade war, with an oil price forecast of $63/bbl. for FY 2020. However, in an unprecedented move, global economic activities were grounded to a halt and country borders were shut; all due to the outbreak of the coronavirus. However, prior to the full-scale impact of the pandemic, a rift between the OPEC+ de facto leaders – Saudi Arabia and Russia – caused a price war wherein the leading suppliers ramped up production in a bid to recover lost market share. A sum of the foregoing factors led to a historic glut in the oil market and a crash in brent oil prices to a two-decade low of $19.33/bbl., while WTI confounded known theories to touch negative territory with a trough of -$34/bbl – both in April. Over H1 20, oil prices was down 37% to $41/bbl in June, with average oil price printing at $42/bbl over H1 20, compared to $62/bbl over H2 19.

For the rest of 2020, our forecast points to likelihood of a net deficit in market balance. With demand expected to print at an average of 95.9mbpd and supply at 92.7mbpd, the oil market could be in a net deficit position of 3.2mbpd over H2 20 from a net surplus of 7.6mbpd in H1. That said, while we could see some recovery in prices, we think it is unlikely prices return to the highs of $60-70 levels as it did at the start of the year. Thus, we project oil prices could print at an average of $40 over H2 20 and we leave our FY 20 oil price forecast unchanged from our last update of $40.5. Overall, we project oil prices could print within a range of $33-$42 for FY 20, with our base case printing at $40.5. That said, the threat of a second wave of the pandemic is a key downside risk to our forecast.

4 Reasons you should diversify your Investment portfolio

As an expert stock trader or a beginner, one thing, you are constantly weary of is risk. The popular phrase -the higher the risks, the bigger the reward, has started to loose relevance, as day after day we realize that smart risks often present the best rewards, as they shield you from losses and unforeseen events. One way to take smart risks is by diversifying your portfolio. Simply put, DO NOT PUT ALL YOUR EGGS IN ONE BASKET.

In this article, we have analysed 4 reasons you should always diversify:

YOU OWN THE ADVANTAGE IN DIFFERENT MARKETS.

Diversification allows you to explore different markets. For instance, rather than just investing in the Nigerian Stock Markets, you might explore some other markets like NASDAQ or New York Stock Market, known to be home to stocks like Exxon Mobil, Uber etc. With this in mind, you should only trade with an app like ARMSTOCKTRADE that gives you the best of all markets.  Investing globally is great way to diversify your investments, because different areas of the world may be experiencing different growth than the domestic market, thus, creating principal shield, and higher returns potential for you.

YOU WORRY LESS ABOUT YOUR EXPOSURE TO RISK. 

Still on, putting all your eggs in one basket, basically, if you’re investing all of your money in one sector, your risk level is far higher. What if something happens and that sector crashes? E.g. the effect of COVID-19 on the travel sector. It is important to diversify by investing in multiple sectors, and with ARM Stocktrade app, you can do this, and also, enjoy research analysis that can guide you on which stocks/sectors to invest in that help you mitigate risk. By diversifying, you can spread your wealth sources around, so that you’re never risking everything.

Weather market storms.

Sometimes, a market event can affect a particular industry, which can negatively affect your entire portfolio. For example, companies in the Tourism and Hospitality are the most by hit by the recent Covid 19 pandemic. Diversification allows you to invest in a variety of industries, company types, and even different sorts of assets. By having a variety of assets, you are better prepared to weather market storms.

Gain a better understanding of the market.

Moreover, diversifying your investment portfolio will make you a well-rounded investor and trader. It exposes you to different markets and different investment types, ensuring you’ll gain a more inherent understanding of the economy and WHAT MAKES MONEY MOVE.

By continuing to educate yourself in these ways, you’ll expand your knowledge base. Knowledge is power when it comes to investing. The more you know, the more investment ideas you’ll be able to generate.

One thing is certain: the market and the business landscape are both ever-changing. By diversifying, you’ll be better able to stay mentally on top of it, thus remaining more nimble as an investor.

Start investing in local and foreign stocks, download ARM Stocktrade app now

ARM Securities NUBAN Account Numbers FAQs

What is the ARMS NUBAN Account Numbers?

This is a new payment solution available for clients to make payments to their ARM Securities investment accounts via bank transfers, internet banking, USSD and any other funds transfer channels using a unique bank account number.

How does it work?

A unique NUBAN account number is generated and linked to your stocktrade account. This ensures that once payment is completed using the unique NUBAN account number, the funds are automatically credited to your cash account.

Can I use my account number for other payment services?

No, you can’t. The NUBAN account number can only be used to fund your stocktrade account.

Who can use Monnify?

Monnify can be used by all existing ARM Securities clients who have active stocktrade accounts.

What is the benefit of using Monnify?

Monnify provides the opportunity to:

  • Fund your stocktrade account directly via bank transfers, internet banking, USSD and any other fund transfer platforms
  • Receive funds from friends and family straight into your stocktrade account
  • Enjoy swift remittance of invested funds into your stocktrade account


    How much does it cost to use Monnify?

A transaction fee of 0.54% of the amount (maximum cap of N100.00) is charged per transaction. This fee will be deducted from the total amount transferred and the net amount will be settled to your stocktrade account.

Is there a limit to the amount that can be transferred?

No, any amount can be paid using your unique NUBAN account number. The limit is only subject to your bank’s fund transfer limits

Are my funds settled immediately?

Yes, all payments are automatically credited to your stocktrade cash account on the same day within minutes.

How safe is it?

It is 100% safe. Money paid using the NUBAN account number can only be settled to your stocktrade account.

What happens if my payment is successful, but I don’t receive value?

If you successfully completed a fund transfer, but your investment account is not credited within 24hours, kindly contact [email protected] for support.

How Offshore Stocks Are Doing

We hope you are keeping safe during this pandemic and observing all the safety procedures listed by the World Health Organization (WHO) and various public health authorities.

The coronavirus pandemic is taking a toll on the global economy and stock markets. While most companies’ shares are experiencing a dip, there are a handful of resilient stocks that are navigating this turbulent period better than others. here

As an investor, we hope you will take advantage of investing in these stocks. We also want to draw your attention to diversifying your portfolio by investing in offshore stocks. Here are some interesting names weathering the covid19 storm:

The online streaming giant, Netflix, has historically proven to be a formidable stock that can stand any tidal wave that may be putting some other giants on their knees. Recently, Netflix reported first-quarter earnings last week that showed a surge in demand for the service. The company reported that 15.7 million new customers signed up in the first three months of the year. This figure is higher than the 7 million users they projected for the year 2020. However, the impressive growth in subscription did not translate to an impressive bottom line owing to other charges that pressured profits. That said, Netflix stock has gained 30% so far this year.

In the same light, Microsoft reportedly recorded significant increase in the use of their services. As more people continue to work remotely, active users of the Microsoft Teams is said to have increased from 10 million last year to 44 million earlier in the month.Microsoft is expected to release result for the last quarter this week. The stock has gained 10% so far this year.

Like Microsoft, Zoom has become a household name since the pandemic started. Zoom’s stock has increased from $68 at the start of the year to $168 per share. Demand for Zoom is high during this new pandemic and it is a great add to your portfolio.

As the quest to find vaccines to the coronavirus pandemic increases, Gilead Sciences Inc, is one of the companies leading the trail. The pharmaceutical company is reputable for making HIV treatment drugs, and Ebola Virus vaccine, Remdesivir. The company’s stock has gained ~22% so far in 2020

These are only a few and we hope you will take advantage of these offshore stocks to diversify your investment portfolio. Start here

Download ARM Stocktrade App today and start trading both local and foreign stocks

January Inflation: CPI maintained upward trajectory

As anticipated, inflation for the month of January ascended by 15bps to 12.13% YoY (vs December: 11.98% YoY) and 4bps shy of our estimate of 12.09% YoY. In our monthly economic update, we highlighted that the low base from food prices would send inflation on an upward trajectory. Unsurprisingly, food inflation rose 18bps to 14.85% YoY, accounting for bulk of the uptick in headline inflation, while core inflation moderately expanded by 3bps to 9.35% YoY. On the former, the pickup was anchored by 29bps and 6bps increase in farm produce and imported food to 15.35% YoY and 16.10% YoY respectively. Nonetheless, the buoyant supply from main harvest season has helped in moderating the pace of increase. Also, Core inflation ticked up by 3bps to 9.35% YoY, reflecting increases in HWEGF (+8bps to 7.78%), Transport (+10bps to 9.35% YoY), Health (+19bps to 9.78% YoY) amongst others.

Following similar trend, Month-on-month numbers rose slightly by 2bps to 0.87% MoM (3bps shy of our estimate: 0.84% MoM) due to minute expansion in both core and food inflation. Food inflation ticked up 1bp to 0.99% MoM mirroring 2bps expansion to 0.93% MoM in farm produce. Similarly, core inflation rose 1bp to 0.82% MoM following increases in HWEGF, Health, Transport, Clothing, Education.

We retain our view for an expanse in headline inflation owing to two key factors. First is the lingering impact of the low base on food inflation. Secondly, the increase in VAT from 5% to 7.5% which took effect from 1st of February 2020 with the aim of the generating more revenues for the government is expected filter into inflation numbers. Consequently, we expect the northward trend to persist, with headline inflation for the month of February printing at 12.3% YoY and 0.88% MoM. Against this backdrop, we expect average inflation for 2020 to print at 13.0% (FY 19: 11.4%).

Figure 1: One-year trend in Inflation rate

Source: NBS, ARM Research

Stock Recommendation for the Week, February 17

The Nigerian equities market maintained a downward trend with the ASI, dropping by 1.11% to 27,755.9 pts, with the market capitalization closing at N14.46 trillion as investors lost N162 billion during the prior week. All sectors closed negative WoW except Cement (+0.37%) and Construction (+0.13%). The deterioration was driven by the Food (-7.27%), Brewers (-2.02%), Oil & Gas (-1.34%), Insurance (-0.94%), Telecoms (-0.53%) and Banking (-0.21%) sectors. The key losers are NESTLE (-10.00%), DANGSUGA (-4.10%), GUINNESS (-16.56%) and MTNN (-0.85%), while GTB (+1.36%), BUA CEMENT (+1.13%) and WAPCO (+1.31%) yielded positive returns.

• Dangcem– STRONG BUY (FVE: N240.87): DANGCEM’s FY 19 earnings is expected to be pressured (EPS: N14, vs N22 in 2018) owing to lower volumes in Nigeria business (due to increased competition from BUA Cement) and some of its Pan Africa business, as well as high base of tax credits from 2018. However, DANGCEM currently trades at FY 19E P/E of 11x on our estimates, which is cheap compared to WAPCO and CCNN of 17.7x and 16.8x, respectively. We believe current valuation is unjustified given the superior ROE of 24%.

• Zenith Bank Plc – STRONG BUY (FVE: N31.50): Zenith bank 9M results saw a moderate expansion in PBT and PAT by 5.3% and 4.5% YoY respectively. We note however, that the banks valuation may remain depressed in the near-term given the regulatory overhang over the industry. Nonetheless, at current levels and based on our FY 19E dividend of N2.90, we view expected dividend yield of 15% as attractive and could be compelling to investors. We value Zenith at N31.50 which implies STRONG BUY by our recommendation.

• Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): GTB’s 9M 19 earnings expanded modestly with PAT and EPS expanding only 3.4% YoY to N146.9 billion and N4.99/share respectively. Although we expect slower growth in EPS (+4% YoY to N6.53) over 2019, our case for GUARANTY remains the resilience in NIR, improved cost management, still strong loan book with moderate expansion in credit loss provision to 0.5%.

• Nestle Plc – OVERWEIGHT (FVE: N1447.39): Amongst the food producers, Nestle Nigeria Plc has managed to stay afloat, reporting modest growth in earnings amidst incessant competition. For 9M 19, EPS expanded by 11.2% YoY to N46.48 driven largely by the absence of impairment charges which created a high base for input costs over the same period last year. Asides from improved earnings, its strong cash balance, return on equity and 100% dividend payout further supports the case for an OVERWEIGHT rating.

• Seplat Plc – STRONG BUY (FVE: N828.90): Seplat’s total production declined in Q3 19, as the drop in gas production offset improvement in the oil segment. That said, we remain positive on growth in production (especially in oil) into 2020 as Seplat increases capex. Cashflows remain healthy. Upsides reside in the ANOH Gas project and acquisition of Eland Oil & Gas Limited, while decline in oil prices pose a threat to our estimates.

See attached for full report.

Kindly, visit ARM Research Portal for full stock reports.

Stock Recommendation for the Week, February 10

Last week, the Nigerian bourse witnessed a steep decline as the ASI closed -2.69% WoW, while market capitalization lost N239 billion to close at N14.62 trillion. All sectors closed in red, save the insurance sector (+0.15%). The decline was anchored by the Breweries (-5.62%), Cement (-4.94%), Banking (-2.26%), Oil & Gas (-5.74%), and Telecom (-1.48%) sectors. On stock performance, FBNH (-8.40%), ZENITH (-5.04%), NB (-6.36%), INTBREW (-5.56%), DANGCEM (-5.50%), BUACEMENT (-4.32%) and MTNN (-2.17%) yielded negative returns amongst other stocks.

• Dangcem– STRONG BUY (FVE: N240.87): DANGCEM’s FY 19 earnings is expected to be pressured (EPS: N14, vs N22 in 2018) owing to lower volumes in Nigeria business (due to increased competition from BUA Cement) and some of its Pan Africa business, as well as high base of tax credits from 2018. However, DANGCEM currently trades at FY 19E P/E of 11x on our estimates, which is cheap compared to WAPCO and CCNN of 17.7x and 16.8x, respectively. We believe current valuation is unjustified given the superior ROE of 24%.

• Zenith Bank Plc – STRONG BUY (FVE: N31.50): We have made adjustment to our FY 2019 expectation for Zenith Bank following some surprises in the Q2 numbers. In specifics, we revised net interest income lower due to compressed yields on its loans and treasury asset (H1 18:10.6%, H1 19 9.1%) amidst contraction in funding cost. Elsewhere, we adjusted NIR higher due to upward review of electronic fee income and trading book. Thus, we now forecast PBT of N218 billion (-5.5% YoY), while we cut our FVE to N31.57/share (previously: N33.71/share).

• Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): GTB’s 9M 19 earnings expanded modestly with PAT and EPS expanding only 3.4% YoY to N146.9 billion and N4.99/share respectively. Although, we expect a slower growth in EPS (+4% YoY to N6.53) over 2019, our case for GUARANTY remains the resilience in NIR, improved cost management, still strong loan book with a moderate expansion in credit loss provision to 0.5%.

• Nigerian Breweries Plc – STRONG BUY (FVE: N75.82): With intense competition from International Breweries (IB) and graduated excise duty (+17% YoY) that kicked-off in Jan-19, revenue growth is expected to be slow even as we expect higher finance cost (+38% YoY) to be another pressure point to earnings this year. However, given our case for a slight improvement in volumes and decline in cost of sales (-1.1% YoY) which translates to gross (+120bps YoY) and EBIT (+101bps YoY) margin expansion, the misery seems moderated. Overall, the net impact of all our adjustments translates to PBT of N29.9 billion and EPS of N2.58 (+6.3% YoY) over 2019.

• Seplat Plc – STRONG BUY (FVE: N828.90): Seplat’s total production declined in Q3 19, as the drop in gas production offset improvement in the oil segment. That said, we remain positive on growth in production going into the final quarter of the year (especially in oil) and into 2020 as Seplat increases capex. Cashflows remain healthy. Upsides reside in the ANOH Gas project and acquisition of Eland Oil & Gas Limited.

Kindly, visit ARM Research Portal for full stock reports.

Stock Recommendation for the Week, February 03

For the first time this year, the equity market closed the prior week on a negative note with the NSE ASI declining by 2.65% to 28,843.53 index points. Loses were observed in the Banking (-6.13%), Cement (-0.90%), Telecom (-2.96%), Personal Care (-13.72%), Food (-0.50%), Oil & Gas (-2.58), and Real Estate (-0.14%) sectors. On the other hand, gains were seen across only the Brewers (4.89%), Construction (2.64%) and Insurance (0.54%) sectors. Major drivers for the week decline were stocks such as; FBNH (-10.27% WoW), STANBIC (-10% WoW), BUACEMENT (-2.12% WoW) and MTNN (-4.32% WoW).

• Dangcem– STRONG BUY (FVE: N240.87): DANGCEM’s FY 19 earnings is expected to be pressured (EPS: N14, vs N22 in 2018) owing to lower volumes in Nigeria business (due to increased competition from BUA Cement) and some of its Pan Africa business, as well as high base of tax credits from 2018. However, DANGCEM currently trades at FY 19E P/E of 11x on our estimates, which is cheap compared to WAPCO and CCNN of 17.7x and 16.8x, respectively. We believe current valuation is unjustified given the superior ROE of 24%.

• Zenith Bank Plc – STRONG BUY (FVE: N31.50): We have made adjustment to our FY 2019 expectation for Zenith Bank following some surprises in the Q2 numbers. In specifics, we revised net interest income lower due to compressed yields on its loans and treasury asset (H1 18:10.6%, H1 19 9.1%) amidst contraction in funding cost. Elsewhere, we adjusted NIR higher due to upward review of electronic fee income and trading book. Thus, we now forecast PBT of N218 billion (-5.5% YoY), while we cut our FVE to N31.57/share (previously: N33.71/share).

• Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): GTB’s 9M 19 earnings expanded modestly with PAT and EPS expanding only 3.4% YoY to N146.9 billion and N4.99/share respectively. Although, we expect a slower growth in EPS (+4% YoY to N6.53) over 2019, our case for GUARANTY remains the resilience in NIR, improved cost management, still strong loan book with a moderate expansion in credit loss provision to 0.5%.

• Nigerian Breweries Plc – STRONG BUY (FVE: N75.82): Intense competition from International Breweries (IB) and graduated excise duty (+17% YoY) that kicked-off in Jan-19, revenue growth is expected to be slow even as we expect higher finance cost (+38% YoY) to be another pressure point to earnings this year. However, given our case for a slight improvement in volumes and decline in cost of sales (-1.1% YoY) which translates to gross (+120bps YoY) and EBIT (+101bps YoY) margin expansion, the misery seems moderated. Overall, the net impact of all our adjustments translates to PBT of N29.9 billion and EPS of N2.58 (+6.3% YoY) over 2019.

• Seplat Plc – STRONG BUY (FVE: N828.90): Seplat’s total production declined in Q3 19, as the drop in gas production offset improvement in the oil segment. That said, we remain positive on growth in production going into the final quarter of the year (especially in oil) and into 2020 as Seplat increases capex. Cashflows remain healthy. Upsides reside in the ANOH Gas project and acquisition of Eland Oil & Gas Limited.

Kindly, visit ARM Research Portal for full stock reports.

Stock Recommendation for the Week, January 13

The bullish sentiments continued last week as the NSE ASI gained 9.07% WoW to close at 29,415.39pts while market capitalization advanced significantly by N2.2 trillion. The boost in market capitalization was largely fuelled by the listing of BUA Cement Plc on the NSE. Precisely, it listed 33.86 billion ordinary shares at N35 per share, making it the third largest company on the bourse. On sectoral performance, gains were seen across Cement (+20.59%), Banking (+8.58%), Telecom (+4.37%), Food (+1.59%) and insurance (+0.47%) transcending losses in the Brewers (-0.17%), Personal care (-5.21%) and Oil & Gas (-0.44%) segments. A further probe revealed gains in DANGCEM (+21.13%), MTNN (+6.42%), FBNH (+15.91%), ACCESS (+6.40%), GUARANTY (+6.15%), UBA (+12.00%), ZENITH (+13.51%), and DANGSUGA (+5.63%) amongst other stocks.

Dangcem– STRONG BUY (FVE: N240.87): DANGCEM’s FY 19 earnings is expected to be pressured (EPS: N14, vs N22 in 2018) owing to lower volumes in Nigeria business (due to increased competition from BUA Cement) and some of its Pan Africa business, as well as high base of tax credits from 2018. However, DANGCEM currently trades at FY 19E P/E of 11x on our estimates, which is cheap compared to WAPCO and CCNN of 17.7x and 16.8x, respectively. We believe current valuation is unjustified given the superior ROE of 24%.

Zenith Bank Plc – STRONG BUY (FVE: N31.50): We have made adjustment to our FY 2019 expectation for Zenith Bank following some surprises in the Q2 numbers. In specifics, we revised net interest income lower due to compressed yields on its loans and treasury asset (H1 18:10.6%, H1 19 9.1%) amidst contraction in funding cost. Elsewhere, we adjusted NIR higher due to upward review of electronic fee income and trading book. Thus, we now forecast PBT of N218 billion (-5.5% YoY), while we cut our FVE to N31.57/share (previously: N33.71/share).

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Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): GTB’s 9M 19 earnings expanded modestly with PAT and EPS expanding only 3.4% YoY to N146.9 billion and N4.99/share respectively. Although, we expect a slower growth in EPS (+4% YoY to N6.53) over 2019, our case for GUARANTY remains the resilience in NIR, improved cost management, still strong loan book with a moderate expansion in credit loss provision to 0.5%.

Nigerian Breweries Plc – STRONG BUY (FVE: N75.82): Intense competition from International Breweries (IB) and graduated excise duty (+17% YoY) that kicked-off in Jan-19, revenue growth is expected to be slow even as we expect higher finance cost (+38% YoY) to be another pressure point to earnings this year. However, given our case for a slight improvement in volumes and decline in cost of sales (-1.1% YoY) which translates to gross (+120bps YoY) and EBIT (+101bps YoY) margin expansion, the misery seems moderated. Overall, the net impact of all our adjustments translates to PBT of N29.9 billion and EPS of N2.58 (+6.3% YoY) over 2019.

Seplat Plc – STRONG BUY (FVE: N828.90): Seplat’s total production declined in Q3 19, as the drop in gas production offset improvement in the oil segment. That said, we remain positive on growth in production going into the final quarter of the year (especially in oil) and into 2020 as Seplat increases capex. Cashflows remain healthy. Upsides reside in the ANOH Gas project and acquisition of Eland Oil & Gas Limited.

Kindly, visit ARM Research Portal for full stock reports.

How to take your New Year goals beyond January

Beginnings are beautiful. Everyone loves the exhilarating feeling that comes with starting. The dawn of something new seems to awaken fresh hope in our hearts, propelling us to dare to dream. We make plans, new resolves, set goals, envision possibilities…For a few golden days or even weeks, there is a spring to our step, a purpose to our every action, we believe anything is possible. Until time proves us wrong and months pile, leaving our dreams stranded in imagination lane, our hopes depleted, and our drive gone. We trudge through the year, looking forward to a brighter day, praying for a miracle or just accepting fate.

Popular statistics reveal that only 8% of New Year resolutions made in January make it to March. But it doesn’t have to be that way. You can transcend from Dreams Ville to Action Lane. You can back up your aspirations with steps. The goals you set in January can become realities in June. You can look back in December with even more than you anticipated. It depends on you. How? Here are just three things you need to do.

  1. Don’t just wish, set goals

What is the difference between a wish and a goal? Goals are calculated projections, feasible, achievable and time bound aspirations while wishes are just desires. Goals are within your reach, you can work towards making them happen, wishes on the other hand happen upon you, if they happen at all. Stop wishing, start setting goals.

  1. Break it down

It is important that you break that overarching goal into smaller units. Identify what your overall goal is, then break it down into smaller goals that lead to the ultimate result. If for instance your goal for 2020 is to travel abroad for Christmas, start by determining how much you will need to make that trip in December (Overarching goal -raise 2 million Naira for vacation). Take it further by calculating how much you will need to put aside every month to accumulate that amount (Monthly goal- invest 100,000 every month). Next you need to ascertain what lifestyle changes are necessary to enable you put aside that amount every month (Weekly goal- reduce Friday night hangout to last Fridays of the month alone).  You can attack your weight loss goal, networking goal or whatever goal with the same model.

  1. Take action

Don’t just determine to eat less or save more or spend less time on social media, put things in place that will propel you to do it. You might need to get an accountability partner to monitor your social media addiction, set up a direct debit mandate to ensure you put funds aside for investment consistently, download an app to monitor your expenses, register at a gym, create a meal plan, purge your house of everything unhealthy- do whatever needs to be done.

Let this be the year you actively pursue your goals. Every day, go to bed with the satisfaction that you are one step closer to realising your ambitions.