The FUGAZ banks—First Bank, UBA, GTCO, Access HoldCo, and Zenith Bank—are drawing positive attention from analysts. The NGX compendium of broker stock recommendations for the week of August 27th-30th, 2024, shows that Bancorp Securities, Afrinvest, and Meristem have given notable ratings to these banks.
Analysts provide valuable insights through stock recommendations, categorizing them into:
- BUY: Analysts anticipate significant stock appreciation, recommending purchase due to strong growth potential and a positive outlook.
- HOLD: Suggests keeping current holdings with expectations of stability or modest returns.
- SELL: Indicates potential decline in stock value, advising divestment to avoid losses.
- ACCUMULATE: Advises gradually increasing holdings, reflecting confidence in long-term growth despite modest immediate expectations.
These ratings consider factors like share price movement, intrinsic value, earnings outlook, overall sector trends, dividend income, and other relevant metrics.
In 2023, FUGAZ stocks achieved an impressive average year-to-date (YtD) gain of 133%, starting the year with a 22% Q1 YtD gain. However, in Q2, the stocks experienced an average decline of 22% YtD. As of August 28, 2024, the stocks have partially recovered, showing a reduced YtD decline of 4.3%, indicating a bearish trend.
However, examining the dividend yield provides a different perspective. The banks offered an average dividend yield of 8.5%, which impacted the total return, bringing it to 4.2% YtD. The average trailing-twelve-month price-to-earnings (P/E) ratio stood at 1.3x. These metrics likely influenced the analysts’ ratings, with the high dividend yield making the stocks attractive to income-focused investors and the low P/E ratio suggesting potential undervaluation.
FBNH and UBA: Strong “BUY” Recommendations
FBNH received a consensus “BUY” from all three brokerage houses. Despite a P/E ratio of 1.68x, higher than the group’s average of 1.31x, analysts are confident in its earnings growth potential. Even with a relatively low dividend yield of 1.78%, the bank’s valuation is seen as having upside potential.
UBA, with a trailing twelve-month (TTM) P/E ratio of 1.13x, is valued attractively compared to the FUGAZ average. Offering the highest dividend yield at 12.44%, UBA’s total return is positive at 0.6%, despite a YtD share price decline of 12.28%. These factors likely contributed to the “BUY” recommendations, reflecting UBA’s growth and income potential.
AccessCorp: A Balanced View with Strong Upside Potential
Access Holdings (AccessCorp) received two “BUY” recommendations and one “HOLD” recommendation, indicating a generally positive outlook with some caution. Its TTM P/E ratio of 0.97x is the lowest among the FUGAZ banks, making it appealing to value-oriented investors. With a high dividend yield of 11.1% and a YtD share price decline of 17.9%, analysts have set a 12-month price target of N30.33, suggesting over 60% upside potential.
Zenith Bank: A Steady Performer with Balanced Recommendations
Zenith Bank received one “BUY,” one “HOLD,” and one “ACCUMULATE” recommendation. Trading at a P/E ratio of 1.39x and offering a dividend yield of 10.50%, Zenith Bank is an attractive option for income-focused investors. With only a 0.65% YtD decline and a total YtD return of 9.7%, the bank’s resilience supports positive recommendations, suggesting potential for further gains.
GTCO: Leading in Returns but with a Cautious Outlook
GTCO garnered one “BUY” and two “HOLD” recommendations. Analysts have set a price target of N56.83, indicating a potential upside of 24.08%. Leading with a 13% YtD return and a total return of 20% YtD, GTCO’s moderate P/E ratio of 1.38x and lower stock beta of 0.84 make it a stable investment. The combination of strong returns and lower volatility aligns with “HOLD” recommendations, reflecting a stable growth outlook rather than aggressive gains.
Overall, each bank in the FUGAZ group offers unique strengths, catering to various investor preferences. Despite recent market volatility, the positive ratings reflect their promising potential. Investors should keep in mind that these ratings are subject to change as market conditions and company developments evolve.
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