Economy

Okomu Oil: Compelling Growth Story Despite Weak Earnings

Published

7 years ago

15/04/2019

By Cordros Research

We update on OKOMUOIL following the 2018FY results and our recent discussion with management. After the unimpressive performance in 2018FY, we forecast EPS to grow by 2.3% in 2019 and 24.6% average over 2020-2021E, with a TP of N93.62/s (previously N91.57/s).

Our revised estimate is driven by both the resurgent price of CPO and the expected boost to volume from additional mature plantations coming on stream both in 2020 and 2021, which should offset persisting energy cost challenges.

CPO volume growth will be muted in 2019: We estimate that CPO volume grew by +22.1% in 2018, supported by higher production from oil mills (+8% y/y) as previous acreage areas replanted matured. With no new maturities expected until 2020E, we do not see CPO sales volume exceeding 2018 level in 2019.

Management, in our recent discussion, guided to flattish to marginal CPO volume growth in 2019. However, we look for strong volume growth in 2020 and 2021, with a further 4,500ha of mature plantation expected to come on stream from Extension II each year, according to management.

Overall, we estimate 46,036MTs will be achieved in 2019 (+1.3% y/y), and volume growth to average 19.7% over 2020-2023E.

Higher selling prices will support revenue: Elsewhere, the narrowing glut in the global CPO market (c. 2,464kMT vs. 4,562kMT in 2018) potentially bodes well for CPO prices in 2019.

Given that domestic CPO price tracks global price, we expect that higher international market prices will pass through to domestic prices.

To buttress, while unfavourable weather conditions are expected to weigh on global supply, demand resurgence in India – which accounts for 15% of global consumption – is expected to lift global demand.

By implication, we project mean CPO price to be 5% higher in 2019 vs. 2018.

On the contrary, however, we hold the view that persisting global stock accumulation will continue to weigh on rubber prices, thus limiting the scope for export sales for OKOMUOIL. Overall, we project +6.9% y/y revenue growth in 2019E and 28.8% average over 2020-2021E.

Albeit with limited pass through to gross margin: We revise our gross margin estimate for 2019E 36 bps lower to 73.1%, reflecting continued CoGS pressure. The company reported 74% y/y and 26% y/y expansion in Q4-18 and 2018FY CoGS respectively.

Management attributed the CoGs pressure in 2018 to energy supply challenges (as only 41% vs. target of 60%, of its energy requirements was supplied by BEDC1, with generator set supplying the balance) which (are not under its control and) have not been addressed.

Higher finance charges to cap pre-tax profits: With the one-year moratorium on the N1.95 billion concessionary loan from the Bank of Industry (BOI) ending last year, we expect interest payment to commence in 2019, potentially increasing finance charges by 83% y/y to N537 million, on our estimate.

Estimates and valuation: The net impact of our adjustment translates to growth in PBT and PAT of 5.2% y/y and 2.3% y/y respectively in 2019, and average EPS growth of 24.6% in 2020-2021E.

Our new TP of N93.6/s implies total upside of 21% after incorporating expected dividend yield of 4.0%.

OKOMUOIL currently trades at P/E and EV/EBITDA of 8.89x and 8.06x, significant discounts to its Middle East and Africa peer averages of 16.6x and 18.6x. We upgrade our recommendation to BUY, from HOLD.

Economy

Food Concepts Return NASD OTC Exchange to Danger Zone

Published

9 hours ago

05/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.

Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.

This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.

Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.

Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.

At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.

InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.

Economy

Investors Gain N97bn from Local Equity Market

Published

10 hours ago

05/12/2025

Dipo Olowookere

By Dipo Olowookere

The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.

This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.

UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.

On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.

Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.

Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.

A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.

This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.

For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.

Economy

Naira Loses 18 Kobo Against Dollar at Official Market, N5 at Black Market

Published

10 hours ago

05/12/2025

Adedapo Adesanya

By Adedapo Adesanya

The Naira marginally depreciated against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Thursday, December 4 amid renewed forex pressure associated with December.

At the official market yesterday, the Nigerian currency lost 0.01 per cent or 18 Kobo against the Dollar to close at N1,447.83/$1 compared with the previous day’s N1,447.65/$1.

It was not a different scenario with the local currency in the same market segment against the Pound Sterling as it further shed N15.43 to sell for N1,930.97/£1 versus Wednesday’s closing price of N1,925.08/£1 and declined against the Euro by 20 Kobo to finish at N1,688.74/€1 compared with the preceding session’s N1,688.54/€1.

Similarly, the Nigerian Naira lost N5 against the greenback in the black market to quote at N1,465/$1 compared with the previous day’s value of N1,460/$1 but closed flat against the Dollar at the GTBank FX counter at N1,453/$1.

Fluctuations in trading range is expected to continue during the festive season as traders expect the Nigerian currency to be stable, supported by intervention s by to the Central Bank of Nigeria (CBN)in the face of steady dollar demand.

Support is also expected in coming weeks as seasonal activities, particularly the stylised “Detty December” festivities, will see inflows that will give the Naira a boost after it depreciated mildly last month, according to a new report.

“As the festive Detty December season intensifies, inbound travel, tourism spending, and diaspora inflows are expected to provide moderate support for FX liquidity,” analysts at the research unit of FMDA said in its latest monthly report for November.

Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450 next week, buoyed by improved FX interventions by the apex bank.

Meanwhile, the crypto market was down as the US Federal Reserve’s preferred inflation gauge, core PCE, likely rose in September—moving in the wrong direction. However, volatility indices show no signs of major turbulence.

If the actual figure matches estimates, it would mark 55 straight months of inflation above the US central bank’s 2 per cent target. The sticky inflation would strengthen the hawkish policymakers, who are in favour of slower rate cuts.

Ripple (XRP) depreciated by 4.5 per cent to $2.08, Solana (SOL) went down by 3.8 per cent to $138.11, Litecoin (LTC) shrank by 3.1 per cent to $83.23, Dogecoin (DOGE) slid by 2.5 per cent to $0.1463, Cardano (ADA) declined by 2.1 per cent to $0.4368, Bitcoin (BTC) fell by 0.9 per cent to $91,975.45, Binance Coin (BNB) crumbled by 0.9 per cent to $899.41, and Ethereum (ETH) dropped by 0.7 per cent to $3,156.44, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 apiece.