Ask Shade About Trusts: My Uncle Is Wrongfully Occupying the Land Our Grandfather Left Us

Ask Shade About Trusts: My Uncle Is Wrongfully Occupying the Land Our Grandfather Left Us

Hello Shade,

Please help me. My grandfather left my brother and I property in our home town. Although we were young when his Will was read, my grandmother lived much longer, and she took us to see the property. Now that we are old enough to use the property, we discovered one of my uncles has since occupied it. All attempts by my dad and other uncles to reason with him have been futile. Since there was a Will, there must be something we can do. How can we reclaim the property? My brother and I intend to start a farm there.

Bode, Ibadan

**
Dear Bode,
You are quite fortunate to have had a grandfather who cared for you enough to leave you something substantial. And your desire to invest in agriculture is also very admirable. Consider this situation a little hurdle on your way to achieving your dreams.

According to your story, your grandfather had written a Will leaving you and your brother his property. Whenever an individual writes a Will, one of the most important questions one must ask is, “who would be responsible and trustworthy enough to carry out my wishes when I pass?”. The individuals appointed to carry out these wishes are called the “Executors” to the Will.

Once a person dies and his Will has been read, the Executors must file for a probate grant at the probate court. Probate refers to the legal process of validating a Will. Once the grant is received, this unlocks the assets and distribution can commence. Because the executors have several responsibilities and can be held personally responsible if they are not properly carried out, it is important to carefully consider appointing executors who are trustworthy and capable of carrying out the sometimes-complicated processes.

Surely, your grandfather appointed executors to his Will. Some questions may likely arise:
1. Are the executors still living?
2. Did they carry out and successfully complete the probate process?
If the answers to the above questions are positive, the first step to reclaiming your rightful property would be to urge the executors to effectively discharge their responsibilities to your grandfather by executing a vesting assent, a document in which the transfer of title to you and your brother would be effected and documented. You may then proceed to register the vesting assent at the land’s registry in the State where the property is located as proof of your title to the land. Once you hold title, you may subsequently evict your uncle from the property by a suit at the court of law.

I would however, counsel that prior to effecting an eviction, please try to use all non-formal means possible for reaching an amicable resolution for your uncle to vacate the property. This may ensure that relationships amongst your family members remains warm and cordial.

My best wishes to you and your brother as you start your farm.

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Ask Shade about Trusts: My Parents Left Me Too Much to Handle

Ask Shade about Trusts: My Parents Left Me Too Much to Handle

Hello Shade,
My parents left me a huge inheritance when they passed away last year. I am just 22 and I don’t think I have enough experience and know-how to manage that kind of money yet. I want to take a few years to further my education and pursue my passion. How can I secure my inheritance while I’m away?
Bola, Lagos
**
Hello Bola,
I commiserate with you on the passing away of your parents. Your ability to pick yourself up and address issues from a rational perspective despite your loss is commendable, as is your desire to further your education regardless of your buoyant financial status.

While it is great that you have chosen to pursue a future of your own, it is important that you appreciate your parents’ sacrifice and kind gesture in leaving you an inheritance. This gesture confers a huge responsibility on you, bordering on the preservation, judicious use and growth of the assets that now belong to you.

For instance, if your inheritance includes functional organisations or property that require maintenance, the responsibility now rests squarely on your shoulders. You would have to keep an eye on operations, ensure the business continues to run, salaries are paid as and when due, maintenance policies are put in place among many other necessities. If your inheritance is liquid as well, the wise thing to do is to ensure it keeps growing via profitable investments and proper handling.

However, it will be extremely difficult, if not impossible to do all of these while you are away studying and charting your own path in life. In order to guarantee the preservation and growth of your inheritance without interfering with your plans and activities, you should seriously consider setting up a Trust.

A Trust can be defined as any arrangement whereby assets (such as your inheritance) are transferred by you as a Settlor (creator of the Trust) into a Trust with the intention that the Trust is to be administered by the Trustee for your benefit and the benefit of any other persons or entities that you so choose.

A corporate trustee (such as ARM Trustees) would have the capacity and experience to manage your inherited assets whilst you focus on your education and pursue your passion. A part of the income on those assets or a portion thereof would be transferred to you periodically until you complete your education or until any stated future time. The Trustee would provide you with periodic reports on the management of your assets and may also take instructions on the management of the assets from you, where necessary.

You may choose to make the Trust a Revocable Trust so that when you believe that you are ready to fully manage your inheritance, the Trust may be terminated and the Assets would be transferred back to you.

Should you require further information and guidance about how to set up a Trust or Investment opportunities to consider for the preservation of your assets, please write to me. I will be glad to help.

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Ask Shade About Trusts: Our Son Doesn’t Want to Continue the Family Business

Ask Shade About Trusts: Our Son Doesn’t Want to Continue the Family Business

Hello Shade,
I need your help. My wife and I have worked hard building our business with hopes that our son would one day join the business and eventually own it when we are retired. We sent him to a business school abroad only for him to return with a photography degree. He is our only child but he is not interested in the business we have built and all our plans for him. If he insists on not joining the business, how can we keep the business alive after we are retired or even gone?
Kenneth, Abuja
**
Hello Kenneth,

I empathise with you regarding the actions of your son. Many parents are increasingly surprised that their children would rather pursue alternative careers other than the ones they desired for them. In many cases however, such children have gone ahead to excel in their chosen careers. Although as parents, we hope that our children follow our directives, we sometimes have to lend our support if they choose to pursue their dreams instead, hoping for the best. While it is yet possible that your son eventually returns to the family business, the best approach to take at this juncture is one that favours both the business and your son.

To ensure that your business survives and continues to run into the foreseeable future, I would recommend that you create a Trust and transfer your shares or other ownership interests in your business to the Trust. The Trustee as owners of the business would run the business by appointing and overseeing the management of your business in the event that you and your wife are retired, become infirm or pass away. You may retain control of your business through the Trustee while you are alive. The income generated by the business would be held by the Trust on your behalf and for the benefit of anyone you may nominate as beneficiary.

You may name your son as a beneficiary and specify that the Trustee may provide for the welfare of your son (or grandchildren) in the Trust. In order to make your son more responsible, you may include “Spendthrift” provisions in the Trust. A Spendthrift provision may state, for example that unless your son is in formal employment, reaches a certain age or has an alternative and verifiable legal source of income, he would not take benefit of the funds or assets in the Trust. Should your son eventually choose to honour your wishes and return to the business, you may make provision for him to do so as well.

I believe this may be in the interest of your child as well as preserve the business. In the words of Warren Buffet, one should leave children with ”enough money so that they would feel they could do anything, but not so much that they could do nothing.” You may also designate alternative persons or entities such as charitable organisations to benefit from the Trust in the event that the assets do not pass on to your son or grandchildren.

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Ask Shade About Trusts: He Doesn’t Know It’s Not ‘Our’ House

Ask Shade About Trusts: He Doesn’t Know It’s Not ‘Our’ House

I have a house, me and my husband are living in currently. It was given to me by my father and I managed to convince my husband that we should live here in town rather than a far place from both our work. I lied to my husband that it was a gift from my dad to the both of us, but it’s just my name there. I did this because he was refusing to stay in the house. He wanted us to rent a house far away and there was no point wasting money on rent and petrol (for travel to and from work, plus it would be so stressful going to and from work as we only had one car at the time) Should I put the house in a trust for my future kids?’ – StaciB

**

Hi StaciB,

You can and should set up a Trust transferring the ownership of the house to the Trust for the specific purpose of later transferring the house to your future children.

A Trust can be defined as any arrangement whereby assets (such as your house) are transferred by a Settlor (creator of the Trust) into a Trust with the intention that the Trust is to be administered by the Trustee for the benefit of others (which in this case would likely comprise you as Settlor in your lifetime, and your children as beneficiaries after your demise).

In creating a Trust, it is imperative that the proposed Trust assets are legally transferred to the Trustee and effectively such assets are thereafter considered trust assets. The trust assets do not form part of the trustee’s own proprietary assets. The Trust Creation document which is known as the Trust Deed would have specified your objectives of transferring the house to your children in future.

The advantage of having a Trust is that you would no longer be reflected as the legal owner of the property. The confidentiality of a Trust also means that it is unlikely that any other person would know about the Trust or its purpose. The Trustee which would hold the house for the benefit of your children is duty bound to transfer the house to your children in accordance with your instructions. The Trust may also be structured to be quite flexible such that you may also be able to transfer or sell the house through the Trust if you decide not to proceed with the transfer to your future children. The drawback of a Trust is that there might be expenses relating to the initial transfer of title to the Trustee and the Trustee would also earn recurrent fees for holding or managing the Assets.

The specific type of Trust that would suit your objective is a Single Asset Trust. The Trust Creation document which is known as the Trust Deed would have specified your objectives of transferring the house to your children in future. The Trust Deed may also state if the Trust is revocable (which means you may terminate the Trust) or not and also specify the powers of the Trustee in relation to the house.

To ‘protect’ your marriage, you can choose to carry your husband along in the Trust process. Perhaps discuss the advantages of securing the house for your children with him and get his buy-in on your decision to set up a Trust or even jointly set up the Trust. That way, he would not wrongly assume that he shares in the ownership of the house and your marriage will be secure in the knowledge that the house ultimately belongs to your children.

In the process of setting up your Trust, you will be further advised by Trust Experts with respect to costs and process for transferring the property to the Trust.

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Stock Recommendation for the Week , May 06

Stock Recommendation for the Week , May 06

The Nigerian Bourse closed negative last week with the NSE ASI slipping 1.78% WoW to close at 29,212.00 points, while market capitalization lost N198 billion. The bearish sentiment was spurred by losses across the Cement (-3.67%), Banking (-2.00%), Personal Care (-1.20%) and Food (-1.18%) sectors. Dissecting the sector performance reveals selloff across various stocks such as DANGCEM: -3.69%, GTBANK: -2.19%, ZENITH: -1.64%, PZ: -5.5%, NESTLE: -1.94%, and DANGSUGAR: -1.4%.

• United Bank for Africa Plc – STRONG BUY (FVE: N13.04): After a very weak Q4 performance, UBA posted a strong recovery in Q1 19 with EPS expanding 69% QoQ to N0.84 on the back of a sturdy growth in NIR and interest income. Over 2019, we maintain our view and believe UBA growth story across Africa remain compelling. Particularly, we expect meaningful growth in earnings over 2019 on the back of strong retail deposit growth, increase in loan book, expansion in trading book and net fee income, and healthier asset quality. Consequently, we see FY 19E earnings growth of 15% YoY to N90.2 billion. Overall, we maintain our STRONG BUY recommendation with a revised FVE of N13.04.

• Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): GTB Q1 19 revealed a double-digit expansion in EPS (+16% QoQ to N1.68) on the back of lower funding cost as well as strong NIR. Our case for GUARANTY remains the resilience in NIR, improved cost management, still strong loan book with a moderate expansion in credit loss provision to 0.5%. Reflecting our expectation of increased transfer of salary accounts to GUARANTY following the Quick Credit Scheme, we model 12% YoY growth in deposits over 2019. However, reflecting the sticky funding cost, we see a slight decline in net interest margin by 7bps YoY. Overall, we see a slower growth in EPS by 4% YoY to N6.53.

• Fidelity Bank Plc – BUY (FVE: N2.92): Fidelity bank kicked off the year on a good note with the bank posting EPS growth of 17.2% QoQ to N0.21 largely due to support from a higher interest income and lower OPEX. Despite an expected decline in NIR for the bank, we expect Fidelity to record a modest growth in earnings over 2019 on account of our expectation of higher loan growth as well as moderation in funding cost. We forecast a 11% increase in EPS (N0.88) over 2019 and thus maintain our BUY rating with an FVE of N2.92.

 Guinness Nigeria Plc – STRONG BUY (FVE: N77.31). We had earlier highlighted that Guinness would have to contend with slower beer volumes due to intense industry competition. QI 19 numbers released last week backed up our expectation. Particularly, revenue was dragged lower due to lower volumes over the same period. Despite stiff competition across the brewery sector, we expect the wider portfolio mix of Guinness and gains from the Spirit segment to support a slower moderation in margins over 2019. Also, following lower finance cost after recent deleveraging of its FCY debt using proceeds from rights issue, we see improved profitability for the company.

 Unilever Nigeria Plc – OVERWEIGHT (FVE: N35.82): Unilever’s earnings for the first quarter of 2019 was rather disappointing, following decline in sales and pressure from input cost. While we envisaged the poor sales outing in the home and personal care segment, the material decline in the food segment (-24% YoY) was rather surprising. Given the tightened business landscape, we cut our 2019 sales expectation and made upward adjustment to our cost estimate to reflect the pressures over Q1 19. Overall, we forecast PAT of N8.5 billion (-7.3% YoY) over 2019 (previously: N11.6 billion) with related EPS of N1.47 (previous: N2.01).

Kindly, visit ARM Research Portal for full stock reports.

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Ask Shade About Trusts: Does My Husband Have to Know?

Ask Shade About Trusts: Does My Husband Have to Know?

Hi Shade,
My name is Gloria, I got married 5 years ago at 35. Before the wedding, I already built a house at Mowe, a block of 6 flats, and I have other undeveloped property that I didn’t tell my husband about (so as not to intimidate or repel him). My plan is to gift the property to my children as a start-up fund the moment they are done with university. Do I have to declare these assets to my husband? If anything happens to me along the way, how can I ensure my children get these assets? The properties were bought in my name.
****

Hi Gloria,
It is quite commendable that you were resourceful enough to invest in assets as a young woman; even more commendable that you are planning towards a secure future for your children.

One of the best ways to secure your property is to set up a Trust, naming your children as beneficiaries. A Trust is a legal relationship amongst 3 parties – the Settlor, the Trustee and the Beneficiaries. The Settlor being the original creator of the Trust, the Trustee the ‘holder’ of the assets transferred to the Trust and the Beneficiary or Beneficiaries the party or parties for whose benefit the Trust has been established. Trusts are very confidential in nature and as such make it possible for you to achieve your objectives privately.

You can set up a Trust and transfer these assets to the Trust. The assets will be held in the name of your Trust/Trustee and in due course, income generated from these assets can be given to your children to start up their own businesses. Alternatively, at a designated time, your Trust may sell such real estate asset and give proceeds to your children as seed investment for their businesses. You can guide your Trustees, even in absentia through a Letter of Wishes. Putting the assets in a trust today offers the protection you require for the assets because such assets will be legally independent of you.

As you are still young and active, I would recommend that you set up a Trust that still leaves the role of management of your assets and investment decisions to you.

To “protect” your marriage, you may choose to set up a joint Trust with your husband or name his as a beneficiary under the Trust with instructions on what exactly you wish to give to him and when. It is not necessary for beneficiaries to know about the Trust.

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Ask Shade About Trusts: My Mum Just Found Love Again! But How Do I Protect My Future?

Ask Shade About Trusts: My Mum Just Found Love Again! But How Do I Protect My Future?

By setting up a trust, your mother can ensure that the fashion line is passed on to you at her death, even though she retains full control while she is alive. She can name beneficiaries of the trust and include her new spouse so as to achieve some balance.

 

Hello Shade,

For five years since I returned from the UK after my Masters program, I’ve worked side by side with my mum to run her highly lucrative fashion line. As a single mum, my mother single-handedly worked hard to build her fashion empire, and with my additional effort, it is currently worth millions of naira. I share in her passion and have shown it through dedication and hard work, but now I’m worried. Mum recently found love again and wants to get married to a widower who has two sons. My mum is wealthier than this man, and the man’s sons are still totally dependent on him.

How do I ensure that this marriage won’t cost me the fashion empire, which by right should remain in my family as an inheritance?
– Jessica, Lagos

***

Dear Jessica,
I totally understand your apprehension regarding your mother’s fashion empire. Indeed, your concerns are genuine, as it could be very disappointing to lose out completely in a business you have contributed so much to. The reality is that most people fail to take the necessary steps that would ensure that their assets are protected and preserved for the benefit of their loved ones when there is a major change in their circumstances, i.e. marriage, divorce, separation, death or permanent disability.

In the case of your mother, it would be most constructive if she considers setting up a trust to manage the affairs of her business and ensure continuity of her fashion empire, for the benefit of her beneficiaries even after her demise. A trust is an arrangement that affords the settlor (the person who sets it up) to transfer its/his/her assets to a third party (the trustee) to hold for the benefit of a named person or group of persons called the beneficiary(ies).

By setting up a trust, your mother can ensure that the fashion line is passed on to you at her death, even though she retains full control while she is alive. She can name beneficiaries of the trust and include her new spouse so as to achieve some balance.

I would advise that you find a convenient time to have a conversation with your mother to confirm how she intends to sustain the business continually. This trust structure should gain her interest and allay any form of misconception about your intentions, since the discussion would be centered more about protecting her legacy than one of you trying to oust your soon to be step-father and step brothers from your mother’s estate if she predeceases them.

I wish you and your mum the best.

Cheers,
Shade

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Stock Recommendation for the Week , April 23

Stock Recommendation for the Week , April 23

After five consecutive weeks of losses, the market took a turn last week with the NSE ASI appreciating 2.52% WoW to close at 30,086.31 points, and the market capitalization gaining N197.5 billion. The bullish sentiment was spurred by gains across major sectors – Banking (+2.01%), Breweries (+5.53%), Cement (+1.52%), Personal care (+1.54%), and Food (+8.12%). Dissecting the sector performance reveals interest across bellwether stocks (ACCESS: +14.17%, GUARANTY: +1.61%, ZENITH: +2.20%, NB: +7.97%, DANGCEM: +1.61%, NESTLE: +8.97%, and DANGSUGA: +5.17%).

• United Bank for Africa Plc – STRONG BUY (FVE: N13.04): Despite sluggish performance over 2018, we believe UBA growth story across Africa remain compelling. Particularly, we expect meaningful growth in earnings over 2019 on the back of strong retail deposit growth, increase in loan book, expansion in trading book and net fee income, and healthier asset quality. Consequently, we see FY 19E earnings growth of 15% YoY to N90.2 billion (lower than prior estimate of N102.5 billion), with FY 20F and FY 21F growth forecasts of 6% and 5% respectively. Overall, we maintain our STRONG BUY recommendation with a revised FVE of N13.04 (previously: N14.10).

• Zenith Bank Plc – STRONG BUY (FVE: N38.17): Following a mark down in its stock price, Zenith offers a more attractive entry point. The stock trades at a FY 19E P/B of 0.9x, at a discount to GTB of 1.3x. Our FVE of N38.17 translates to a STRONG BUY rating based on current pricing. Strong valuation for Zenith is hinged on i) expansion in assets yield from increase in loan book which would more than outweigh funding cost to support moderate expansion in NIM ii) increase in NIR due to resilience in fee income and iii) improvement in asset quality with non-performing loan (NPL) ratio of 4.5% (FY 18: 5.0 %) and slower expansion in cost of risk (CoR) to 1.0%. At current price, expected dividend of N2.92 over FY 19E translates to a dividend yield of 14.3%.

• Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): Our case for GUARANTY remains the resilience in noninterest revenue, improved cost management with cost to income ratio expected to moderate 50bps YoY to 36%, still strong loan book with a moderate expansion in credit loss provision to 0.5%. Reflecting our expectation of increased transfer of salary accounts to GUARANTY following the Quick Credit Scheme, we model 12% YoY growth in deposits over 2019. However, reflecting the sticky funding cost, we see a slight decline in net interest margin by 7bps YoY. Overall, we see a slower growth in EPS by 4% YoY to N6.53.

 Guinness Nigeria Plc – STRONG BUY (FVE: N77.31). Despite stiff competition across the brewery sector, we expect the wider portfolio mix of Guinness and gains from the Spirit segment to support a slower moderation in margins. Also, following lower finance cost after recent deleveraging of its FCY debt using proceeds from rights issue, we see improved profitability for the company.

 Okomu Oil Palm Plc – STRONG BUY (FVE: N97.75): Over our forecast period, we anticipate volumes growth emanating from the harvest of fresh fruit bunches from its extension 2 plantation. Based on our expectation for volumes growth, accompanied by margin expansion, we raise our FVE to N97.75.

Kindly, visit ARM Research Portal for full stock reports.

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THE UNEXPECTED GIFT

THE UNEXPECTED GIFT

I had mixed feelings as I stared at my admission letter into the University sitting in my mail. On one hand, I was extremely happy but on the other, I was totally sad because father is no more and can’t celebrate this win with me. Aside that, there was no obvious means to pay the required fees if I accept the admission.

Three weeks ago while he was returning from an official trip, my father was involved in a fatal auto crash. Exactly two days after, the entire extended family gathered in our middle-class sitting room and debated on how his wealth would be distributed which they said is the tradition. Now according to what I knew of the custom, a man’s son inherits most of his earthly possessions and where he’s still underaged as it was in my case (I was still a few months shy of eighteen), his mother would manage the inheritance until he arrived the legal age of eighteen. The extended family conveniently forgot this detail and decided to do this as it pleased them.

My mother, who was still in shock watch, helplessly as they fought over his estate. When they were finally done with the vicious bickering and throat grabbing, they allotted the home we lived and an account that held only about fifty-thousand Naira to me, mother and my little sister.

In the evening I crept into mother’s bedroom to show her the mail containing my admission into the university. I could not hide it from her even though I wanted to spare her the heartache because I knew that she couldn’t afford my fees, especially with father’s burial looming and with the family’s insistence on an elaborate ceremony.

Mother was overjoyed and I watched her smile for the very first time since the disaster happened. I sat on her bed and watched as she did a few dance steps and my heart nearly broke in two. I  dreaded seeing the watery smile go back into a downpour of sorrowful tears.

Sensing my sadness she stopped dancing and watched me closely.

“Why do you look so sad instead of being happy at this good news,” she scolded me sternly.

“Mother, you know that we cannot afford this as the moment.”

Then it hit her. She then understood my mood. To my surprise, she began to cry and smile even more at the same time. I didn’t understand her but I stood to hug her.

“You are such a good boy, Kenneth. You do not need to worry too much about this though, your father had prepared for this day a long time ago.”

She drew away from the embrace and went into her bedside drawer to get a file. I stared at her curiously not understanding what she meant.

She motioned for me to sit beside her, handed the file to me and urged me to open it. I found that it contained ARM Life Education Plan. I still did not fully understand what it meant but mother explained it all to me.

Father got an insurance policy for me and my sister ten years ago with ARM Life and that definitely changed everything.

I hugged my mother tight and couldn’t stop my own tears as I silently thanked my late father for this unexpected gift. With this Education Plan our dreams do not have to die.

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Stock Recommendation for the Week , April 15

Stock Recommendation for the Week , April 15

ARM Research | Weekly Call

The Nigerian equities market extended its loss run last week, with the ASI shedding 0.19% to close at 29,560.47 points while market capitalization lost N21 billion. This performance was largely driven by bearish sentiments in the Breweries (-0.32%), Personal Care (-2.16%), Food (-0.21%) and Insurance (-0.39%) indices, offsetting the mild gains in Banking (+0.08%), Cement (+0.04%) and Oil and Gas (+0.70%) sector. Dissecting the sectoral performance revealed marked sell-offs in (GUINNESS: -3.92%, CCNN: -5.88%, PZ: -9.69%, GSK: -1.58%, UACN: -4.76%, CADBURY: -3.8%, DANGFLOUR: -1.75%, DANGSUGA: -1.44%, and MANSARD: -5.00%).

• United Bank for Africa Plc – STRONG BUY (FVE: N13.04): Despite sluggish performance over 2018, we believe UBA growth story across Africa remain compelling. Particularly, we expect meaningful growth in earnings over 2019 on the back of strong retail deposit growth, increase in loan book, expansion in trading book and net fee income, and healthier asset quality. Consequently, we see FY 19E earnings growth of 15% YoY to N90.2 billion (lower than prior estimate of N102.5 billion), with FY 20F and FY 21F growth forecasts of 6% and 5% respectively. Overall, we maintain our STRONG BUY recommendation with a revised FVE of N13.04 (previously: N14.10).

• Zenith Bank Plc – STRONG BUY (FVE: N38.17): Following a mark down in its stock price, Zenith offers a more attractive entry point. The stock trades at a FY 19E P/B of 0.9x, at a discount to GTB of 1.3x. Our FVE of N38.17 translates to a STRONG BUY rating based on current pricing. Strong valuation for Zenith is hinged on i) expansion in assets yield from increase in loan book which would more than outweigh funding cost to support moderate expansion in NIM ii) increase in NIR due to resilience in fee income and iii) improvement in asset quality with non-performing loan (NPL) ratio of 4.5% (FY 18: 5.0 %) and slower expansion in cost of risk (CoR) to 1.0%. At current price, expected dividend of N2.92 over FY 19E translates to a dividend yield of 14.3%.

• Guaranty Trust Bank Plc – STRONG BUY (FVE: N49.66): Our case for GUARANTY remains the resilience in noninterest revenue, improved cost management with cost to income ratio expected to moderate 50bps YoY to 36%, still strong loan book with a moderate expansion in credit loss provision to 0.5%. Reflecting our expectation of increased transfer of salary accounts to GUARANTY following the Quick Credit Scheme, we model 12% YoY growth in deposits over 2019. However, reflecting the sticky funding cost, we see a slight decline in net interest margin by 7bps YoY. Overall, we see a slower growth in EPS by 4% YoY to N6.53.

 Guinness Nigeria Plc – STRONG BUY (FVE: N77.31). Despite stiff competition across the brewery sector, we expect the wider portfolio mix of Guinness and gains from the Spirit segment to support a slower moderation in margins. Also, following lower finance cost after recent deleveraging of its FCY debt using proceeds from rights issue, we see improved profitability for the company.

 Okomu Oil Palm Plc – STRONG BUY (FVE: N97.75): Over our forecast period, we anticipate volumes growth emanating from the harvest of fresh fruit bunches from its extension 2 plantation. Based on our expectation for volumes growth, accompanied by margin expansion, we raise our FVE to N97.75.

Contact [email protected]

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