Economy

Seplat Plc: Will the Bulls Crossover?

Published

8 years ago

02/01/2018

Following our last note, Seplat Plc – Revision to Forecast published on Nov 7th, Seplat has returned 20.5% with YTD return of 57%.

Much of the early gains was underpinned by the lifting of force majeure on the Trans-Forcados Pipeline (TFP) which drove a marked rebound in performance in the third quarter of 2017 with the company posting profit after tax (PAT) of $22.3million, after realizing losses in six consecutive quarters.

Particularly, oil revenue at $115million almost doubled from the prior quarter, anchored by higher production of 26.4kbpd while gas sales remained resilient posting $31.5 million (+7.5% QoQ) as gross daily gas output touched a high of 352Mscfd (working interest: 111Mscfd).

At the latter, it was a play of cheap valuation and bargain hunting. In sync with our investment case for Seplat which tilts towards 2018 wherein we had projected a substantial upside in earnings hinged on balance sheet deleveraging as well as improved and more stable P&L.

Our view was premised on the company’s return to past production levels and de-risked earnings via the addition of a new export route to existing two routes.

Consequently, we had earlier forecasted a 90-day downtime in 2018 with working interest production forecast of 45.5bopd and over four-fold increase in PAT to $108.6 million (2017E: $19.4 million). In line with this adjustment, Seplat remained well positioned to relatively outperform its larger peers, trading at a 2018 P/CF of 1.7x compared to African peers’ and FTSE 350 Oil & Gas index of 5.5x and 12.05x respectively. As it stands, the stock is currently trading at a premium of 130bps to our last communicated FVE of N588.11.

So how does it look from here?

Beyond our earlier views on higher production, lower all-in cost, balance sheet deleveraging and deceleration in Capex which should drive cash-flow and ROE improvement, the recent rally in crude oil prices (Brent) and Seplat’ s tax allowance provision (estimate: $98 million) provides fresh upside to earnings.

Riding the oil price upswing. As a pure E&P play, Seplat’s earnings are more sensitive to oil prices. Consequently, we run a scenario analysis of 2018 key financial metrics at varying crude oil prices while keeping our production forecast intact. From our analysis, every $5/bbl. increase in Brent crude prices could lift 2018 earnings by ~25%; while every $5/bbl increase in long-term oil price could raise our FVE by about N45/share or 8%.

We have now raised our 2018 earnings by 26% in FY 2018, in line with the accelerated rebalancing in the crude oil market and house views on 2018 Brent price (base case of $60/bbl.). However, crude oil prices below $40/bbl. and a reappearance of insecurity in the Niger delta may trigger a downward review to earnings.

Balance sheet should de-leverage significantly. We think net debt to free cash flow will fall sizably from the current level of 1.7x to 1.2x by FY 18. Seplat is expected to rake in stronger operating cash flows of c.$300million over 2018 well above capital spending (estimate: $20 million capex). With the significant deleveraging in the balance sheet based on our estimates, there is clear capacity for enhanced shareholder return via resumption of dividend payments in 2018. Furthermore, while Seplat has no explicit dividend policy, we find that full-year dividend per share (DPS) has displayed strong correlation to its operating cash flow per share. Thus, with earnings and operating cash flow expected to rebound in FY 2018 on higher oil prices and production, we assume that DPS in FY 2018 will be $0.05.

Key Risks. Lower-than-expected oil prices and production are the key risks. The most apparent near-term driver for such a scenario would be an increase in US crude oil supply as well as the risk of OPEC falling apart. Upside risk would stem from the contrary, if oil prices increase above projected levels. Also, return of security concerns in the Niger Delta in the run-up to election is another key risk to earnings. However, with three alternative export routes, Seplat is in a better position than prior year.

Valuation is more compelling. We raise our FVE from N588.11 to N663.85 after reviewing our model and considering the possibility of higher crude oil prices. Our revised target equates to 2018 P/E and P/CF of 5.0x and 1.4x compared with African peers of 14.4x and 3.5x respectively.

Source: ARM Securities Limited

Economy

Unlisted OTC Securities Slide Further by 0.35%

Published

2 hours ago

18/03/2026

Adedapo Adesanya

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange further dropped 0.35 per cent on Tuesday, March 17, with the market capitalisation down by N8.80 billion to N2.471 trillion from the preceding day’s N2.480 trillion, and the NASD Unlisted Security Index (NSI) dipping by 14.71 points to 4,130.89 points from 4,145.60 points.

The loss recorded during the session was influenced by three securities, which overpowered the gains recorded by four stocks.

Okitipupa Plc lost N15.00 to sell at N215.00 per unit compared with the previous day’s N230.00 per unit, FrieslandCampina Wamco Nigeria Plc depreciated by N1.23 to trade at N122.32 per share versus Monday’s closing price of N123.55 per share, and Afriland Plc declined by 90 Kobo to quote at N17.05 per unit versus N17.95 per unit.

On the flip side, Central Securities Clearing System (CSCS) gained 36 Kobo to close at N75.43 per share versus the preceding session’s N75.07 per share, Geo-Fluids Plc added 6 Kobo to trade at N3.11 per unit compared with the previous day’s N3.05 per unit, Lighthouse Financial Service Plc improved by 5 Kobo to 60 Kobo per share from 55 Kobo per share, and Industrial and General Insurance (IGI) Plc rose by 1 Kobo to 55 Kobo per unit from 54 Kobo per unit.

Yesterday, the volume of securities surged by 97.5 per cent to 921,265 units from 265,610 units, the value of securities advanced by 64.6 per cent to N54.7 million from N33.2 million, and the number of deals went up by 46.2 per cent to 38 deals from 26 deals.

The most active stock by value (year-to-date) was CSCS Plc with 38.7 million units worth N2.4 billion, trailed by Okitipupa Plc with 6.4 million units valued at N1.2 billion, and FrieslandCampina Wamco Nigeria Plc traded 6.8 million units for N649.1 million.

The most traded stock by volume (year-to-date) was Resourcery Plc with 1.1 billion units sold for N415.6 million, followed by Geo-Fluids Plc with 130.9 million units exchanged for N505.1 million, and CSCS Plc with 38.6 million units worth N2.4 billion.

Economy

Nigeria’s Stock Market Now N130trn After 0.54% Surge

Published

3 hours ago

18/03/2026

Dipo Olowookere

By Dipo Olowookere

A 0.54 per cent surge was witnessed by the Nigerian Exchange (NGX) Limited on Tuesday as a result of strong investor demand and broad-based gains in the banking and industrial goods sectors.

According to data from the bourse, the industrial goods space expanded by 4.44 per cent, and the banking index chalked up 4.30 per cent, offsetting the losses recorded by the three other indices due to profit-taking.

Business Post reports that the consumer goods sector depreciated by 1.30 per cent, the insurance counter shrank by 0.41 per cent, and the energy landscape lost 0.13 per cent.

At the close of business, the market capitalisation soared by N696 billion to N130.026 trillion from N129.330 trillion, and the All-Share Index (ASI) surged by 1,084.52 points to 202,559.41 points from 201,474.89 points.

BUA Cement ended the day as the best-performing equity after it jumped 10.00 per cent to N326.70, Premier Paints appreciated by 9.86 per cent to N23.40, Zenith Bank expanded by 7.91 per cent to N111.15, NAHCO moved up by 7.14 per cent to N175.60, and RT Briscoe grew by 6.67 per cent to N11.20.

Conversely, Presco was the worst-performing equity, with a decline of 10.00 per cent to quote at N1,875.60. Caverton dropped 8.70 per cent to N6.30, Secure Electronic Technology lost 7.69 per cent to trade at N1.20, Guinea Insurance shed 6.43 per cent to quote at N1.31, and International Breweries crashed by 6.35 per cent to N14.00.

During the session, 1.8 billion shares worth N88.1 billion exchanged hands in 62,654 deals compared with the 948.2 million shares valued at N49.2 billion traded in 72,735 deals a day earlier, implying a contraction in the number of deals by 13.72 per cent, and an expansion in the trading volume and value by 89.83 per cent and 79.07 per cent, respectively.

Dominating the activity chart was FCMB with a turnover of 516.2 million equities valued at N6.6 billion, Wema Bank transacted 213.4 million shares for N5.6 billion, Zenith Bank traded 163.1 million stocks worth N18.1 billion, Access Holdings sold 123.9 million equities valued at N3.2 billion, and GTCO exchanged 100.0 million shares worth N12.4 billion.

Economy

Naira Strengthens to N1,344/$ at Official FX Market

Published

3 hours ago

18/03/2026

Adedapo Adesanya

By Adedapo Adesanya

It was another outstanding performance for the Nigerian Naira in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Tuesday, March 17, as it further appreciated against the US Dollar by N8.46 or 0.62 per cent to trade at N1,344.04/$1, in contrast to Monday’s closing rate of N1,357.77/$1.

It also gained N6.85 against the Euro in the official FX market during the session to sell at N1,551.46/€1 compared with the previous day’s N1,558.31/€1, but weakened against the Pound Sterling by N6.33 to close at N1,795.87/£1 versus Monday’s value of N1,789.54/£1.

At the GTBank forex counter, the Naira improved its value against the Dollar yesterday by N20 to settle at N1,365/$1 compared with the preceding session’s N1,385/$1, and in the black market, it remained unchanged at N1,395/$1.

With over $50 billion in foreign reserves, analysts assert that the outlook for the Naira is positive, powered by expectations of increased forex receipts from Nigeria’s hydrocarbon sales, as potential disruptions to global oil supply have increased volatility in energy markets.

The pressure that has piled on the local currency appeared to ease, buoyed by higher oil prices that have continued to bolster market sentiment.

Call for allies to help reopen the Strait of Hormuz was ignored, prompting traders to speculate that a continued closure is likely, which means oil prices will remain higher.

Meanwhile, the cryptocurrency market was in green ahead of a Federal Reserve meeting. There are no expectations that the US central bank will move rates at its Wednesday meeting, but Chairman Jerome Powell’s tone regarding the inflation outlook could prove a catalyst.

Analysts noted that a hawkish tone alongside hot February Producer Price Index (PPI) inflation data could weigh on equities and crypto, but Mr Powell’s signal that the Federal Reserve is treating rising oil prices as a temporary shock could extend the crypto rally.

Cardano (ADA) appreciated by 2.6 per cent to $0.2905, TRON (TRX) grew by 2.3 per cent to $0.3033, Ripple (XRP) jumped 1.2 per cent to $1.52, Ethereum (ETH) rose 0.9 per cent to $2,320.83, Dogecoin (DOGE) increased by 0.8 per cent to $0.1005, Solana (SOL) gained 0.6 per cent to sell at $94.11, and Bitcoin (BTC) went up by 0.3 per cent to $74,073.07.

However, Binance Coin (BNB) lost 0.3 per cent to close at $672.27, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 apiece.