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Lafarge, NB, Stanbic, GTB top best-performing stocks in Q3:2020

FOLLOWING the ongoing stock market recovery, Lafarge, Nigerian Breweries, Stanbic IBTC and GTBank topped the best performing stock, says Chapel Hill Denham. 

The Nigerian stock market staged a remarkable rebound between the second and third quarters of 2020, after sell-offs in the first quarter of the year.

This was partly driven by the lifting of lockdowns and low interest rates as yields on high conviction stocks became substantially high, above the yields on fixed income/money market instruments.

Chapel Hill Denham detailed that stock market sustained its recovery trend in the third quarter 2020, the All-Share Index return of +9.6% compared with 14.9% in Q2, thus erased the 20.6% year to date loss in Q1-20, for a flat year to date negative performance of 0.04% in Q3.

“Among our coverage names, 11 stocks outperformed the market in Q3:2020”, Chapel Hill said.

In the entire market, the firm said Lafarge Africa Plc, currently enjoying analysts’ buy rating recorded +50% gain, while NB share price rose +35.7%.

Rated Buy by equity research analyst Chapel Hill Denham, Stanbic share price rose +33.9% as GTB stock appreciated +27.2%.

Chapel Hill Denham however indicated that these four stocks recorded highest gain in Q3:2020.

Interestingly, analysts explained that the four stocks outperformed the 10-yr bond, 1-Yr OMO, and 1-Yr Nigerian Treasury Bills returns of 21.5%, 1.5%, and 1.0% respectively in the period.

Analysts stated further that the other stocks in under Chapel Hill Denham coverage that outperformed the broad market index are Presco with share price appreciation of+17.1%, Airtel +15.6%, Flourmill 13.9%.

Others are FCMB which share recorded +13.5% gain, Dangote cement stock rose +12.5% and Zenith did +10.9% to lead MTNN with +9.8% price appreciation.

For the fourth quarter 2020, Chapel Hill Denham believe investors should focus on valuations, which are currently cheap for most of its coverage names and high dividend yields as analysts earlier indicated.

“We believe market timing is crucial to generating exceptionally high returns, so we maintain our view that investors should buy fundamentally sound, but cheap stocks with high dividend yields”, the firm stated.

Analysts at Chapel Hill Denham however recommend that investors should considered Zenith, UBA, Access, GTB, Lafarge, Airtel; and MTNN.

Other top picks include Dangote sugar, Stanbic, Nestlé, and NB.

Among these names, analysts said on a forward price earnings (P/E) basis, Access is the cheapest with a P/E of 2.6x followed by UBA and Zenith at 2.7x and 2.8x respectively.

It is worth noting that the dividend yields indicated below are based on our dividend per share forecasts for financial year 2021 as estimated while the yields on the 10-Yr bond and 1-Yr NTB are our forecasts for end of 2021.

Chapel Hill Denham maintained that Nigeria remains cheap amid recovery which is expected to continue in the fourth quarter 2020.

Source: Market Forces Africa

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