Nigeria | NGX

In 2022, investors have shown a certain apathy towards GTCO, which has experienced a material YTD decline of 17.3%. This apathy appeared to have worsened after the release of its relatively weak Q1'22 financials compared to its peers. Even though the drivers differed, the first-quarter weakness represented an extension of the PAT contraction reported in FY'21. However, in our view, the bank may experience a turnaround on the potential impact of higher yields in the coming quarters. This projected recovery and the competitive profitability and capital ratios support an unchanged BUY recommendation on the ticker.

Our 12-month target price (TP) for ZENITHBANK is mostly unchanged at N30.23 (vs N29.86 in our previous publication). Our TP is likely to be supported by the bank’s strategy of accelerated retail penetration, which could combine with the passthrough from robust growth in interest-earning assets to amplify the impact of higher yields on earnings. We see scope for a capital appreciation of 32.3% and a dividend yield of 15.2% over the next 12-months. We retain a BUY recommendation on the ticker on the back of this projected upside and an implicit undervaluation by the market.

We revise our FY’22 earnings expectation for ACCESSCORP to N186.7 billion (vs N154.2 billion previously). This upward adjustment reflects our projection for improved net-interest income, which is likely to reflect pass-through from a CBN-induced increase in yields and sustained increases in interest earning asset. Beyond the current year, the imminent launch of a new strategic agenda, ongoing expansion across pan-African markets, and the restructuring to a HoldCo are likely to be positive for the bank’s operating performance. We, therefore, leave our 12-month target price mostly unchanged at N12.77 (N12.21 previously).

Despite the slight moderation in asset yields in Q1’22, we remain constructive on UBA’s FY’22 NIM, which we expect to improve by 20bps from FY’21 level. Our positive view on NIMs is built around the following potential drivers:

In our last report on PRESCO, we highlighted 3 main drivers that are likely to keep CPO prices elevated in 2022 viz a viz: Malaysian supply constraints, Indonesian CPO exports levies and renewed demand for biofuels. In addition to these, recent geopolitical developments have taken CPO price pressures beyond our previous expectations. Specifically, supply constraints in CPO's two main substitutes (sunflower oil and soybean oil), occasioned by the Russia/Ukraine crises and the droughts in South America, resulted in increased demand for CPO. Elsewhere, Indonesia's progressive use of biodiesel in its energy mix continues to grow its local demand, disincentivize exports, and pressure the commodity price.

Nestlé has consistently grown its revenue in the last 23 years, with related CAGR printing at 19.2%. This revenue momentum was taken up by several notches in FY'21 (+22.6% YoY) and Q1'22 (26.3% YoY). The recent traction in topline growth mostly reflects: