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Reasons Lafarge Africa has a SELL recommendation

Buy Sell Hold is picked from the top gainers and losers of the previous week, as well as various analyst results.

Custodian Investments: SELL

Recent ResultsResults for the nine months ended September 30, 2018 show that gross revenue increased from N31.8 billion in 2017 to N36.2 billion in 2018. Profit before tax increased from N6.1 billion in 2017 to N6.8 billion in 2018. Profit after tax also rose from N4.6 billion in 2017 to N5.1 billion in 2018.

Price Information

Current Share Price: N 5.80

Price to Earnings Ratio: 4.56X

Price to Book Ratio: 0.8

Year to Date Return: 2.7%

One Year Return: 59.88%

External View 

Analysts at Afrinvest Securities have a “Reduce” recommendation on the stock. They have a 12-month target price of N6.10, which is 0.2% above the stock’s price of N6.10 as at when the report was prepared.

Our View 

Custodian Investment is a SELL in Nairametrics’ opinion. The stock is currently trading close to an all time high, and could decline further in the coming weeks.

Upcoming elections have led to bearish sentiments on the Nigerian Stock Exchange, and are likely to remain dominant. Investors would be better off waiting for significant correction before taking a position.

Julius Berger: SELL 

Recent Results: Results for the nine months ended September 30, 2018 show that revenue increased from N105 billion in 2017 to N118 billion. Profit before tax increased from N85 million in 2017 to N5 billion in 2018. The firm made a profit after tax of N3.4 billion, as against a loss of N349 million recorded in the comparative period of 2017.

Price Information

Current Share Price: N28.4

READ MORE:  Increasing VAT is Not The Ultimate Solution to Nigeria’s Revenue Problem

Price to Earnings Ratio: 7.87X

Price to Book Ratio: 1.24

Year to Date: 41.3%

One Year Return: 0.24%

External View

Our View

Julius Berger is a SELL in Nairametrics’ opinion. The stock is trading at a 6 month high, and could decline further if negative sentiments in the markets are pronounced. The NSE has fallen sharply in the first few days of trading, and could decline further in the coming weeks prior to the election.

The stock has also out peformed the index by iver 30% in just a few weeks of the year, in what is turning out to be a bearish month. Investors are best exiting the stock for now.

Lafarge Africa: SELL 

Recent Results:

Results for the nine months ended September 30 2018, show revenue increased from N223 billion in 2017 to N234 billion in 2018.

The firm made a loss before tax of N14.3 billion in 2018, as against a profit before tax of N1 billion for the corresponding period of 2017.

Price Information

Current Price: N12

Price to Earnings Ratio: None 

Price to Book Ratio: 0.8 

One Year Return: N75.42

Year to Date Return: -3.6%

*Lafarge recorded a loss in the 2017 financial year, hence the absence of a PE ratio.

External View

Analysts at United Capital have a ‘Buy’ recommendation on the stock. They have a target price of N13.7 which amounts to a potential upside of 21.2% from the stock’s price of N11.3 as at when the report was prepared.

Analysts at FBNQuest have a ‘Neutral’ opinion on the stock. They have a target price of N21.5 which represents a potential upside of 89.8% from the stock’s price of N11.3 as at when the report was prepared.

READ MORE:  Here’s a look at how Nigeria’s Pension Fund performed in Q1 2019

Our View

Lafarge Africa is a SELL in Nairametrics’ opinion. The stock is currently trading close to a 5-year low of N11.5 and may slide below that whenever full year 2018 results are released.

The company is very likely to record a full year 2018 loss, and will witness dilution following the listing of the additional shares from its rights issue.

Investors would be better off waiting for first quarter 2019 results and/or the listing of the stock’s additional shares before taking positions.

Source: Nairametrics

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