What formed the previous week
global Markets: international markets started off the week on a good note, as the global monetary Fund mentioned it will carry its boom outlook for the U.S. economy, following the Federal Reserve’s determination to taper. positive sentiments extended to week shut after reviews showed unemployment claims falling to higher-than-anticipated ranges of 338,000. These enhancements in information bolstered self belief within the markets, stirring buyers to take on riskier belongings, riding global markets to the golf green at week close.
domestic financial system: For the 2nd consecutive yr, it seems Nigeria’s exterior reserves would finish below the $50bn goal set by the Federal government. at the same time as the reserves started the yr on a promising note, reaching a top of $forty eight.4 billion on April 30, it fell to a report 12 months l0w of $44.19 billion on 17 December 2013, ahead of growing to $forty three.9 billion – approximately $6 billion below the set mark – as at December 23, 2013. The discount in proceeds from crude oil exports, fall in traders’ portfolio and a reversal of flows following bulletins of tapering, are significant components affecting the performance of the reserve. This depletion will increase the draw back chance of the Naira. moreover, it has left the economic system more vulnerable within the imaginable event of a world financial downturn.
Equities: The NSE ASI opened the week on a positive, with financial services and products (+121bps) recuperating from earlier week’s losses courtesy of a rally in FBNH (+230bps). On Tuesday, the ASI shed 12bps ahead of the 2-day holiday, as client items (-79bps) got here beneath drive as soon as again. The ASI advanced 94bps on Friday, tied to beneficial properties in Industrial goods Sector (+103bps), following a reversion of losses in DANGCEM (+84bps), bringing the market’s WoW achieve to 1.sixty nine%.
fastened income: regardless of gadget liquidity opening this earlier week in way over NGN200 billion, the call and seven-day rates edged up a typical 33bps, closing at eleven.sixteen% and 11.33% respectively on Monday, and subsequently remained flat throughout the week. The T-payments and Bond markets recorded quiet buying and selling sessions, with yields closing flat, a customary 12 months-finish pattern, exacerbated via investor considerations around the effect of the latest Fed stimulus tapering decision on the yields of local gadgets.
currency: Following a quiet begin to the FX interbank market this prior week, the Naira got here back beneath drive for the rest of the week as a result of sturdy demand for the greenback; the native forex depreciated 87kobo to close at NGN/USD160.45.
what’s going to shape markets in the coming week?
With just two trading classes left within the 12 months, we think markets (across equities and bonds) to be rather quiet with low volumes in the week in advance.
center of attention for the week: UAC of Nigeria p.c.04a7d3d609129a9296bf7ac0608c2097)
Q3’thirteen revenue: another robust efficiency
• UACN posts robust QoQ growth, bucking market development
• meals section struggles due to security situation in North East Nigeria and input challenges
• UPDC was the foremost performance driver in Q3
UACN goes for a house run in 0.33 quarter whilst meals segment slows: In a surprise to the upside, UACN mentioned QoQ boom of 24% in earnings in its Q3 results after a 3% QoQ decline in Q2. UPDC, UACN’s actual property subsidiary used to be the most important efficiency driver, bouncing back from a three% QoQ earnings decline in Q2 to ship 23% QoQ growth in Q3. however, the meals segment buckled below distribution challenges due the security quandary in the North. Turnover in UAC meals got here in flat, erasing the 8% YoY growth recorded in H1. gross sales of Grand Cereals had been also negatively impacted, as YoY increase slowed to 22% from 27% in Q2. UACN’s management has stated that it is working on market penetration and distribution methods to deal with the protection challenges within the North.
Gross margin efficiency declined to 20% in Q3 after an superior 29% efficiency in Q2 and even lower than 22% in Q1. We notice that UACN has confronted some raw material challenges this year to the extent of getting to import maize. however, we had anticipated this line merchandise to make stronger over the quarter provided that grains harvest season falls in the 0.33 quarter (management reports that, enter costs have begun to decelerate in this autumn’13). additionally, we noticed a jump in working prices in the third quarter, in advance of our estimates as a result of a major elevate in administrative costs.
the significant N3.3 billion in different income, partly from the sale of funding properties in UPDC, used to be sufficient to cushion spikes in production and working costs. We notice additionally that UACN has divested its one hundred% equity stake in its non-core Registrars trade in Q3.web revenue grew forty nine% YoY and 13% QoQ, thanks to the a hundred and forty% increase in UPDC regardless of the numerous decline in profits within the food section. For the workforce, these are a powerful set of numbers as internet margin elevated 100bps to five.5%.
Forecast and Valuation replace: Given this outperformance in Q3, now we have revised upwards our FY’13 earnings and net revenue estimate to NGN85.three billion (earlier: NGN84.1 billion) and NGN9.three billion respectively (previous: NGN9.1 billion), implying respective YoY growths of 23% and 31% respectively. We look forward to dividend per share of NGN1.75 (FY’12: NGN1.60), a 66% payout ratio EPS of N2.sixty seven. then again, regardless of the upward revision to our FY’thirteen forecasts, our revised 12-month goal value is slightly decrease at NGN68.ninety seven (earlier: NGN69.18) due to the adjustment of our possibility free fee assumption to reflect the present yield setting. we are sustaining our sell score on UACN because it bargains a three% upside to our revised target worth.
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at the same time as reasonable care has been taken in making ready this report to ensure the accuracy of information said herein and that the ratings, forecasts, estimates and opinions additionally contained herein are function, cheap and honest, no responsibility or liability is frequent both with the aid of Vetiva Capital management limited or any of its staff for any error of reality or opinion expressed herein.
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