Nigeria | NGX

Following the slight sell-offs that trailed the new administration-inspired rally, local equities embraced corporate actions/announcements as key catalysts in August. Notably, the disclosure on the proposed merger of DANGSUGAR, NASCON, and Dangote Rice Limited was released on the 1st of August 2023. GSK UK also disclosed its intention to cease commercialising its prescription medicines and vaccines through the GSK local operating companies and plans to transit to a third-party distribution model two days later. The disclosure also highlighted the consequent decision of GSK Nigeria to cease operations in Nigeria, with its next steps expected to include submission of a scheme of arrangement to SEC and drive accelerated cash distribution and return of capital to shareholders. In the light above, there were strong rallies in the share prices of the linked companies, with DANGSUGAR, NASCON, and GSK accelerating by 103.7%, 55.5%, and 87.8% MoM, respectively.

Fidelity Bank’s recently released its H1 2023 audited numbers showed significant y/y and Q/q growth in Pre-tax profit, driven by significant growths in both Interest and Non-Interest Income. Interest Income grew 39.4% y/y, which according to the bank’s Management, was driven by expansion in earning assets and improved yields on assets. Net Loans to Customers were up 25.1% in H1 compared with the December 2022 position. Growth in Non-Interest Income on the other hand, was driven by foreign currency revaluation gains, trading gains and strong growth in several Fee Income lines.

GTCO’s H1 2023 audited numbers showed a 53.5%y/y growth in Interest Income to N225.95bn driven by growth in Interest Income on Net Loans and Investment Securities. Net Loans and advances to Customers was up 22.8% in H1 2023 relative to December 2022 (inclusive of the impact of devaluation of foreign currency loans). The bank has been very reluctant to increase risk assets amidst the negative headwinds. On the other hand, Interest Expense also grew strongly, up 84.0% y/y to N48.5bn. Customer Deposits grew moderately, up 39.1% (inclusive of the impact of devaluation) in June 2023 compared with December 2022. Overall, Net Interest Income grew 46.8% y/y to N177.5bn.

BUA cement’s +17.2% y/y Revenue growth in H1 2023 was primarily driven by an upward price adjustment amidst stable sales volumes. Bua Cement reported increases in prices in H1 2023 with average cement price rising to N67,192/ton in H1 2023 from N56,454/ton in H1 2022 while sales volumes closed H1 2023 at 3.29 million MT from the 3.34MT recorded in H1 2022, indicating a 1.5% decrease. Net Income increased by 3.7% y/y to N63.62bn in H1 2023 from N61.36bn in H1 2022

We revise our CPO and RBDO production forecasts for FY'23 to 62,500 tons and 65,000 tons, respectively (vs 52,813 tons and 55,943 in 2022 and 66,211 tons and 61,228 tons in previous projections). The company's output will likely be supported by the continued ramp-up in production at the acquired SIAT Nigeria Ltd, which increased the oil palm area planted by 15,000 hectares and boosted matured areas by 40.1% late last year. Overall, we forecast revenue 13.4% higher in FY'23 at N92.85 billion, with EPS likely to grow 45.7% YoY to N18.99 per share.

Despite notable challenges in H1'23, SEPLAT appears set to achieve production levels above the midpoint of management's 45,000 to 55,000 barrels of oil equivalents per day (boepd) guidance for the current financial year. This view is supported by the de-risking of evacuation at OMLs 4, 38, & 41 and ongoing efforts to leverage Edo Refinery to arrest third-party evacuation concerns. We recall that H1'23 production was primarily supported by OML 40, wherein volumes rose by 24.3% YoY to 10,803 barrels of oil per day (bopd) due to improvement in uptime and delivery of new wells. The gains from this asset masked the weaknesses in OMLs 4, 38, & 41 and the smaller Eastern operation (OML 53). According to management, the H1 set-backs across OMLs 4, 38, & 41 and OML 53 reflected delays in the on-streaming of new wells (meant to offset the impact of assets' deterioration) in the former and evacuation challenges due to the unavailability of key deliverable lines in the latter.