Economy

Analysis of Dangote Sugar 2016 Performance

Published

8 years ago

11/04/2017

Modupe Gbadeyanka

**Posts Positive Performance Despite Input Costs Pressures

By Modupe Gbadeyanka

Dangote Sugar Refinery Plc delivered a remarkable financial performance in spite of elevated input cost within the financial year, as top line recorded a solid growth of 68 percent at N169.7 billion (FY 2015: N101.1 billion) and bottom line grew by 29 percent to N14.4 billion (FY 2015: N11.1 billion).

After a review of the company’s performance and based on our expectations, we project a fair value of N8.23 for Dangote Sugar and we assign a BUY rating on the stock.

The current market price of N6.00 implies a 27 percent discount to our fair value estimate of N8.23. DSR currently trades at a forward P/E and EV/EBITDA multiple of 4.82x and 4.97x, respectively.

FY’16 Performance Highlights:

Revenue grew markedly by 68% to N169.7bn (FY 2015: N101.1bn) on the back of major price increases within the year, while volume growth remained muted.

The average selling price in the year increased by 69% to N214.41/kg (N126.82/kg: FY’15), while sales volume was flat at 778,518mt (FY 2015: 778,000mt).

The major price hikes within the year were necessitated by the sharp rise in input costs as cost of sales increased by 82% to N146.7bn (FY 2015: N80.6bn), driven by a combination of increase in the international price of raw sugar, depreciation of the domestic currency, and higher energy costs.
The international price of raw sugar rose by 19% to an average of USD410.6 in 2016 (USD345.3 in FY 2015) while the domestic currency depreciated by 53% to further impact the cost of imported raw sugar. Also, gas supply interruptions led to the usage of more expensive low pour fuel oil (LPFO) and this aggravated energy costs.
DSR was, however, unable to fully pass the higher input costs to consumers through the several increases in selling price within the year as gross profit margin declined to 14% (FY 2015: 20%) and gross profit increased marginally by 12% to N23.0bn (FY 2015: N20.5bn).
Profit before tax grew by 21% to N19.6bn (FY 2015: N16.2bn) as fair value gains on biological assets of N2.5bn (FY 2015: N1.2bn) recorded in the year also supported bottom line. Profit after tax rose by 29% to N14.4bn (FY 2015: N11.1bn).

Our view

We expect revenue growth in FY 2017 to be driven primarily by volume. We believe the second phase of the crop season which kicked off in November ’16 from DSL’s backward integration drive will support more increases in production volume in H1 ’17. We expect volume sales to be driven by increase in market share as foreign exchange scarcity and higher imported sugar prices continue to subdue competition.

Ultimately, we believe lower international sugar prices, relative “stability” in the FX market and improved gas supply should ease input costs pressures and support profitability margins in FY 2017.

Valuation and rating

In estimating the fair value of DSR Plc, we adopted a combination of DCF and relative valuation methodologies. Our initial year cost of equity estimate of 19% was computed using a 10-yr risk-free rate of 15.80%, beta of 0.53 (relative to the NSE ASI) and an equity risk premium of 5.69%. We arrived at a fair value estimate of N8.23 per share.

Our fair value estimate implies a justified forward P/E multiple of 6.61x and EV/EBITDA multiple of 6.00x.
The current market price of N6.00 is at a 27% discount to our fair value estimate; hence, we rate the company’s stock a BUY.

Downside Risks to Valuation

The downside risks to our fair value estimate include:

Gas supply disruptions and increase in energy prices;
Further spike in international price of raw sugar;

• Devaluation of the domestic currency and the impact on the international price of raw sugar.

http://www.wstc.com.ng/uploads/reports/Earnings%20Update%20Dangote%20Sugar%20Refinery%20Plc.pdf

Economy

Debt Servicing Gulps N13.12trn in 2024 Versus N12.3trn Allocated in Budget

Published

5 hours ago

07/04/2025

Aduragbemi Omiyale

By Aduragbemi Omiyale

Data from the Debt Management Office (DMO) showed that the Nigerian government used about N13.12 trillion to service the various debts in 2024.

Business Post reports that this was 68 per cent higher than the N7.8 trillion paid by Nigeria to pay interests on debts in 2023 and higher than the N12.3 trillion approved by the National Assembly for last in the 2024 Appropriation Act.

Over the weekend, the DMO revealed that the total debt of the country as of December 31, 2024, stood at N144.67 trillion versus N97.34 trillion a year earlier.

This comprised an external debt of N70.29 trillion and a domestic debt N74.38 trillion.

The agency stated that the significant increase in the debt service was due higher interest rates and increased domestic borrowing as well as rising global interest rates and the depreciation of the Naira, which has made dollar-denominated debt more expensive to service.

About N5.97 trillion was used to funds borrowed by the government from domestic investors, higher than the N5.23 trillion used for the same purpose in 2023 by 14.15 per cent, while N7.15 trillion was used for paying interest on foreign loans, higher than the N2.57 trillion in 2023 by 167 per cent.

Analysis showed that about N4.69 trillion was paid to local investors for giving the federal government money to fund the 2024 budget deficit from the sale of FGN bonds at the local capital market versus the N3.66 trillion recorded a year earlier.

Following the FGN bonds was treasury bills, which recorded the use of N747.15 billion for the payment of interest to investors compared with N326.12 billion in 2023.

Debt servicing for FGN Sukuk gulped N158.43 billion last year, the sum of N6.38 billion was used to pay interest to investors who subscribed to the monthly FGN savings bonds, and N2.18 billion was for FGN green bonds, with N265.86 billion for promissory note principal repayments.

In the 2025 budget, the federal government has allocated about N16 trillion for debt servicing.

Economy

NASD OTC Exchange Market Cap Drops 0.44% in Week 14

Published

8 hours ago

07/04/2025

Adedapo Adesanya

By Adedapo Adesanya

The market capitalisation of the NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.44 per cent or N3.87 billion decline to close at N1.911 trillion in the 14th trading week 14 of 2025 compared with the preceding week’s N1.915 trillion.

The drop was impacted by a markdown in the price of Capital Bancorp Plc for the company’s proposed interim dividend of 10 Kobo per share.

During the three-day trading week, the Unlisted Security Index (NSI) went down by 0.20 per cent or 6.71 points to 3,309.46 points from the 3,316.17 points recorded in Week 13.

The share price of Food Concepts Plc tumbled by 10 per cent last week to N1.17 per unit from N1.30 per unit, Geo-Fluids Plc slipped by 8.2 per cent to N2.48 per share from N2.70 per share, Capital Bancorp Plc slid by 4.7 per cent to N2.04 per unit from N2.14 per unit, and Afriland Properties Plc lost 2.6 per cent to end at N18.42 per share versus the preceding week’s N18.92 per share.

On the flip side, IPWA Plc gained 10 per cent to close at 55 Kobo per unit compared with the previous week’s 50 Kobo per unit, Lagos Building Infrastructure Company (LBIC) Plc went up by 9.9 per cent to N2.63 per share from N2.40 per share, First Trust Microfinance Bank Plc appreciated by 3.6 per cent to 58 Kobo per unit from 56 Kobo per unit, Industrial and General Insurance (IGI) Plc rose by 2.9 per cent to 36 Kobo per share from 35 Kobo per share, and FrieslandCampina Wamco Nigeria jumped by 0.2 per cent to N36.80 per unit from N36.73 per unit.

In the week, investors executed 82 deals in 14 different stocks as there was only a short trading week due to the Ramadan holidays.

The trading volume in the week increased by 262.8 per cent to 10.8 million units from 2.98 million units, but the value of transactions decreased by 76.1 per cent to N16.3 million from N68.2 million.

The most active stock by value last week was FrieslandCampina Wamco Nigeria Plc with N6.1 million, followed by IPWA Plc with N4.9 million, 11 Plc recorded N1.4 million, Air Liquide Plc posted N1.3 million, and Nipco Plc achieved N1.0 million.

But the most active stock by volume was IPWA Plc with 8.8 million units, IGI Plc transacted 1.1 million units, Food Concepts Plc recorded 0.334 million, FrieslandCampina Wamco Nigeria Plc traded 0.164 million units, and Air Liquide Plc exchanged 0.159 million units.

Economy

NGX Delists Med-View Airline, Capital Oil, Goldlink Insurance

Published

11 hours ago

07/04/2025

Dipo Olowookere

By Dipo Olowookere

The shares of Med-View Airline Plc, Capital Oil Plc, and Goldlink Insurance Plc have been delisted from the trading platform of the Nigerian Exchange (NGX) Limited.

This action followed the inability of the companies to meet the standards of the NGX for trading its securities.

In a notice, Customs Street delisted the equities of the publicly-quoted firms from Thursday, April 3, 2025, “on the grounds that they are operating below the listing standards of NGX, and their securities are no longer considered suitable for continued listing and trading in the market.”

It was stated that the removal of the three organisations was in compliance with the provisions of Clause 14 of the Amended Form of General Undertaking, for listing on Nigerian Exchange Limited General Undertaking.

This clause states that, “The exchange reserves the right to, at its sole and absolute discretion, suspend trading in any listed securities of the issuer, delist such securities, or remove the name of the issuer from the daily official list of the exchange with or without prior notice to the issuer, upon failure of the issuer to comply with any one or more of the provisions of this General Undertaking, or when in its sole discretion, The exchange determines that such suspension of trading or delisting is in the public interest, or otherwise warranted.”

Business Post reports that the last share price of Capital Oil on the Nigerian Exchange before its exit was 20 Kobo, Goldlink Insurance was also 20 Kobo, while Med-View Airline was N1.62.