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
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.
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