We maintain our 12-month target price at N3.86 and our HOLD recommendation on the counter. While we continue to be encouraged by management’s initiatives to optimize balance sheet to maximize the benefits of the high-yield environment, we are wary of the potential impact of higher costs on earnings growth momentum.
Following a stellar H1'23 performance on the back of the material FX revaluation gains, we expect GTCO's FY'23 earnings to surpass our prior estimate of N251.6 billion to reach N338.72 billion. Our adjusted FY'23 earnings (+100.2% YoY) account for the higher-than-expected revaluation gain of N357.1 billion reported in H1'23 and the accretive impact of higher yields on the bank's net interest income (NII).
Revitalized hotel business to outperform in 2022 The hospitality business emerged as the premier contributor to topline growth in H1'22 (67.7% of additional sales), with a positive passthrough from political activities driving up occupancy rates from 54.0% to 79.0%. In our view, the formal commencement of election campaigns, the typical higher levels of activities during H2 festivities and the upgrade of the Calabar hotel could drive FY'22E occupancy rate to 80.0% and hospitality revenue to N28.0 billion (+29.4% YoY) in FY'22.
In its H1'22 results, UACN reported a N716 million loss driven by higher cost and a temperance in revenue growth across its key business segments. This underperformance and an increasing consumer sensitivity to price adjustments have necessitated an adjustment to our full-year projections and a reduction in our 12-month target price for UACN to N11.18 (vs 14.88 previously). In particular, we now project a five-year revenue CAGR of 5.9% (vs 11.5% in previous communication).
ZENITHBANK has delivered significant improvements from its retail strategy, which, most notably, resulted in a 2.5x increase in retail deposits to N2.6 trillion between 2017 and H1'22. Cost-of-funds (CoF) has also plunged from 5.8% in FY'17 to 1.5% in H1'22, aided by the aggressive retail tilt.
Following the release of H1'22 financials and subsequent conversations with management, we lower our EBIT expectations for DANGCEM across our forecast horizon. Specifically, we now expect an average EBIT of N737.7 billion over the next five years (vs N899.5 billion previously). Our cautious position primarily reflects the cumulative impact of higher energy prices and expected temperance in the pace of cement price increases as competition intensifies. We have a new 12-month target price (TP) of N322.58 (vs N349.76 previously).
