This Christmas, consider gifting your loved ones something that could grow in value over time, and a classic example of this is penny stocks.
In the Nigerian context, penny stocks describe shares that trade at relatively low prices, typically below N5 per share. The term is borrowed from the American capital markets, where “penny stocks” refers to shares of small-cap or micro-cap companies.
Often overlooked, penny stocks can offer unique opportunities for those who can take a risk in pursuit of high rewards. BusinessDay compiled a list of promising penny stocks listed on the NGX that have the potential to bring financial joy in the coming year.
AIICO Insurance
AIICO Insurance was trading at a share price of N1.24 as of December 12, representing a 55 percent year-to-date gain. The stock has a price-to-earnings (P/E) ratio of 3.65x, with Meristem Research projecting the target price for AIICO at N1.54. Afrinvest, Bancorp Securities, and Lead Capital also placed a ‘BUY’ recommendation on the stock.
AIICO’s net profit for the first nine months of 2024 reached ₦12.4 billion, reflecting a 110% year-on-year growth from ₦5.9 billion in the same period of 2023. The company is poised to increase its dividend payout from the 5 kobo per share distributed for FY 2023.
Veritas Kapital Assurance
After a 230% gain year-to-date, stockbroking analysts are advising to sell Veritas Kapital Assurance. However, with a P/E ratio of 2.98x, one of the lowest in the insurance sector, it remains a strong buy.
The company reported a net profit of ₦2.9 billion for the nine months ending September 30, 2024, reflecting a 117% year-on-year increase from ₦1.32 billion in the same period of 2023. With a net interest income of 15 percent and a Return on Equity of 16 percent, the company is on track to provide returns to its shareholders, additional benefits of VERITASKAP stocks.
JAIZ BANK
With a share price of N2.40, Jaiz Bank is the second cheapest banking stock available on the NGX. Analysts recommend a strong buy on JAIZBANK because it is still off the target price range. For Meristem, the target price is N2.88.
Jaiz Bank has emerged as one of the top-performing banking stocks in 2024, boasting a year-to-date return of 23.7%. However, the stock is currently 35% below its year-high price of ₦3.70. To meet its new capital requirements, the bank needs approximately ₦2 billion, a sum that can be raised without recourse to the capital market, hence it is not in a hurry to initiate any capital-raising efforts in the NGX.
International Energy Insurance
Now owned by Norrenberger, International Energy Insurance is a stock with huge potential in the NGX. Year-to-date, INTENEGINS has appreciated by 5.76 percent, one of the slowest returns by an insurance stock.
The stock’s underperformance can be attributed to the company’s recent struggles, which culminated in a change of management. Under the new leadership, IEI Plc is preparing to hold its first Annual General Meeting since 2020 and will soon release its audited financial statements for 2023, while awaiting approval for its 2024 financials. These steps by the new management may help shift investors’ attention and potentially revitalize confidence in the company.
Unity Bank
Ahead of its merger with Providus Bank, Unity Bank presents a strong long-term investment opportunity. Currently priced at ₦1.51, Unity Bank is the cheapest banking stock on the NGX. While the stock has declined by 6.79% in 2024, the upcoming merger with Providus Bank is expected to offset the bank’s losses, positioning the combined entity for future growth and potential value appreciation.
Champion Breweries
With a share price of N3.90, Champion Breweries presents a compelling investment opportunity. After ending FY 2023 as the only profitable brewer in Nigeria, the company is on track to maintain profitability in 2024, which signals strong financial resilience in a challenging industry. Although its share price has depreciated by 6.02% in 2024, this decline can be attributed to the bonus share issuance in H1 2024, which temporarily affected the stock price.
Given the company’s solid profitability and potential for growth, Champion Breweries’ stock could present significant upside for long-term investors looking for a stable performer in the brewing sector.
Other penny stocks that could present promising investment opportunities as 2024 draws to a close include NPF Microfinance Bank, priced at ₦1.50 per share, cable manufacturer Cutix Plc which trades at N2.30, and Livestock Feeds, which is trading at ₦3.15 per share.
