Following the release of the FY’21 and Q1’22 results and investor conference calls, we adjust our forecasts for UAC of Nigeria Plc. These adjustments result in an upgraded target price of N14.88. We retain a HOLD recommendation on the ticker.
We raise our 12-month target price (TP) for DANGCEM to N349.76 (vs N277.02 previously). Our new TP primarily reflects a revision to our 5-year mean revenue growth forecast to an average of 10.2% (vs 5.1% earlier and 18.3% over the last 5 years). We see scope for a 1-year total return of 23.3% (comprising a 16.6% in capital appreciation and 6.7% in dividend yield). Therefore, we upgrade our recommendation on the stock to a BUY.As mentioned in our previous report, prices remain the biggest single driver of DANGCEM's FY'22 earnings. This position is corroborated by the 36.4% YoY growth in domestic rev/tonne, which masked the 1.7% volume contraction in Q1'22 and cascaded to 34.3% sales growth in Nigeria. We expect prices to remain relatively elevated in the interim, given the heightened level of demand and the rise in energy costs such as diesel and gas prices.
Following FCMB’s impressive Q1’22 performance, we revise our FY’22 earnings expectation upwards to N23.8billion (vs N20.8 billion previously). Our robust earnings expectation primarily reflects an expected increase in net interest income on the impact of higher yields and an improved asset base. In addition, we believe that the bank’s digital banking efforts should further bolster revenue from net fees and commissions. Nevertheless, a significant downside risk to our expectation is the bank’s elevated operational cost.
In our view, MTNN may be set for another data-driven robust earnings performance in FY'22. The recently released Q1'22 financial statement, for example, showed that data contributed 66.6% of total revenue growth, while the voice segment (54.9% of total sales) contributed only 16.5%. The primary drivers of data revenue growth are: 1. Increased usage from active data customers, 2. Conversion of voice-only customers to voice and data users, 3. Improved network rollout.
The local African currency (LCY) bond market remained bearish in April, with the AFMI Bloomberg African Index shedding 4.40% in April—the worst performance in 25 months. These weak sentiments may have primarily reflected the second-order effects of the Russia-Ukraine war, which continues to pressure global inflation. In addition, global central banks appeared to have shown a greater disposition to tightening, despite weaker growth expectations. With the 50bps rate increase in the U.S and the sustained risk-off sentiments of foreign investors, the prognosis is for yield uptrend to persist across African bond markets. Another notable concern for some foreign investors could be the likelihood that pass-through from the Russia-Ukraine war may continue to drive elevated inflation, currency weakness, and less appealing carry trade opportunities in Africa.
We raise our 12-month target price for GUINNESS to N86.68/share (vs N74.60 previously) to reflect the impact of a better-than-expected 9M’21/22 earnings, improved net cash position, and higher price growth expectations across our forecast horizon. The section below highlights the prominent drivers of our target price revision: While our FY'21/22 revenue growth projection is largely unchanged, we have slightly adjusted our five-year CAGR to 13.9% (vs 12.7% previously). This revision reflects an expected average price increase of c.6.3% over the next five years (vs 5.0% previously), reflecting an improved capacity to transfer cost burden across the industry.
