Nigerian Stock Exchange (NSE)30 index companies that are likely to outperform peers over the next 12 months.

NSE30 Stocks Index are weighted by adjusted market capitalization, meaning number of listed shares multiplied by closing price, and a capping factor. It should be noted that only fully paid common stocks are included in the NSE30 index. The index is usually rebalanced on semi-annual basis, on the first working day in January and in July.

Companies presently listed on the NSE30 Index include:

• BANKS: GTBank Plc, Zenith Bank Plc, Stanbic IBTC Holdings Plc, Access Bank Plc, UBA Plc, FBN Holdings, Union Bank of Nigeria Plc, Ecobank Transnational Inc, Fidelity Bank Plc, FCMB Group Plc, Sterling Bank Plc.
• FMCGs: Nestle Nigeria, Nigerian Breweries Plc, Dangote Sugar Refinery Plc, Unilever Nigeria Plc, Guinness Nigeria Plc, International Breweries Plc, Flour Mills of Nigeria Plc.
• OIL & GAS: Seplat petroleum Development Co. Plc, Mobil Oil Plc.
• TELECOMMUNICATIONS: MTN Nigeria Communications Plc, Airtel Africa Plc.
• BUILDING MATERIALS: Dangote Cement Plc, BUA Cement Plc, Lafarge Cement, WAPCO Plc.
• AGRO-INDUSTRIAL: Presco Plc.
• AGRO-ALLIED: Notore Chemical Plc.
• AGRICULTURE: Okomu Oil Palm Co Plc.
• HOSPITALITY: Transcorp Hotels Plc.

In a mail to Nairametrics, Equity Analyst, CardinalStone Research, Khalil Woli, gave vital insights on the top NSE30 stocks that investors and stock traders should consider buying.

“Although domestic equities have delivered broadly negative returns in H12020 against a backdrop of weakening growth, currency concerns, and depressed earnings releases, we identify historically resilient names among the NSE 30 index that are likely to outperform peers over the next 12 months.

“Specifically, we like stocks with track records of high profitability, low financial leverage, and less margin volatility,” he said. These stocks also have attractive upside potential for 2020 based on our target prices, and are relatively consistent with dividend payments.

Notably, ZENITH and UBA have dividend yield that exceeds inflation levels. GUARANTY and STANBIC are also likely to offer dividend yield that are higher than the return on one-year T-Bill, going by their first-half performances. These banking names all announced interim dividends for the first half of the year.

In the cement space, WAPCO and DANGCEM are currently trading at attractive prices in the market, despite strong earnings expectations for FY20. Both companies delivered impressive growth in profit after tax (DANGCEM, +5.8% YoY; WAPCO, + 60.0% YoY) in H1 2020, despite the COVID-19 impact on sales (principally noticed in April).

DANGCEM and WAPCO are trading at 23.6% and 35.8% discounts respectively, to their 5-year average P/Es, despite expectations of higher ROEs in 2020.

There is also a strong investment case for PRESCO and OKOMUOIL, as oil palm companies historically thrive during currency liquidity crisis in Nigeria. Recall that OKOMU and PRESCO grew profits by over 100.0% YoY and 82.0% YoY respectively in 2016. Border closure and potential FX-induced increase in domestic patronage are other arguments in favor of the sector

Lastly, NESTLE is an obvious pick from the consumer goods space. The company has demonstrated high defensive attributes of consistent dividend payments and superior ROE (73.9% compared to a sector average of 27.6%), amidst macro headwinds of the last few years. Its healthy reliance on locally sourced raw materials makes an additional case for the stock, given recent naira pressure.

In addition, Silas Ozoya, Managing Partner, SUBA Capital, in a chat with Nairametrics, used the prevailing macros in selecting his favorite NSE30 stocks.

“My personal favorites are in the financial sector and consumer goods. This is because transactions happen every day and humans must consume house hold items. So, my first pick would be Zenith Bank, GTBank, and Sterling Bank. They are the stocks to hold in my portfolio, because of pond standing stability in the case of Zenith Bank and GTBank, and rapid growth in the case of Sterling Bank,” he said.

Also, the consumer goods market is the next on his list. “Unilever, Flour Mills of Nigerian Plc, and Nestle would top my list here, because of the market and consumer behavior towards their products, which translates to a healthy bottom, capitalization, and dividend,” he added.

Overall, the leadership of these companies, and their response to the ever-changing policies have shown how much longer they’re willing to keep the business running, which is a priority for any investor holding shares in their portfolio.

SOURCE (abridged): https://nairametrics.com/2020/09/16/top-nse30-stocks-you-should-consider-buying/