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Protest Proof Your Portfolio with These Stocks

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Nigeria’s Macroeconomic space has become filled with much uncertainty following the coronavirus Pandemic and protests over police brutality that have gripped the nation in recent weeks.

For an economy that was thought to begin to emerge from the downturn recorded in the second quarter (Q2) of 2020 as a result of the Pandemic, the protests are a negative for asset classes like stocks.

This is because the closing down of roads and bridges, private businesses and government establishments by the protesters could begin to negatively affect the third quarter GDP data if it continues for much longer.

MoneyCentral foresees a situation where equities will struggle to rally from these levels due to the protest uncertainty as well as Investors seeking of clarity regarding Q3 results due to be released from the end of October.

Our analysis shows that the following stocks provide some resilience against the protests and any negative economic surprise.

MTN Nigeria

The #EndSARS protests have largely been organized on social media and over the internet and this is no major surprise since the major protagonists are youths who are fairly comfortable with Technology.

MTN Nigeria is one of the biggest beneficiaries from the data boom in Nigeria. MTN Nigeria reported data revenues of N153.9 billion in the six months to June 2020, compared to N103.3 billion in the 2019 period.

For the 3 months’ period (April – June 2020), data revenues increased by 40.7 percent to N79.9 billion. Data revenues made up 24 percent of total revenues for MTN Nigeria in the first 6 months of 2020. This is up 5.7 percentage points (pps) from 18.22 percent in June 2019.

A word of caution though. MTN Nigeria shares look pricey at these levels. The stock is up 16.40 percent in the past year to close trading at N140 per share on Friday October 17.

A market capitalization of N2.8 trillion means MTN Nigeria is the largest listed company in the country by far. MTN Nigeria currently sports a dividend yield of 4.99 percent, according to Bloomberg data, which we believe is not too attractive compared to other large cap names in some other sectors.

The bottom-line is MTNN is a defensive stock at this time and not really a growth play until the Nigeria economy improves. In order words you can park your cash in the stock or buy the commercial paper which yields a little higher compared to the dividend yield for the time being.

Guaranty Trust Bank

Guaranty Trust Bank or GTB is one of the best in class modern banks in Nigeria that is full of innovation. It is also pretty quite popular with the demographics that are currently engaged in the protests.

GTB is the largest Nigerian Bank by market capitalization. The bank recently announced plans to transform into a holding company structure which is expected to drive its future growth plans.

The bank has the lowest cost structure among Nigerian Banks (measured by the cost-to-income ratio) and this is because it has embraced technology and serving its customers through alternative channels such as ATMs, online banking and Telephone Banking.

Guaranty Trust Bank reported profit after tax of N94.2 billion in the half year (H1) period to June 2020, down from N99.1 billion in H1, 2019.

Shares of the bank have rallied 32 percent in the past year meaning investors may be buying close to the top and could wait for it to come in a bit lower before pulling the trigger. GTB sports a juicy dividend yield of 9.23 percent and the stock closed trading at N30.35 per share on Friday.

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