Stock Market Review: July 31, 2023

The stock market last week closed on a positive note with 0.08% growth. Year to date, the market has returned 26.94% with the All Share Index and Market Capitalisation at 65,056.39 points and N35.403 trillion.

In a stock market review with the MD/CEO of Global View Capital Limited, Aruna Kebira, the following were discussed:

Excerpts:

•             The market last week closed positive with marginal growth of 0.08%. What is the outlook for the new week?

The market started the week on a positive note on Monday with a close of 0.14%, and appreciated 1.1% on Tuesday, but declined 0.46% on Wednesday, 0.31% on Thursday, and 0.65% on Friday respectively.

It could be noticed that the market was still poised for another rally for the week having closed in the green zone on Monday and Tuesday but the market took a different direction when the released H12023 earnings reports began to manifest after the same pattern.

Most released companies’ earnings declined which was a reflection of the same impact: Unification of the foreign exchange rate.

The exercise led to market de-segmentation, reduced restrictions & controls, exchange rate convergence, effective supply, stopping unorthodox intervention, increase effective rates and transparency on exchange rate determining mechanism & net reserves.

Most of the H12023 earnings released displayed humongous losses across the board, hitting the manufacturing companies the most.

For those who have taken facilities, especially foreign currencies-denominated ones, have to make provisions for the difference in the former I & E windows rate and the current rate of the dollar.

Most companies have to revalue their assets and liabilities in line with the current situation and this re-valuation led to posting of huge losses to their income statements.

It should be noted that most of these loses are not stemmed out of managerial inefficiencies, as there were growths from their toplines up to the middle lines even up to PAT, only for the bottom lines to be eroded by the losses in foreign currency revaluation.

Be that as it may, this revaluation exercise may only need to hit the company’s books once. The likelihood of a reoccurrence is remote as the exchange rate had been left in the hands of market forces of demand and supply.

A lot of equities suffered decline last week and majority may likely continue. But we know the maxim that says that whatever comes down must go up.

Take the price of NB and Guinness for instance, NB at N36 and Guinness at N66, any further decline in the prices will attract the attention of the market and there could be reentry move that will may spur a rebound.

•             How would you rate the performance of the Q2 results released so far?

Like I have just enumerated above, the H12023 results so far released to the market are not lack lustered but are affected by what I may call “force majeure”, spreading across major companies financial statements. The unification of the exchange rate left big holes in the operation and performances of major issuers.

Since it is likely going to be a one-off thing, after a certain percentage decline, the market will rise to support the fundamentality strong stocks. This is why we have always advised investors to concentrate on fundamentals.

•             What is driving the price of LASACO? How attractive is it at N2.03?

LASACO had its AGM on July 27, 2023. One of the agenda items was to declare a dividend. The company has brought a notice of dividend declaration of 15k earlier with the qualification and closing dates of July 3, and July 4-7, respectively.

To cap it up, the company in the midst of many losses, has a 21.6% turnover growth, 32% growth in PAT, and 440% eps growth.

LASACO’s 52-week high price is N2.70 and a 52-week low of N0.77. At the current price of N2.03, It still has a spread of 42% to give.

Based on the direction of the growth in its H1 results, Lasaco is good to go.

•             How attractive is Cadbury, Nigerian Breweries, May & Baker, Fidelity and FBNH?

These prices suffered serious diminution in the previous week, owing to the losses recorded in their earnings, like NB, Cadbury and Guinness.

But after the rain comes sunshine, if the prices further lose another 10% this week, there would be a rebound in their prices. At the current price of these three stocks, they are good to go as the losses in their financial statements are not as a result of managerial incompetence but an act of policy change.

May and Baker grew its turnover by 29.7%, PAT at 39% and eps at 38% respectively. This performance will bring May and Baker to the attention of the market and the market will reward the price appropriately.

The recent noticeable decline in the price of FBNH is as a result of the market wide action, but the company performed well in its H1 2023 with a N5.19 eps. Chance is that the recent bearish levels noticed in the price is as a result of the bank proposal to raise additional capital by way of Rights issue.

But by and large, leaning on its performances of Q22023, and the secrete plot and battles for the sole of the bank, the big elephant will fly.

•             What are the stocks to watch?

LASACO, May and Baker, NB, Guinness, Transcorp and FBNH

Source: Stock Market Review: July 31, 2023 – StocksWatch (stocksng.com)

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