Investment - January 13, 2022

What Stocks Should Investors Buy in 2022? Here is What Experts Think

However, what stocks should investors buy in 2022 remains a big question?

January 13, 2022

14 min read

Despite the impending hazards to the equity market boom in 2022, Nigerian equities remain appealing and could hold up well this year. However, what stocks should investors buy in 2022 remains a big question?

To provide answers, many analysts made a BUY list of stocks that investors can invest their money in this year. Many of these companies are now cheap in the Nigerian market, making them exciting BUY chances for investors seeking capital appreciation and long-term gains.

According to Isaac Olorungbon, CEO of Deep Trust and Investments Limited, “companies such as Dangote Cement, MTN Nigeria, GTCO, Nestle and Zenith Bank, which are our top picks, are resilient bellwethers with the history of sustainable earnings growth through political cycles”.

He is optimistic about the stocks in 2022, adding that “as our cautious optimism reinforces our outlook of another positive return for Nigerian equity investors in the new year.”

Hence, these are the top four stocks investors should consider investing in this year.

Dangote Cement

Dangote Cement is Africa’s largest cement company, with 48.6 million tons per year production and activities in ten African nations. As of January 10, 2022, the company’s stock price was N260 per share with a year-to-date (YTD) change of (+1.2%) after growing by +4.9% in 2021.

According to the following analysts, Dangote Cement’s target price (TP) are Meristem analysts – N287.81, Vetiva analysts – N280, and United Capital analysts – N270.3. Based on these analysts’ 2022 target price for the cement firm, the stock has upside potential and should be rated a BUY.

From the company’s unaudited interim financial statements for nine months (January – September 30, 2021), the company’s full-year (FY) 2021 result shows an increase in sales to N1.022 trillion from N761.44 billion in FY 2021. The nine-month pre-tax profit was N405.487 billion, compared to N271.960 billion in nine months ‘2020.

In the first nine months of 2021, earnings per share grew to N16.23, up from N12.2 in the previous nine months. The Company and its subsidiaries’ primary business is to run operations that prepare, produce, and distribute cement and associated materials.

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Market Classification (Premium Board); Sector (Industrial Goods); Sub-Sector (Building Materials); and Shares Outstanding (17,040,507,405 units).

MTN Nigeria

MTN Nigeria Communications (MTNN) is a company that builds and operates cellular network systems based on the Global System for Mobiles (GSM) and provides other services.

From December 1-14, 2021, the company had a public offering of its stocks, allowing investors to acquire up to 575 million shares at N169 per share. This price was, however, lower than the secondary market price.

Its share price of N185.5 per share on January 10, 2022, reflected a negative 5.8% return (YTD). In the year 2021, the stock increased by 16%. The Central Bank of Nigeria (CBN) gave MTN Nigeria a preliminary license to launch a payment service bank (PSB) in November 2021.

According to Victoria Ejugwu, an oil and gas, telecommunication analyst at Lagos-based Vetiva, MTN has the potential to scale up this year following the Pay Service Banks (PSB) license recently issued to it by the Central Bank of Nigeria (CBN).

She said MTN’s “product offerings are up for a full-blown scale-up, and we might start to see the considerable impact on MTN’s top-line performance.”

Also, Coronation Research Analysts, in their January report noted that “Going forward into 2022, we are guided by our recent Nigerian telecom sector report ‘Delivering a Digital Future,’ December 30, in which we recommend a BUY for MTNN with a target price of N266.17/share and a Sell for Airtel Africa with a target price of N793.84/share.”

The unaudited condensed consolidated interim financial accounts of MTNN for the nine months (January- September 30, 2021) revealed that revenue increased by 23.6% to N1.206 trillion from N975.764 billion in nine-month of 2020.

Its profit before tax (PBT) increased by 51.87% to N321.352 billion in the nine-month of 2021 from N211.594 billion in 2020. Its basic/diluted profits per share grew by 52.74% to N10.82 from N7.09 in the nine-month of 2020.

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Sector: (ICT); Sub Sector (Telecommunications Services); Market Classification (Premium Board) and Shares Outstanding (20,354,513,050 units).

Seplat Energy

Seplat Energy is a renowned Nigerian independent energy firm that traded on the Nigerian Exchange Limited and the London Stock Exchange. Seplat ended 2021 with a share price of N650, up 61.6% from the previous year.

As of January 10, the stock price was N665 indicating a 2.3% year-to-date (YTD) rise. It increased revenue to N182.7 billion compared to the N135.6 billion made in the nine-month of 2020.

The gross profit increased from N31.7 billion made in the nine-month of 2020 to N58.1 billion in the nine-month of 2021. Pre-tax earnings increased to N38.6 billion from a loss before tax of N45.5 billion in the nine-month of 2020.

Seplat has a BUY recommendation from United Capital, with a target price of N770.4. Meristem’s target price is N754.42, with a BUY recommendation. Vetiva also gave the company a BUY rating, with a target price of N796.57 in 2022.

The following analysts gave Seplat a target price and BUY rating: United Capital – N770.4, Meristem – N754.42, and Vetiva – N796.57.

Luke Ofojebe, Vetiva’s head of research, said, “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 purchase are yet to be released to the public, we have not included the potential impact on the valuation of Seplat.

However, should the deal materialise, 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.”

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Sector (Oil & Gas); Sub Sector (Exploration and Production); Market Classification (Premium Board); and Shares Outstanding (588,444,561 units).

Flour Mills of Nigeria

Flour Mills of Nigeria, one of Nigeria’s largest food and agro-allied companies, is devoted to implementing its long-term plan to preserve growth and profitability.

Flour Mills of Nigeria recently agreed to consolidate activities of FMN with Honeywell Group Limited through its affiliates and Honeywell Flour Mills (HFMP), an HGL portfolio business, for a total enterprise value of N80 billion, with Honeywell Group selling a 71.69% share in HFMP to FMN.

In 2021, Flour Mills was one of the best-performing companies, with a gain of 183.3%. The share price of Flour Mills of Nigeria closed at N29 per share in the trading week of January 7, 2022, indicating a growth of 2.3% year to date.

The Group’s revenue in half-year (H1) 2021/2022 was N522.8 billion, in contrast to N355.1 billion in H1 2020/21, representing a 47% year-on-year (YoY) increase. The group’s performance was constant across all-important business sectors, with the agro-allied and support segments, in particular, growing by as much as 35%. The Group’s profit before tax (PBT) was N15.5 billion in H1 21/22, compared to N14.6 billion in H1 2020/21 (6% YoY increase).

Continued good operational performance in the food business and steady development in the agro-allied and support segments impacted the growth in the company. Also, it was fueled by strong organic growth, which was aided by product innovation and ongoing retail sales momentum.

The stock dropped by 0.9% in January 2022. According to United Capital research analysts, Flour Mills target price is N46.6, and it is a BUY. During stock recommendation, Meristem research analysts advised investors to “BUY” Flour Mills of Nigeria Plc shares.

Chinma Ukadike, Vetica’s consumer goods analyst, also said that Flour Mills’ price target is N44.34.

According to the analysts, “We note that the company’s volume growth strategy has been quite successful so far, across its Food and Agro-allied segments. In line with this, we remain positive on the impact of newer product roll-out expected in the coming quarters”.

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Sector (Consumer Goods); Sub Sector (Food Products); Market Classification (Main Board); Shares Outstanding (4,100,379,605 unit.