Economy
Okomu Oil: Great Finish to Epic Year
By ARM Securities
Over FY 16, The Okomu Oil Palm Company Plc (Okomu) reported a nearly two-fold YoY jump in earnings buoyed by an upsurge in commodity prices (CPO and rubber) and the company’s focus on containing cost.
In view of the buoyant operating performance, the company raised its dividend per share to N1.50 (FY 15: N0.10) yet still had sufficient capital to pursue its expansion plans.
Going forward, the still favourable price regime as well as management’s cost containment efforts leave scope for sustained earnings growth over 2017.
Okomu reported its fastest pace of revenue growth in five years as favourable pricing environment drove sales at the Crude Palm Oil (CPO) segment to record high even as rubber turnover recovered from the 2015 trough despite weaker volumes (-8% YoY to 7,140MT).
Pertinently, the robust CPO sales in the review period was buoyed by higher domestic CPO prices—which reflected combined impact of naira depreciation and bullish global CPO prices (+13% YoY) that deterred imports (29% of total supply).
At the other end, cartel like cuts by major rubber producers bolstered impact of weaker currency on rubber sales, which are entirely exported.
Management linked the decline in rubber volume to the combined impact of wind damage and fire outbreaks on some portion of the company’s rubber plantation which forced some rejuvenation exercises on a section of the company’s rubber farmland.
Given the price induced revenue growth, Okomu reported a moderate rise in input (+5% YoY) and operating (+22% YoY) costs despite rising energy expenses.
According to Management, the benign cost is a fall-out of deliberate increase in import substitution—with imported raw materials now reduced to about 10% of COGS—and tight control on labour costs (65% of overall cost).
Particularly, over the period, the company reduced its full-time employees by 5% to 534 with the knock-down effect applying downward pressure on salaries and wages (-4.4% YoY to N2.4 billion). Consequently, operating margin rose to a record high of 48% (operating profit: +112% YoY). Further down, despite FX loss of N1.0 billion1 which underpinned a nearly three-fold YoY jump in net finance cost, strong operating performance ensured a nearly two-fold YoY jump in earnings to a record high of N4.9 billion.
Over 2017, we expect revenue growth to be tempered by recent retracement in domestic CPO prices from January 2017 peak of N732/kg2 which management linked to the sharp appreciation of the naira (incentivising cheaper imports), declining demand, and onset of the harvest season.
Nonetheless, reflecting the lower base in 2016, we project mean CPO prices to be 38% higher YoY at N423/kg.
The foregoing combined with higher volume (+7% YoY to 38,853MT), informs our forecasted CPO sales to N16.7 billion (+37% YoY). With regards to rubber, management’s guidance of sustained rejuvenation exercise over the financial year underpins our flat volume projection of 7,140MT.
However, reflecting recovery in global rubber prices (Q1 17: +94% YoY, 2017E: +44% YoY), we project a 44% YoY jump in rubber sales to N3.2 billion which brings overall turnover to N19.8 billion (+38% YoY), sustaining its double-digit growth for the third consecutive year, albeit at a slower pace.
On costs, as with 2016, we expect both input and operating cost to rise modestly, given the largely price induced growth in top-line.
In addition, management intends to increasingly substitute its biggest remaining raw material import (fertiliser) with domestic alternatives if available, or cheaper imports. Furthermore, the company intends to connect to the national grid over the year, which could reduce power cost by as much as 60%.
Given that significant progress on this front is not expected until towards the end of the year, we believe the company’s expanded plantation of 21,798 hectares3 should drive a 10% and 21% YoY rise in COGS and OPEX respectively.
Given the company’s sizable external debt of N1.2 billion (43% of total borrowings), we expect vagaries in the FX rate, which we forecast at N360/$ at the year end to induce a N300 million FX loss (-72% YoY) with the reverberating effect expected to drive net finance cost 57% lower YoY to N451 million. Bringing it altogether, we project FY 17 earnings to climb 80% YoY to N8.8 billion.
Largely reflecting strong earnings growth thus far, Okomu has rallied 30.7% YTD, as with peer Presco (+17.2% YTD) outperforming the broader NSEASI (-6.2% YTD).
The stock trades at current P/E of 10.20x (forward: 5.6x) vs. 11.61x (forward: 8.46x) for Bloomberg Middle East & Africa peers with last trading price of N52.51 at a discount to our FVE of N63.10.
We maintain our BUY rating on the stock.
Source: www.armsecurities.com.ng.
All rights reserved. This publication or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of ARM Securities Limited
Economy
Afriland Properties, Geo-Fluids Shrink OTC Securities Exchange by 0.06%
By Adedapo Adesanya
The duo of Afriland Properties Plc and Geo-Fluids Plc crashed the NASD Over-the-Counter (OTC) Securities Exchange by a marginal 0.06 per cent on Wednesday, December 11 due to profit-taking activities.
The OTC securities exchange experienced a downfall at midweek despite UBN Property Plc posting a price appreciation of 17 Kobo to close at N1.96 per share, in contrast to Tuesday’s closing price of N1.79.
Business Post reports that Afriland Properties Plc slid by N1.14 to finish at N15.80 per unit versus the preceding day’s N16.94 per unit, and Geo-Fluids Plc declined by 1 Kobo to trade at N3.92 per share compared with the N3.93 it ended a day earlier.
At the close of transactions, the market capitalisation of the bourse, which measures the total value of securities on the platform, shrank by N650 million to finish at N1.055 trillion compared with the previous day’s N1.056 trillion and the NASD Unlisted Security Index (NSI) went down by 1.86 points to wrap the session at 3,012.50 points compared with 3,014.36 points recorded in the previous session.
The alternative stock market was busy yesterday as the volume of securities traded by investors soared by 146.9 per cent to 5.9 million units from 2.4 million units, as the value of shares transacted by the market participants jumped by 360.9 per cent to N22.5 million from N4.9 million, and the number of deals increased by 50 per cent to 21 deals from 14 deals.
When the bourse closed for the day, Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units valued at N3.9 billion, followed by Okitipupa Plc with 752.2 million units worth N7.8 billion, and Afriland Properties Plc 297.5 million units sold for N5.3 million.
Also, Aradel Holdings Plc, which is now listed on the Nigerian Exchange (NGX) Limited after its exit from NASD, remained the most active stock by value (year-to-date) with 108.7 million units sold for N89.2 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units worth N5.3 billion.
Economy
Naira Weakens to N1,547/$1 at Official Market, N1,670/$1 at Black Market
By Adedapo Adesanya
The euphoria around the recent appreciation of the Naira eased on Wednesday, December 11 after its value shrank against the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) by N5.23 or 0.3 per cent to N1,547.50/$1 from the N1,542.27/$1 it was valued on Tuesday.
It was observed that spectators’ activities may have triggered the weakening of the local currency in the official market at midweek as they tried to fight back and ensure the value of funds in foreign currencies strengthened.
The domestic currency was regaining its footing after the Central Bank of Nigeria (CBN) launched an Electronic Foreign Exchange Matching System (EFEMS) platform to tackle speculation and improve transparency in Nigeria’s FX market.
At midweek, the Nigerian currency depreciated against the Pound Sterling by N3.56 to close at N1,958.68/£1 compared with the preceding day’s N1,955.12/£1 and against the Euro, it slumped by 34 Kobo to trade at N1,612.66/€1, in contrast to the previous session’s N1,613.00/€1.
As for the black market segment, the Naira lost N45 against the American currency during the session to quote at N1,670/$1 compared with the N1,625/$1 it was traded a day earlier.
A look at the cryptocurrency market showed a recovery following profit-taking as the US Consumer Price Index report matched economist forecasts.
The news was enough to convince traders that the Federal Reserve is certain to trim its benchmark fed funds rate another 25 basis points at its meeting next week.
The move also saw Bitcoin (BTC), the most valued coin, return to the $100,000 mark as it added a 2.9 per cent gain and sold for $100,566.12.
The biggest gainer was Cardano (ADA), which jumped by 15.00 per cent to trade at $1.16, as Litecoin (LTC) appreciated by 10.4 per cent to sell for $121.76, and Ethereum (ETH) surged by 7.0 per cent to $3,929.30, while Dogecoin (DOGE) recorded a 6.7 per cent growth to finish at $0.4181.
Further, Binance Coin (BNB) went up by 5.2 per cent to $716.72, Solana (SOL) expanded by 4.6 per cent to $229.77, and Ripple (XRP) increased by 4.2 per cent to $2.43, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 apiece.
Economy
Dangote Refinery Makes First PMS Exports to Cameroon
By Aduragbemi Omiyale
The Dangote Refinery located in the Lekki area of Lagos State has made its first export of premium motor spirit (PMS) just three months after it commenced the production of petrol.
In September 2024, the refinery produced its first petrol and began loading to the Nigerian National Petroleum Company (NNPC) on September 15.
However, due to some issues, the facility has not been able to flood the local market with its product, forcing it to look elsewhere.
In a landmark move for regional energy integration, Dangote Refinery has partnered with Neptune Oil to take its petrol to neighbouring Cameroon.
Neptune Oil is a leading energy company in Cameroon which provides reliable and sustainable energy solutions.
Dangote Refinery said this development showcases its ability to meet domestic needs and position itself as a key player in the regional energy market, adding that it represents a significant step forward in accessing high-quality and locally sourced petroleum products for Cameroon.
“This first export of PMS to Cameroon is a tangible demonstration of our vision for a united and energy-independent Africa.
“With this development, we are laying the foundation for a future where African resources are refined and exchanged within the continent for the benefit of our people,” the owner of Dangote Refinery, Mr Aliko Dangote, said.
His counterpart at Neptune Oil, Mr Antoine Ndzengue, said, “This partnership with Dangote Refinery marks a turning point for Cameroon.
“By becoming the first importer of petroleum products from this world-class refinery, we are bolstering our country’s energy security and supporting local economic development.
“This initial supply, executed without international intermediaries, reflects our commitment to serving our markets independently and efficiently.”
-
Feature/OPED5 years ago
Davos was Different this year
-
Travel/Tourism8 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz2 years ago
Estranged Lover Releases Videos of Empress Njamah Bathing
-
Banking6 years ago
Sort Codes of GTBank Branches in Nigeria
-
Economy2 years ago
Subsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking2 years ago
First Bank Announces Planned Downtime
-
Sports2 years ago
Highest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn
-
Technology4 years ago
How To Link Your MTN, Airtel, Glo, 9mobile Lines to NIN