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The Nigeria equity market booked another week of loss, with the NSE ASI declining by 2.54% WoW to 30,874.17 pts and the market capitalization shedding N293.7 billion over the week. The loss was driven by declines in bellwether stocks in the banking (FBNH: -6.58%, GUARANTY: -5.63%, STANBIC: -2.04%, UBA: -3.85% and ZENITH: -3.33%), cement (DANGCEM: -4.15%, LAFARGE: -7.14%) and Oil & gas (SEPLAT: -9.68%) sectors. Top decliners during the week were DIAMONDBNK (-31.58%), PRESTIGE (-30.38%) and UNITYBNK (-18.82%).

  • Fidelity Bank Plc – BUY (FVE: N92). We are now more optimistic on our earnings expectation over 2018 largely on the back of lower loan-loss provisioning. We have revised our FY 18E EPS higher to N0.82 (previously N0.76) which is 25% higher YoY. Our FVE of N2.92 (previously N2.82) translates to a BUY rating on the stock. Based on Friday’s closing price, our dividend expectation translates to a dividend yield of 8%.


  • Nigerian Breweries Plc – SELL (FVE: N58): Reflecting the heated competition and further declines in volumes into Q4 18, we forecast FY 18E revenue to decline by 6.8% YoY to N321 billion. However,  we envisage cost pressures due to rising barley prices. Thus, we forecast FY 18E gross margin at 40.8% (FY 17: 41.7%) and EBIT margin of 12.6% (FY 17: 17%). Having rolled forward our model, we cut our FVE on NB to N76.58 (previous: N121.30), translating to a SELL.


  • Guinness Nigeria Plc – UNDERWEIGHT (FVE: N96): As with NB, due to heated competition in the brewery sector, we foresee higher cost of sale over FY 19F due to rise in barley price and higher cost per unit due to loss of diseconomies of scale following weaker volumes. Having rolled forward our model, we cut our FVE on Guinness Nigeria to N73.96 (previous: N88.21), translating to an UNDERWEIGHT


  • Okomu Oil Palm Plc – STRONG BUY (FVE: N75): Over our forecast period, we anticipate volumes growth emanating from the harvest of fresh fruit bunches from its extension 2 plantation. Based on our expectation for volumes growth, accompanied by margin expansion, we raise our FVE to N97.75.


  • Seplat Petroleum Development Company Plc – STRONG BUY (FVE: N27). The case for Seplat remains higher crude oil prices and volumes, unrecognized capital allowance, reserve accretion, higher receipt from crude oil lifted in OML 55 as well as the company’s extended debt maturity profile which feeds into an improved cash position


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