Economy
Total Nigeria: Whistle Blowing on Solid First Quarter
By ARM Securities
In keeping with the rave in town, we beam our equity strategy searchlight on a leading Oil Marketing Company (OMC), Total Nigeria Plc. (Total), which is scheduled to report 1st quarter earnings in the last week of April.
Despite its striking FY 16 earnings, which was almost four-fold higher YoY with EPS at N43.58, Total’s share price has declined 9.7% YTD (post result release: – 3.7%)—underperforming the broader NSEASI.
In our view, the weak appetite for the stock was underpinned by the company’s disappointing final dividend announcement of only N7.00 which brought total DPS to N17.00, with the implied pay-out ratio of 39% well behind its average of 84% over the last decade.
That said, the stock is typically prone to big moves after earnings releases and can easily gap up if the numbers are as strong as expected.
For full-year ended 2016, revenue grew 39.9% YoY to N290.9billion, largely reflecting a 38% YoY increase in petrol sales. The jump in PMS turnover reflects higher prices (+42% YoY to an average of N123/litre) which neutered volume weakness. Elsewhere, sales of lubricants climbed 53% YoY as the company raised lubes prices even as NGN depreciation at the parallel market pulled back importation of lubes to create scope for market share expansion for domestic players.
Consequently, gross profit was 94% higher relative to prior year with corresponding margin jumping to a decade high of 16.9% (+4.7pps YoY).
The foregoing combined with efficient cost control (OPEX: +1.3% YoY) to drive a four-fold YoY expansion in earnings.
Total reported its highest gross margin on record of 24.2% (+12.2pps QoQ) in Q4 16 in line with those of its close rival (Forte Oil Plc).
In our view, the upsurge reflects price increases in lubes and deregulated product segments (LPG, AGO, DPK) which more than offset weaker petrol sales.
Irrespective, N9 billion in other expenses mainly due to N7.4billion in foreign exchange loss1 moderated the impact of its record gross margin to leave EPS at N9.32 (+17.3% QoQ and +147.9% YoY). Barring the impact of the FX loss, Q4 16 EPS would have printed at N36.00 (FY 16: +489.4% YoY to N70.26).
For Q1 17, we expect petrol volumes to head further south owing to higher prices and supply constraints.
Specifically, we forecast a 10% QoQ decline in petrol volumes to 373million litres. That said, as with Q4 16, higher prices across petrol (67% YoY to N145/litre), diesel (60% YoY to N234.5/litre), kerosene (40% YoY to N311.56/litre), and lubricants (+18% average) as well as resilient volumes in these segments (excluding petrol) guide our Q1 17E sales of N75.7billion (+27% YoY, +7% QoQ).
Consequently, our gross margin expectation for the quarter is 20.2% (+5.3pps YoY, -3.9pps QoQ).
Further down, the flat movement in the interbank market (N305/$) and appreciation at the parallel market (+20% to N390/$2), compared to prior quarter, should dispel foreign exchange losses in the period.
To be clear, we now see scope for FX gains on the Trade creditors line—pegged to the parallel market.
This possibility notwithstanding, we take the cautious approach of discounting potential currency induced gains. Irrespective, we expect strong underlying performance over Q1 17, with an EPS estimate of N17.04 (83% QoQ and 104% YoY) leaving prospect for an interim dividend payment.
Over FY 17, despite expected higher average petrol pump price of N145/litre (2016 average: N123/litre) as well hike in lubes prices, weaker petrol volumes should moderate total sales growth to 8.5% YoY (to N315.6billion).
On cost, notwithstanding recent NGN appreciation at the parallel market which should ordinarily moderate input cost, our average crude oil price (22% YoY to $55/bbl.) and NGN forecasts (18% to N360/$) should leave COGS at elevated levels.
Consequently, gross margin should come in 20bps lower YoY at 16.7%. Furtherdown, amidst the still elevated payables, second order impact of weaker naira underpins our expectation for FX loss of N6.4bilion over 2017.
The foregoing should combine with higher net finance charges (+24% YoY to N717million), reflecting absence of payment of accrued interest on delayed subsidy, to drive our FY 17 EPS to N39.8 (-9% YoY) with total dividend at N19.88 (50% pay-out).
Total has had a good run over the last one year and currently trades at a P/E of 6.2x relative to 12.9x for peers. Net adjustments to our models drive our FVE 8% higher to N384.72, which implies a 43% upside from last closing price. We retain a BUY rating on the stock.
Source: www.armsecurities.com.ng.
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By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange opened the week with a 0.52 per cent rise on Monday, July 20, driven by renewed buying interest.
The volume of securities traded during the opening session surged by 6,663.3 per cent to 52.6 million units from the previous 777,002 units, and the value of securities rose by 200.9 per cent to N191.2 million from the preceding session’s N104.2 million, while the number of deals depreciated by 15.2 per cent to 28 deals compared to the preceding session’s 33 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units sold for N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units valued at N6.5 billion in trades, and Central Securities Clearing System (CSCS) Plc with 75.4 million units exchanged for N5.3 billion.
GNI Plc also closed the day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units traded for N415.7 million.
Yesterday, there were two price gainers and three price losers, led by FrieslandCampina Wamco Nigeria Plc, which slid by 66 Kobo to end at N141.15 per unit versus last Friday’s N141.81 per unit, Food Concepts Plc lost 24 Kobo to close at N2.31 per share versus N2.55 per share, and Geo-Fluids Plc declined by 17 Kobo to settle at N2.25 per unit compared with the previous closing price of N2.42 per unit.
Conversely, CSCS Plc chalked up N5.19 to close at N99.33 per share versus N94.14 per share, and Mass Telecoms Plc appreciated by 3 Kobo to sell at 35 Kobo per unit from 32 Kobo per unit.
As a result, the market capitalisation increased by N13.57 billion to N2.606 trillion from N2.593 trillion, and the NASD Security Index (NSI) gained 22.6 points to quote at 4,343.27 points, in contrast to the previous 4,320.67 points.
By Adedapo Adesanya
The Naira almost traded flat against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Monday, July 20. It gained 7 Kobo during the session to sell at N1,380.11/$1, in contrast to last Friday’s value of N1,380.18/$1.
It also appreciated against the Euro in the same market window during the session by N1.64 to close at N1,575.95/€1 versus the preceding session’s N1,576.99/€1, but depreciated against the Pound Sterling by N2.93 to trade at N1,857.35/£1 compared with the previous trading day’s N1,854.42/£1.
At the GTBank forex desk, the Nigerian Naira lost N1 against the US Dollar to quote at N1,389/$1 versus N1,388/$1, and at the black market, it traded flat at N1,405/$1.
Data from the Central Bank of Nigeria (CBN) showed that interbank FX turnover settled at $266.2 million, 7.5 per cent lower than the previous close of $287.8 million. Also, the number of deals at the interbank FX market declined to 68 from 106.
Despite this, there are signals that the Naira has pillars that can prop up its stability. Updated data from the apex bank showed Nigeria’s gross foreign exchange reserves increased to $51.92 billion as of July 16, 2026, reflecting continued improvements in the country’s external position.
A slew of analysts predict further increases will lift the gross balance above $52 billion this week, the highest seen since 2009.
Also, there are expectations that the country will be able to boost remittances into the country to $1 billion on a monthly basis by the end of the year; this will help ease pressure on the FX markets.
Meanwhile, in the crypto market, Bitcoin (BTC) climbed to about $65,500, reaching a two-week high, as the semiconductor selloff that dragged crypto lower last week reversed and Asian chip stocks led a broad risk rally. It rose by 2.4 per cent to $65,676.01.
There was also support from five straight days of inflows into US spot Bitcoin ETFs totalling more than $600 million, marking the strongest stretch of institutional buying since mid-July.
Cardano (ADA) jumped by 8.3 per cent to $0.1756, Ethereum (ETH) grew by 4.0 per cent to $1,930.33, Ripple (XRP) improved by 3.9 per cent to $1.13, Solana (SOL) appreciated by 3.2 per cent to $78.34, Binance Coin (BNB) added 1.9 per cent to sell for $575.34, and Dogecoin (DOGE) expanded by 1.7 per cent rise to $0.0729.
However, TRON (TRX) declined by 0.1 per cent to $0.3261, and the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each
By Dipo Olowookere
Sustained bargain-hunting in local stocks further lifted the Nigerian Exchange (NGX) Limited by 1.12 per cent on Monday.
The buying pressure was across the major sectors of Customs Street, though the consumer goods space came under profit-taking, closing flat.
But the banking counter expanded by 3.14 per cent, the industrial goods index gained 2.82 per cent, the insurance sector increased by 0.25 per cent, and the energy segment soared by 0.08 per cent.
Consequently, the All-Share Index (ASI) surged by 2,721.83 points to 246,183.96 points from 243,462.13 points, and the market capitalisation went up by N1.755 trillion to N158.812 trillion from N157.057 trillion.
Custodian Investment and NEM Insurance chalked up 10.00 per cent each to sell for N75.90 and N30.80, respectively, BUA Cement rose by 9.98 per cent to N303.10, First Holdco improved by 9.95 per cent to N105.50, and FTN Cocoa advanced by 9.94 per cent to N9.29.
On the flip side, SUNU Assurances shrank by 10.00 per cent to N3.60, Tripple Gee slipped by 9.77 per cent to N3.51, ABC Transport tumbled by 9.62 per cent to N7.05 per cent, Abbey Bank crashed by 9.00 per cent to N9.10, and Coronation Insurance dipped by 7.69 per cent to N2.40.
The market breadth index was flat yesterday, as there were 31 price gainers and 31 price losers.
First Holdco led the activity chart during the session, with a turnover of 203.9 million shares valued at N21.5 billion. Access Holdings sold 190.7 million equities worth N4.8 billion, UBA traded 29.2 million stocks for N1.4 billion, Zenith Bank transacted 24.7 million shares valued at N2.9 billion, and Sterling Holdings exchanged 23.6 million equities worth N187.4 million.
When trading activities ended at 4 pm, investors traded 851.6 million stocks for N49.6 billion in 56,873 deals compared with the 685.9 million stocks valued at N42.7 billion transacted in 44,134 deals last Friday, representing a rise in the trading volume, value, and number of deals by 24.16 per cent, 16.16 per cent, and 28.86 per cent, respectively.
