Nigeria | NGX

In H1’23, FIDELITYBK revealed that the changes in its share capital and premium emanated from the private placement of 3.0 billion shares at 50 kobo each. This capital injection, coupled with the bank’s intended capital raise via a right issue of 3.2 billion shares and a public offer, reflects the impetus to support the bank’s capital ratio and operational expansions. We adjusted our 12-month target price to N8.34 (vs. N10.50 previously) and revised our rating on the stock to a HOLD (previously a BUY) to account for the projected ROE contraction over our forecast horizon.

In September, the performance of global equities remained underwhelming, with the MSCI world (-4.5%) and MSCI emerging market (-2.81%) indices declining for the second consecutive month. This bearish undertone was likely due to the dollar strengthening amidst renewed inflation concerns, weak macroeconomic numbers in China, and a sharper-than-expected increase in crude oil prices. To the first point, the US dollar index touched its highest point in the year in September as a second straight surge in inflation to 3.7% (vs consensus of 3.6%) further entrenched expectations of higher-for-longer interest rates. Elsewhere, macroeconomic issues remained underscored by China's deepening real estate crisis and high youth unemployment. These issues have forced the World Bank to cut the country's growth forecast to 4.4% (vs. 4.8% in April and the country's central bank target of 5.0%). Similar to the US and China, European equities were negatively impacted by a fourth consecutive contraction in PMI to 47.1 in September, highlighting possible weaknesses in private sector activities.

The Afrinvest weekly sentiment improved to 2.2x (previously at 2.0x). This week, we expect bargain hunting opportunities to boost market performance.

NB will likely remain in a loss position in FY'23, primarily due to the significant impact of naira devaluation on its huge FX-denominated payables. However, we like the company's aggressive expansion of market footprint, and current drags are likely to create long-term entry opportunities for patient capital. We retain our HOLD recommendation on the ticker with an unchanged 12-month TP of N43.10.

UBA’s H1 2023 audited numbers showed a strong 66.4% y/y growth in Interest Income to N428.3bn driven mainly by a significant growth in Interest Income on Investment Securities and on cash and bank balances. Net Loans to customers grew 43.5% in H1 compared to December 2022, inclusive of the impact of devaluation on foreign currency loans. Interest Expense also grew strongly, up 88.0% y/y on the back of a 237% y/y growth in Interest Expense on deposits from banks, 80% y/y growth on Interest Expense on Customer Deposits, and a 49% y/y growth in Interest Expense on borrowings. Customer Deposits were up 42.4% in June compared with December 2022. Overall, Net Interest Income was up 56.7% y/y to N278.1bn in June 2023 from N177.5bn in June 2022 and up 32.5% q/q to N158.5bn in Q2 2023 from N119.6bn in Q1 2023.

Nestle Nigeria Plc’s (Nestle) reported Revenue growth rate of 17.7% y/y to N261.77bn in its H1 2023 earnings result from N222.45bn in H1 2022. The company’s EBITDA also advanced by 30.6% y/y to N66.27bn from N50.76bn in H1 2022. However, Nestle’s Net Finance Cost grew significantly to N129.91bn from N2.44bn in H1 2022. This resulted in a Loss before tax of N69.19bn in H1 2023 compared with a profit before tax of N43.74bn in H1 2022.