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Custodian and Allied Insurance to outperform peers

The first quarter of this year witnessed 7 companies approaching the Nigerian Capital Market to raise additional funds for branch net work expansion, technological advancement, improved workforce, purchase of new equipments, boast working capital, among others in a drive to position themselves strategically to play favorably in their individual sectors and evolving market. Within the period under review, the over all size of the new as well as right issue amounted to 22.49 billion units which amounted to N166.59 billion. This figure shows that majority of Nigerian companies are now seeing the capital market as key source of raising fresh capital for expansion. Going by previous records on the performance of issues like these, we expect heavy over subscription and few allotment issued to applicants requesting for large volume.

In the Banking sub-sector we had the likes of Skye Bank Plc, offering 2,231,599,145 Ordinary shares at N14 per share and First Inland Bank Plc, offering 4,000,000,000 Non-Cumulative Convertible shares at N9.50k per share, 5,000,000,000 Ordinary shares at N9.50k per share, as well as 968,863,000 Rights Issue at N8.50k per share. Within the Insurance sub-sector, we had Standard Alliance Insurance Plc with an offer for subscription of 4,750,000,000 ordinary shares at N3.95k per share and Custodian & Allied Insurance Plc offering 350,000,000 ordinary shares at N5.20k per share and 400,000,000 Rights issue at N5.20k per share. Daar Communications Plc and Daar Investment & Holding Company Plc came out for their Initial Public Offering of 1,829,478,000 and 960,000,000 Ordinary shares respectively at N5 per share each.

Allotment approved (January – March 2008)

A total of thirteen companies’ allotments were approved by the Securities and Exchange Commission (SEC) between January and March, 2008. These include – Access Bank Plc, Dangote Flour Mills Plc, Goldlink Insurance Plc, Nigerian Aviation Handling Company Plc, International Breweries Plc, First City Monument Bank Plc, Japaul Oil & Maritime Services Plc, Nigerian Bags Manufacturing Company Plc, Thomas Wyatt Nigeria Plc, DVCF Oil & Gas Plc, Afribank Nigeria Plc,

Fidelity Bank Plc and Chams Nigeria Plc.

We expect this double reward to positively impact on its price to take it to a new all time high. Our projection before the closure of its books in June is N85. However, our medium term projection is N60, ie after adjusting its price for the cash dividend and scrip issue.

Bank PHB

The bank has demonstrated strong ability to grow its turnover, and earnings at a rapid rate. Its latest quarterly result showed the banking growing its PAT by over 250%. If this trend is sustained, Bank PHB will certainly outperform its projections. Our price forecast place the stock at N36 for the medium term (6 to 9 months).

University Press plc

We expect the federal government UBE policy to impact greatly on University Press Plc. It is a growth stock that promises impressive returns to investors in the medium term. University Press had traded at a year high of N15.43 and our estimation for the medium term shows that the stock may hit N17.20 within the next 9 months. Investors may consider taking position in the stock for medium to long term investment decision.

Oceanic International Bank plc

Oceanic is in the first tier banks when measured by shareholders’ fund, total asset, total deposits among others. It has been trading at a relatively low price when compared with its peers in the first tier category. Going by its half year result released recently, Oceanic bank posted a PAT of over $20 after posting over $8 billion in its first quarter, showing a more than proportionate growth rate. By annualizing this, our estimate shows that Oceanic will post at least $44 billion by its FYE on September 30, 2008. The key problem behind its low price is as a result of. We strongly believe there is hidden value in the stock as the current market tempo provides unusual chance for astute investors. However, Oceanic Bank’s ability to enjo strong rally may be weakened by its large flood of shares in issue.

Our Medium term forecast gives us N39.50

Custodian & Allied Insurance Plc

Since its listing on the floor of the NSE in 2007, Custodian & Allied Insurance has maintained a strong resistance to generally market swings. Though, the market was bearish which made the stock relatively expensive, investors still maintained their confidence in the stock as it remained on strong demand. In its latest audited account for the year ended December 31, 2007, Custodian & Allied rewarded its shareholders with an impressive cash dividend of 14. Custodian & Allied has a niche for itself and with its visionary management, we expect the firm to outperform most of its older peers in the years ahead.

Our price forecast put it at N8.00 for the medium term.

Flour Mills Nigeria plc

Flour Mills has maintained a strong corporate brand and business model with diverse products portfolio which provide it’s a larger stream of income. Its current price is relatively low when we bring into account its current EPS of N4.68 and a PE multiple of 18.80xs. The stock is a good pick for value investors who are looking for medium to long term return.—BusinessDay

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