(Sundiata Finance) – With optimism that stocks would extend the gains seen in 2017 in the New Year, analysts have identified stocks that could drive such a rally. The All Share Index was up 42 per cent in 2017 making it the third best performing stock market globally.
Some of the stocks that drove the rally in 2017 include; Dangote Sugar (up 227.3%), Dangote Flour (185.9%), International Breweries (194.6%) Fidelity (192.9%) and (Fidson 189.1%).
However, in 2018, the stocks that analysts are tipping to drive the market upwards include; Dangote Cement Plc, Zenith Bank Plc, United Bank for Africa Plc, Diamond Bank Plc, Guaranty Trust Bank Plc, UAC of Nigeria Plc, and Flour Mills of Nigeria Plc.
Also found in the basket of most analysts’ stock picks this year include Nigerian Breweries Plc, FBN Holdings Plc, Access Bank Plc, Lafarge Africa Plc, Okomu Oil Palm Plc, Presco Plc, Unilever Nigeria Plc, United Capital Plc, Fidson Healthcare Plc, FCMB Group Plc, Dangote Sugar Refinery Plc, Cement Company of Northern Nigeria Plc, and Seplat Petroleum Development Company Plc.
Driven by Nigeria’s improving macroeconomic fundamentals and healthier global commodity prices, it is expected that banks asset quality should improve further this year –which further justifies the inclusion of more banking counters in analysts’ stock picks for 2018.
Olalekan Olabode-led team of research analysts at Lagos-based Vetiva Capital said their selection for “10 high conviction stocks” covers companies that offer the strongest potential risk-adjusted returns over the next 12 months.
Also in their picks, Vetiva researchers included a few stocks they said provide defensive play for portfolios given their limited downside risk.
“For the banking sector, we believe 2018 portends strong returns for Tier-II banking names as the stronger economic recovery supports earnings recuperation for these highly undervalued stocks. Whilst the fundamentals and superior returns of Tier-I banks will uphold investor interest,”Vetiva analysts said.
Zenith Bank Plc remains one of analysts’ top picks for 2018. With an estimated market leading dividend yield of 10.8percent and an above average Return on average equity (ROAE) of 21percent for full year 2018, analysts believe the bank is on track for another impressive market performance in 2018.
“Zenith Bank has consistently outperformed the broad market index as well as the banking sector index in the last three years. Zenith currently trades at 0.9x 2018 price to book (P/B) and 4.7x 2018 price to earnings (P/E) compared to Tier-1 average of 1.0x and 5.1x respectively.” (BusinessDay)
For Flour Mills Nigeria Plc, its capital restructuring is expected to support earnings accretion. For analysts, the stock is a good buy because of expected benefits from capacity expansions in its sugar business (commissioning scheduled for early 2018) and exciting consumer potential that will further accelerate top line growth for the business.