Archive for March, 2011

Here are the analyses of the recently released results of these companies by Afrinvest, Vetiva, BGI and FSDH.

  • Nigerian Breweries
  • Oando
  • Cadbury
  • Lafarge WAPCO
  • Sovereign Trust
  • Flour Mills of Nigeria
  • PZ Cussons
  • Access Bank
  • Diamond Bank
  • Nestle
  • Fidson Healthcare
  • FCMB
  • Zenith Bank
  • Guinness

Company Analysis - BGI Research - Nigerian Breweries - March2011 (668).

Company Analysis - BGI Research - Oando Q3 March 2011 (573).

Company Analysis - FSDH - Cadbury Nigeria Plc 2010 (2729).

Company Analysis - Lafarge WAPCO Cement - Vetiva Research - March 3 2011 (1223).

Company Analysis - Vetiva Research - Sovereign Trust Insurance Plc (896).

Company Report - FSDH - Flour Mills - Q3 2010 (803).

Company Report - FSDH - Flour Mills - Q3 2010 (668).

Company Results Analysis - Afrinvest - Access Bank FY 2010 (595).

Company Results Analysis - Afrinvest - Diamond Bank Plc FY 2010 Result (544).

Company Results Analysis - Afrinvest - Nestle (Nigeria) FY 2010 (872).

Company Results Analysis - Fidson Healthcare Plc H1 2011 Results (625).

Company Results Analysis - First City Monument Bank Plc FY 2010 Result (684).

Company Results Analysis - FSDH - Flour Mills - Q3 Dec 2010 (498).

Company Results Analysis - FSDH - Zenith Bank FY 2010 Result (682).

Vetiva Research - Flour Mills of Nigeria Q3 2011 Earnings Results Analysis (751).

Vetiva Research - Guinness Nigeria Plc Q2 2011 Earnings Release (1449).

Vetiva Research - Nestle Nigeria Plc FY10 Earnings Release (1519).

Vetiva Research FY 2010 Earnings Season Review (496).

Vetiva Research PZ Cussons Nigeria Q2 2011 Earnings Release (977)

Courtesy of the NSE, Vetiva and Proshare, here are the reports on the performance of the Nigerian Stock Exchange for the month of February.

Monthly Economic Note - Vetiva Research - February 2011 (583).

Monthly NSE Report - Proshare - February 2011 (674).

NSE Summary for February 2011 (991)

Here are the NSE Weekly Reports for the month of March. prepared by Afrinvest, FSDH, IBTC and Lead Capital.

Here are outlooks from Afrinvest and Vetiva for the Pharmaceutical, Cement and Banking sectors of the Nigerian economy for 2011:

Afrinvest 2010 Pharmaceutical & Healthcare Sector Update (1539).

Vetiva Research - Cement Sector Study (4804).

Vetiva Research - Nigerian Banking Sector Update - January 2011 (786)

Vetiva Research recently released their Economic Outlook for the Nigerian economy for 2011. It is a very detailed report and the accompanying document includes their underlying assumptions.
Vetiva Research 2011 Economic Outlook (1222).
Vetiva Research - 2011 Outlook and Underlying Assumptions (850)

An excerpt of their outlook for the different sectors of the economy is below:
<blockquote>Sector Outlook

Banking Sector: Risk gives way, eyes on fundamentals
We are overtly upbeat on 2011 earnings, as the key drags on growth fizzle out. Aside our modest outlook on loan growth which is expected to enliven interest income as well as fee and commission books, the steady uptick in the overall yield environment will provide support for appreciable growth in FY’11 earnings over 2010 levels. Our top calls in the sector are ZENITHBANK, ACCESS and FIRSTBANK. These three banks have an expected return of 27%, 25% and 17% respectively.

Consumer Sector: Tough year ahead…efficiency, requisite
The global factor of rising commodity prices, and constrained domestic credit growth will combine to pose challenges for companies within the consumer sector in 2011. It is worthy to note that these stress points would play differently for the sub-sectors within the Consumer industry. Importantly, the ability of consumer companies to improve and sustain production efficiencies would gird against some of these pressures. In the consumer space, we are bullish on Dangote Flour and Flour Mills on the basis of our expected return of 29% and 11% respectively.

Energy Sector: Elections to slow reforms
With far reaching reforms in the pipeline in of the oil, gas and power segments of the Energy industry, electioneering for the April polls seems to be shifting the focus of the legislators, and also the ability of the executive arm of government to focus on implementation. We note that for most segments, less activity on the reforms would be felt pre-election, whilst the Government is likely to put more focus on the pressing issues in the Energy Industry, post-elections. Our top shot in the sector remains Oando, based on our estimated return of 32%.

Infrastructure Sector: Set for mixed realities
Our focus on the building materials sub sector is on the cement producers, as they dominate the infrastructure sector. The outlook for the cement producers follows from our overall expectations of slow infrastructure development. In line with the additional capacities expected to come on stream this year, the sub sector is set to witness a major boost in cement supply. On consumption, we expect some improvement in Q1’11 given the onset of the dry season. The construction sub sector will still be dependent on government capital expenditure. We expect a reduced level of government contract awards and mobilization as focus on elections stalls decision making in government quarters. Notwithstanding the strong fundamentals of the sector, most of the stocks are stretched at current prices. However, we remain bullish on Lafarge WAPCO and Julius Berger based on our estimated potential return of 18% and 14%.

Insurance Sector: Searching for value
With the Nigerian economy forecast to grow at 7.0% in 2011, and given rising income levels and higher risk awareness among the populace, we are cautiously optimistic about the demand for insurance products. However, intense competition with rate undercutting, moderate returns from investments, and adjustments to the new regulatory guidelines is likely to continue to taper short-term profitability. Our favorite in the Insurance space remains Custodian and Allied Insurance based on our estimated return of 32.1%

Capital Markets: High Expectations Amid Uncertainty
Our expectation is that the equity market will close 2011 18% up, with the benchmark index ending the year at 29,246.49. In our view, this base case scenario would be driven by a 30% return by banks,  while Petroleum Marketing and our new Infrastructure (includes building materials and construction companies) sectors are forecast to return 18% and 9% respectively. We expect our new Consumer group to return 15%, however, sub sector forecast puts Food & Beverages at 21%, the Brewers at 12%, while the Conglomerates will throw in a 6% return. As in 2010, we believe the Insurance sector would once again lag the broader market with 2011 return forecast at 5%.

Our Bull case estimate for the equity market performance rises 606 bps above our base case scenario to 24%. Again the banks will lead with a 40% return, Petroleum Marketing and Consumer sectors will follow with 25% and 19% respectively. The Infrastructure sector will post 18% return, while Insurance counters will return 10%.

Our Bear case estimate sees equities returning 10% for the year. This scenario forecasts banks adding 25%, the Petroleum Marketing and Consumer sectors posting gains of 10% and 6% respectively, while the Infrastructure and Insurance sectors will shed 4% and 5% respectively.

Given the expected hyperactivity in local Bond issuances by AMCON and the federal government early in the year, we expect the bond market to continue to attract capital flows as bond  yields would trend   higher in 2011, hence shaving off, only slightly though, some of the potential investments in equities. Stronger still, the uncertainty in the Nigerian Political environment might delay significant investments in the capital markets  further into the year as investors exhibit caution over the outcome of the elections. </blockquote>

Here is Vetiva Research’s review of the economic activities for February 2011.

And here is their outlook:
Vetiva Research Feburary 2011 Monthly Economic Note (507)
<blockquote>Outlook

Inflation
We  expect inflation to trend higher in the short-term thereby piling pressure on the need to  continue raising interest rates. We emphasize “short-term”,  as the drivers of inflation are clearer and more persuasive over this time frame. Fiscal spend in the run up to the April elections, expectations on the back of the  recently approved  N18,000 minimum wage,  high oil prices owing to rising  tensions in the MENA region and,  spiking food prices on the back of adverse weather conditions are a few of the risks somewhat certain to linger up till H1’11. Our  view is that these risks are short-lived,  and we expect  inflation will finish the year in the 10%-11% range.

Interest rates
The lack of clarity on the fiscal direction of the government and the anticipation of higher  oil revenues have pushed  ahead market expectations  of the likely timing and pace of monetary policy tightening. On this assumption, we expect interest rates to edge higher gradually in reaction to the tightening measures. In addition, we anticipate there will be a more dramatic reaction as soon as the  CBN’s  guarantee on interbank market transactions is removed as expected in H1’11.

Exchange rates
Without discounting the possibility of short-lived volatilities, we remain positive on the stability of the  naira on the back of  a steady accretion of reserves and well managed demand  base. We are cautiously optimistic that the withdrawals from the Excess Crude Account (ECA) as seen in 2010 will not recur.

From all indications, oil prices are not a major risk  to  reserve accumulation in 2011  as prices are forecast to remain significantly above the budget benchmark. The major risk we see is the health of oil production volumes, which will depend on the outcome of the April elections.  Another slightly worrying consideration is the devaluation of the US  dollar  which is the world’s reserve currency. The Bloomberg Dollar Index has lost 4.8% and 1.1% in the last three  months,  and one month respectively. There is no gainsaying that the greenback will devalue further in  2011,  as the government is committed to closing its huge deficit gap. It may make sense for the CBN to actively pursue diversification of Nigeria’s reserve currency exposure.</blockquote>


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