The year 2021 was a roller-coaster for equities, with eight months of positive returns and four months of bearish season. The market ended with a positive return of 6.7 percent amid a remarkable last-minute rally that helped push the value of listed stocks up by N1.23 trillion. Notwithstanding imminent risks to equity market rally in 2022, Nigerian stocks are still attractive and should remain resilient in this year.
The big question now is: what stocks should investors buy in 2022? Stocks seen reoccurring in many analysts BUY lists for 2022, which investors should actively consider in their equities portfolio this year include; Dangote Cement, MTN Nigeria, Lafarge Africa, Seplat Energy, GTCO, Nestle Nigeria, Zenith Bank, BUA Cement, BUA Foods, UBA, Fidelity Bank, Access Bank, Stanbic IBTC Holdings, and Flour Mills of Nigeria.
Dangote Cement is Africa’s leading cement producer with existing operations in 10 African countries with a production capacity of 48.6 million tons per year. The company’s share price as of January 10, 2022, was N260 per share; year-to-date (YtD) change (+1.2%), while in year 2021 the stock rose by +4.9 percent. Meristem analysts target price (TP) for Dangote Cement is N287.81; Vetiva analysts target price for the stock is N280; while United Capital analysts target price is N270.3. Going by these analysts 2022 target price for the cement maker, the stock has upside potential and should be considered a BUY.
BUY rating is given to a stock considered highly undervalued, but with strong fundamentals, and where potential return in excess of or equal to 15 percent is expected to be realised between its current price and analysts’ target price (TP).
MTN Nigeria Communications (MTNN) is engaged in the business of building and operating Global System for Mobiles (GSM) cellular network systems and other related services. MTN, Nigeria’s largest telco, did a public offer of its shares from December 1 to December 14, 2021, which allowed retail investors to purchase up to 575 million shares at N169 per share—lower than its share price on the secondary market.
“Given that the NCC has lifted the suspension of new SIM card registrations, and with the company also hinting that it is actively ramping up new-registration centers, which will support the FG’s NIN enrolment programme, we expect to see some gains in MTNN’s subscriber base going forward. Thus, we expect this to somewhat provide a support system for voice revenue through 2022. However, we also bear in mind that voice services are subject to stiff competition, given the growing preference for internet-driven cheaper substitutes. With the company now underway to getting a PSB license, product offerings are up for a full-blown scale-up, and we might start to see considerable impact on MTN’s top-line performance,” according to Victoria Ejugwu, oil & gas, telecom’s analyst at Lagos-based Vetiva.
Seplat Energy is a leading Nigerian independent energy company listed on both the Nigerian Exchange Limited and London Stock Exchange. Seplat closed the year 2021 at N650 per share, up by 61.6 percent in 2021. United Capital target price for Seplat is N770.4 with BUY rating. Meristem target price is N754.42 supported with BUY rating. Vetiva also rated the stock a BUY with 2022 target price at N796.57.
“Recently, Seplat announced that the company was in discussions for a possible acquisition of some shallow water assets from ExxonMobil. Given that details of the acquisition are yet to be released to the public, we have not included the potential impact on the valuation of Seplat. However, should the deal materialises, we expect to see an increase in crude output, while we expect cost synergies to result from the integration of administrative operations for the combined entity,” said Luke Ofojebe, Vetiva’s head of research.
Flour Mills of Nigeria is one of Nigeria’s leading food and agro-allied groups. Recently, Flour Mills of Nigeria and Honeywell Group Limited agreed to combine operations of FMN through its affiliates and Honeywell Flour Mills (HFMP), a portfolio company of HGL, at a total enterprise value of N80 billion, which will make Honeywell Group dispose of a 71.69 percent stake in HFMP to FMN. Flour Mills was among best performing stocks in 2021 (+183.3%). In the trading week ended January 7, 2022, the share price of Flour Mills of Nigeria closed at N29 per share, representing an increase of 2.3 percent YtD.
United Capital research analysts say Flour Mills is a BUY considering their target price of N46.6 for the stock. Meristem also wants investors to buy Flour Mills considering their target price of N40.63. Meristem research analysts in their January 10 stock recommendation urged investors to “BUY” Flour Mills of Nigeria Plc shares. Also, Vetiva’s price target for Flour Mills is N44.34,” said its consumer goods analyst, Chinma Ukadike.