Emeka Ucheaga Advisory

Dear Speculators, Access b ank has been my favourite stock since 2016, not because it's the best bank in Nigeria but because of how low the market undervalued the company. I've been talking about it for a year, now I'm writing about it. When big macro events like the '16 recession starts to cloud people's judgement, that's the best time to be a bargain hunter in the stock market. With about 3.5 trillion in assets and just over 3 trillion in total liabilities, Access bank is one of the largest banks in Nigeria. Book value of the company exceeds N467 billion while its current market value as at 2nd June, 2017 was N258 billion. Thus, the company is selling at a discount to book value of almost 45 percent! With pretax earnings doubling in just three years between 2013 and 2016 from 45 billion to 90 billion while earnings per share increased from 114k to 221k, it is mind boggling to imagine why the company is still trading at a price-earnings rati...

Dear Speculators, One thing for sure this week is that the monetary policy committee will not be short of hot topics to discuss during the upcoming meeting. From big global events in developed markets like the surge in the euro since Macron's victory in France to political uncertainty in Britain as the parliamentary elections draws closer and finally to Trump's row with the intelligence community that is weakening the dollar. Some more interesting topics like the possibility of a second impeachment of a Brazilian President in less than two years and military unrest in Ivory Coast that is driving up cocoa prices will also be on the table. Troubling news closer to home is the current crude oil price spending more time below $50 than above it as OPEC tries it's best to manage the oil glut. Still none of these issues rocks the monetary policy boat as much as the proposed 2017 budget of 7.44 trillion Naira currently on the President's desk. Why? The government pl...

Dear Speculators, The value of Naira has changed, the price of crude oil has appreciated significantly from January last year but nothing really has changed in the way Nigerian government carelessly plans and budget for the year ahead.  A budget is too important to be built on a shaky foundation. The 2017 budget is far too important considering the current economic recession in Nigeria. Keynes strategy of an expansive fiscal policy during economic slowdowns seems to be the country's favoured approach to pulling the economy out of recession. It's a goldilocks strategy considering it pushes Nigeria further into debt at a time when the cost of borrowing in the country is too high but the benefit of increased spending in the country is too important to ignore. Budget estimates for 2017 will see Nigeria spending beyond N 7.4 trillion, a 21 percent increase to last year record spending which was still unable to prevent the country from entering a recession. Crud...

Dear Speculators, It's a happy New year for Nigerian banks. After getting hammered for most of 2015 and early 2016, the NSE banking index is now up 22.42 percent year-to-date and up 29.62 percent in the past one year. Why the renewed interest in banks? How about increasing supply of foreign currencies to banks, higher than usual interest rate, higher earnings expectation following the economic recession but most importantly, grossly undervalued bank stocks .  Currently most bank stocks are selling at a huge discount to book value even with the rapid stock price growth in the past year. The fall in the stock price of the banks was technically right reflecting the change in the economic fortunes of the country but fundamentally wrong in how low bearish investors were willing to sell these stocks. At least now that investors are realising the value opportunity in banks, there is hope that in the not too distant future bank stocks will be trading closer...

Dear Speculators, The Nigerian stock market has moved steadily in one direction since July, 2014 and this direction is not up! The downward spiral in the market is now only a few months away from clocking three years, yet when you stretch the time horizon backwards, things haven’t been rosy either. The stock market All Share Index currently sits at the same level it was in May, 2004, that is now 13 years ago! In English, that is over a decade of zero growth in the broad market. Another similarity between 2004 and today is that the Nigerian ec onomy was in a recession in 2004 and is currently experiencing a recession in 2017 that started in 2016 . Interestingly , the All Share I ndex is currently less than half its level in March, 2008. Whereas most W estern stock markets have already recovered losses sustained during the global financial market meltdown in 2008. In dollar terms, the market is down over 60% since 2004. Not to say that stock market investing is a bad...