NEWSLETTER NO.

0021/2014- 18 JULY 2014

GOLDEN RULE: PROTECT YOUR SELF CONFIDENCE/COURAGE. SELL OFF STOCKS IF YOUR LOSS
IS UP TO 50%. IT WOULD TAKE 100% GAIN TO RECOVER FROM A 50% LOSS. THE PERCENTAGE
REQUIRED FROM LOSSES ABOVE 50 INCREASES GEOMETRICALLY (SEE THE GRAPH IN THE
NOTE SECTION BELOW). THERE ARE ALWAYS OPPORTUNITIES IN THE MARKET, FOR YOU TO
COME BACK ANOTHER TIME.

Dear Sirs,
MARKET SUMMARY FOR THE WEEK ENDED 18 JULY 2014
The market continues in a dull mode as it has been doing for the past 2 weeks. This is an
opportunity to take profit on some weak stocks, example is OANDO (if you have bought at a
lower price) which may fall to around NGN20 if the downward momentum for the stock
continues.
The all share index lost 0.14% for the week to close at 42,891.82. Major gainers for the week
were Mobil, Wema bank, NPF Microfinance Bank etc.
Results were release for; Nigerian Breweries, African Prudential Registrars, Courtville etc. The
details can be seen in the attached weekly report and the next paragraph.

REALEASED RESULTS
See the attached stock exchange report and the details below:












Source: Proshareng.com

SOME FUNDAMENTAL DATA
Today we are looking at the data for CCNN and Berger paints as they trade at a price range not
too far from each other.
PARAMETERS CCNN Berger Paints
PE Ratio 8.10 9.69
Net Margin 11.16 10.01
ROA 19.65 7.79
Interest
Coverage 14.10 1.94
Earnings Growth 18.96 4.85
PEG Ratio 42.77 215.34
Sales/Assets 1.05 0.84
Source: www.Capitalcube.com
From the above, CCNN is the clear winner. The price is about now is close to a resistant point
(no need to panic if there is a retracement immediately) which is likely to become a support for
the following reasons:
I. Earning for the current year is attractive
II. There is a proposed right issue still being planned and the Directors/Investment
advisers will ensure that stock price remains high
III. The average No of deals on the stock recently increase, thus making the stock very
liquid
IV. Recent rise of Ashaka will pave way for this stock to move higher







TECHNICAL CHART/QUARTERLY FINANCIAL FOR STOCK IN VIEW- CCNN

CCNN Chart from market.ft.com

IMPORTANT INVESTMENT LESSON- THE INMPORTANCE OF EARNINGS GROWTH
If you have been following my fundamental analysis table for some time now, you will observe
that the market is willing to pay a higher premium for companies with increasing earnings. Let
us look at the 2 example below: AP released the 2
nd
quarter 2013 result on _25 July 2103
(http://www.forteoilplc.com/f/news/2013%20Half%20year%20results.pdf) , at this date the
price of the stock was NGN42, subsequently the price jumped to NGN_115.42 within a period
of 4 months; same goes for Transcorp , the 2
nd
quarter report was released in September 2013
( http://thecitizenng.com/company-review/transcorp-heads-for-new-revenue-peak-profit-
rebounds/ ) at this date the price was NGN1.55, we saw the price jumped to NGN5.89
subsequently within 2months .
What are the criteria we are to look for to see which company has delivered good earnings:
1. Current quarter net profit should increase substantially compared with previous
quarter of last year. For this we can fix our benchmark at 40%
2. Earnings per share must be higher than previous year. This is a good criteria as it
enables us to eliminate those companies that got their earning increase from the
additional capital raised during the current result period. For earnings growth, we can
fix 30%. This looks high, but we are looking for above average organisations, therefore
our benchmark need to be high. For big organisations probably 20% may be okay for
the benchmark
3. Must have been profitable in the previous year. This will ensure that we do not invest
in a flash in the pan performance. It takes a long time to effectively turn a moribund
organisation around. This is the reason why a stock like Costain Plc, Pharma Deko Plc
and MTI Plc will not be an ideal investment for an individual.

Forte Oil Chart- From website markets.ft.com

Transcorp l Chart- From website markets.ft.com
If we are able to invest in a growing company at right time, we are likely to make substantial
profit from the investment. Looking at the above, in the past we have picked Conoil, Tanscorp
and I want to add CCNN Plc to my list.

STOCKS GOOD FOR PURCHASE
STOCK CURRENT
PRICE
BUY TIMING REASON TARGET PRICE STOP/EXIT
CCNN 11.84 Immediately Low Risk 18.45 NGN7.40
PZ 38.50 Immediately Low risk, Higher
Earnings
42, NGN52.83 NGN34

STOCKS GOOD FOR SELLING
STOCK/CURRENT
PRICE
CURRENT PRICE REASON
Costain Plc 1.26 Falling Prices
Air Service 2.23 Weak Fundamentals
Julius Berger 63 Falling Prices

Thanks.

Yusuf Kelani
Caution: Investing is a risky venture. This is just my opinion and I cannot be liable for
any loss suffered as a result of following this recommendation All data used are assumed
to be correct, but you may need to verify some of the figures independently.

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This newsletter will give you automatic buy/sell signals. Our analysis are improving all the time,
with a newsletter like this, you are likely to avoid significant loses that will make life miserable
or hunt you for a long time as experienced in the 2007 market meltdown.
Explanation of Terms:
Support: Price at which on can start thinking of buying, if price stays above the support level.
This is like saying get set to buy. It is a forecast buying Zone. If price is below support, this is a
likely selling point.
Resistance/Target Price: Price at which you should think of selling/taking some profit or
exercise caution in buying at this price. Resistance can easily become a support point once
price refuse to fall below this point. Example was Nestle at NGN1,000 per share. Initially, the
price seems high but for some months the price of the stock has not fallen below this price,
thus it this is like a support level.

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Newsletter-009-17-August-2013








Loss Recovery Graph