10 STOCKS TO BUY IN 2015



 

Looking at the market currently, one observes that many equities are undervalued. No matter how you see it or measure the prices quoted, companies are selling on the exchange today. The new stock market we have in the New Year is as a result of changes in the economic fundamentals of the nation as the monetary policy rate is high at 13 percent. The naira was devalued, the external reserve of the nation is dwindling on daily basis due to the continued fall in crude oil price which is the major foreign exchange and revenue earners for government. This is in addition to the general elections that are around the corner - less than 21 days to the poll to decide the continuity or change in government.
In this environment of slow economic growth due to austerity measures, investors should become more discerning about where to invest their funds profitably in 2015 as we expect a gradual reversal in the present trend after the elections. The contemporary transfer of wealth in the global economy as a result of low oil price should be a boost as a number of energy consumers in terms of nations and companies outnumber the countries and companies producing oil or energy. This is expected to reduce the cost of living and enhance profitability for companies that depend on oil to run their businesses.
On this note, I do not expect a prolonged slow global growth as projected by many analysts. We have analysed tenof the top picks we believe can power your portfolio higher in 2015 and beyond.

OKOMU OIL
Market Cap: N22. 23 billion - $132.30 million;    Net Assets: N24.01 billion - $142.93 million
Current PE ratio:  3.54x;                                           Price/Book value: 0.93
 Dividend Yield: 4.29%;                                             ROE: 9%.


This palm oil-producing company has of late adjusted to stable and steady earnings performance to reflect its business environment and industry. The downward trend of the company’s share price in 2014 where it lost almost 45 per cent of its market value was due to the market correction after bonus had influenced its share price. The improving earnings, regardless of the increase in share outstanding did not support price before now. But with the expected improvement in its sector as government continues to channel effort towards agriculture in a bid to diversify the economic by encouraging agribusinesses, Okomu Oil is likely to benefit and enhance its operation.  It has remained the leader in its industry in terms of earnings growth and consistency in rewarding shareholders. On the strength of its recent third quarter earnings position of N2.17 and book value of N25.14, the stock is trading at a discount. This company is reasonably valued as it is currently trading at 3.5 times earnings with a dividend yield of 4.29 per cent. The stock is almost at all-time support level which might be a breakout or reversal.  It is expected that the company will pay dividend when its full year scorecard hits the market.

TRANSCORP
Market Cap: N115.78 billion-$689.14 million;    Net Assets: N92.87 billion - $552.78 million
Current PE ratio:  4.67x;                                          Price/Book value: 1.25
 Dividend Yield: 1.68%;                                            ROE: 9%.

This is a holding company in the conglomerates sector of the market with companies in the essential area of the economy that will continue to drive the business model of each facet to boost profitability at all time - whether in a boom or gloomy economic situation.  The company’s investment in capacity building in hospitality, agriculture, hotel accommodation, power, oil and gas sectors has started yielding results as reflected in the numbers posted so far in 2014.  The improving earnings have equally supported its share price rally before the correction with the market direction. It started rewarding its shareholders with dividend in 2014 after 10 years. As the company’s chief executive officer and his team have lived up to their promise to double its earnings in 2014, the possibility of dividend above 8k is high. As a company with diversified business portfolios, its revenue and earnings momentum are expected to be on the increase in 2015.  It has posted six consecutive earnings surprises since the company moved from a negative position in the previous years to profitability. This stock is recommended for buy at the current price. It currently trades at 4.67 times earnings and a price to book value of 1.25. 

FLOUR MILL
Market Cap: N97.07 billion-$577.80 million;    Net Assets: N82.95 billion - $493.76 million
Current PE ratio:  11.11x;                                     Price/Book value: 1.17
 Dividend Yield: 5.86%;                                         ROE: 5%.


This company is into manufacturing and distribution of consumer staple products. Yes, it has been consistent in paying dividends but the payout has been up and down to reflect the earnings position of the company at a given time. Due to the nature of its products and those of its subsidiaries, it is expected that its future dividend payout would increase as it has divested from cement business to focus on its core business and the re-engineering of other businesses in the company’s portfolio to impact its bottom line. The stock trades at 11.11 times earnings with price to sales and book value of 1.70 and 1.17 respectively. It is currently trading at a reasonable valuation as the sale of its cement business impacts on its profit margin in the expected financials. It has an upside potential of more than 35 per cent from the current price as the market expect its third quarter scorecard before the election and full year after the election.

DANGOTE SUGAR
Market Cap: N66.36 billion-$395 million;    Net Assets: N48.74 billion - $290.10 million
Current PE ratio:  2.42x;                                  Price/Book value: 1.36
 Dividend Yield: 11.36%;                                  ROE: 19%.


This company is into the refining of raw sugar into edible sugar and sale of refined sugar with strong prospects of growth as it continues to invest in capacity expansion to meet domestic consumption and export with the aim of boosting profitability. The backward integration of the company with the setting up of sugar cane farms in more than five states, is geared towards making raw materials available for its production at low cost. The presidency has also given full support to this move which is expected to boost activities in the sector. The company has distributed dividends to its shareholders since it got listed on the floor of the stock exchange. The company’s stock is reasonably valued as it currently trades at 2.42 times earnings with a price to book value of 1.36. The stock has an upside potential of more than 40 per cent from the current price as the market expect a reversal after the election with the earnings season in view. The company’s expanded marketing and distribution outfit within and outside the shore of the country will boost profit that will support price rally.

UACN
Market Cap: N69.13 billion - $411.50 million;   Net Assets: N70.34 billion- $418.68 million
Current PE ratio:  4.93x;                                         Price/Book value: 0.98
 Dividend Yield: 5.68%;                                           ROE: 5%.


This holding company has its hands in many listed companies. It is into agriculture, manufacturing, property, paints, chemical and distribution of consumer staple products. Yes, it has been consistent in paying dividends but the payout has been up and down to reflect the earnings position of the company at any given time. Due to its diversification in investment and those of its subsidiaries, it is expected that its future dividend payout would increase as profit from all its investment starts impacting on its bottom line. The stock trades at 4.93 times earnings with a price to book and sales of 0.98 and 0.88 respectively. Technically, the stock has been trending down since July 2014 and has broken several support level to N26.20 before retracing on the 14 day of January 2015, rallying for straight seven trading days to N38 which stands as a new resistance level. The stock is buyable but more attractive if it adjusts lower to the last support level. With the upside potential of 40 per cent after the polls, investors with short, medium and long term investments should look the way of this stock. 

To be continued next week.
For comments or questions email: ambrose.o@investdataonline.com OR text 08179547605.



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