Economy
Why Lafarge Africa is Currently Undervalued—Analysts
By Modupe Gbadeyanka
Analysts at United Capital Research have said shares of Lafarge Africa Plc are currently being traded at the Nigerian Stock Exchange (NSE) at a price below its real value.
Business Post reports that as at the time of filing this article on Monday noon, Lafarge Africa was up by 10 kobo or 0.85 per cent, selling at N11.85 per share compared with N11.75 per share it closed last Friday at the market.
In their analysis of the half-year earnings of the cement manufacturer in Nigeria, United Capital Research analysts argued that shares of Lafarge Africa should be trading around N14 per unit.
“WAPCO (Lafarge Africa) currently trades at a forward EV/EBITDA of 4.3x, which is well below both the local and EM peers average of 5.13x and 10.9x, respectively implying that the ticker is currently undervalued.
“Putting the above together, we update our valuation assumption and revised our 12M-TP to N14.4/share (from prior N16.6/share) with a potential upside of 23.1 per cent when compared to the current price of N11.70/share,” a report from the firm said.
United Capital Research noted that it is positive about the short-term outlook for the cement maker, especially at a moment it was restructuring its balance sheet to improve performance.
It said the opening of the economy by the federal government will help the company because construction activities will resume, which will, in turn, boost its revenue.
“Accordingly, we have estimated a Revenue growth of 3.3 per cent y/y in FY-2020E. Also, we expect the cost of sales growth to come lower compare to revenue growth, hence, gross margin is expected to be strengthened.
“Our expectation for lower cost of sales rests on the back of the aggressive cost optimization strategy that the company has embarked on since the beginning of the year which has resulted into a 17.8 per cent reduction in production cost.
“However, our concern remains the continued increase in energy cost. Also, we have estimated an uptick in OPEX as the company resumes promotional activities in a bid to drive volumes and compensate for
Q2-2020 shortfalls.
“In all, we expect the surge in PAT to be sustained, fuelled by the lower base effect of the 2019 performance,” the analysts said in the report.
In the first six months of 2020, Lafarge Africa grew its revenue grew by 2.3 per cent despite apparent challenges that characterized Q2-2020 amid the COVID-19 induced lockdown.
According to the management, this growth was because of an increase in volume sold and better average prices in H1-2020 when compared to the corresponding period in 2019.
Also, a sharp decline in Operating Expenses (OPEX) by 27.9 per cent y/y to N9.4 billion supported the overall bottom-line performance in H1-2020.
This was as Administrative/Selling and Marketing expenses fell 30.6 per cent and 9.9 per cent y/y to N7.8 billion and N1.5 billion, respectively. Similarly, Net finance cost tumbled 67.3 per cent resulting in 86.1 per cent y/y surge in pre-tax profit to N28.8 billion.
However, a 1.5x jump in tax expense brought post-tax profit growth to 47.3 per cent y/y to settle at N23.3 billion. Notably, the jump in tax expense was a fallout of tax credit accessed by the company in 2019.
By Aduragbemi Omiyale
On Tuesday, December 17, 2024, President Bola Tinubu will present the 2025 budget to a joint session of the National Assembly.
The size of the 2025 Appropriation Bill is about N47.9 trillion and would be presented to the parliament for approval.
Speaking at the plenary on Thursday, December 12, 2024, the President of the Senate, Mr Godswill Akpabio, said the presentation by Mr Tinubu would be at the chamber of the House of Representatives.
However, it is not certain if the lawmakers will pass the budget before December 31 to allow for a recent budget cycle of January to December.
Recall that on December 3, the senate approved the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) for 2025 to 2027.
This was after the President presented this the National Assembly on November 19 ahead of the consideration of the 2025 budget proposal.
In the MTEF/FSP, the government said it planned to borrow about N9.22 trillion from local and foreign sources to finance the budget deficit.
It pegged the crude oil benchmark at $75 per barrel and a daily oil production of 2.06 million barrels at an exchange rate of N1,400 to $1, and a targeted gross domestic product (GDP) growth rate of 6.4 percent.
At the plenary today, Mr Akpabio informed his colleagues that, “The President has made his intention known to the National Assembly to present the 2025 budget to the joint session of the National Assembly on December 17, 2024.”
By Adedapo Adesanya
Nigeria added 150,000 barrels per day to its crude production in November 2024 as it continues to pursue an ambitious 2 million barrels per day target.
According to the Organisation of the Petroleum Exporting Countries (OPEC), Nigeria’s oil production rose to 1.48 million barrels per day in November, up from 1.33 million barrels per day the previous month.
In its Monthly Oil Market Report (MOMR), OPEC revealed that at 1.48 million barrels per day, it is the continent’s leading oil producer, surpassing Algeria’s 908,000 barrels per day and Congo’s 268,000 barrels per day.
Business Post reports that OPEC doesn’t account for condensates, which Nigeria’s accounts for in its broader 2 million barrels per day target.
Despite the surge in production levels, Nigeria is still under producing its 1.5 million barrels per day output quota under a deal involving OPEC and 10 other producers known as OPEC+.
OPEC said it relied on primary data gotten through direct communication, noting that secondary sources reported 1.417 million barrels per day as Nigeria’s crude production in November — up from 1.4 million barrels per day in October.
The data also shows that OPEC’s total oil production among its 12 members rose by 104,000 barrels per day in the month under review.
According to secondary sources, the total of the 12 OPEC countries’ crude oil production averaged 26.66 million barrels per day in November 2024.
“Crude oil output increased mainly in Libya, Iran, and Nigeria, while production in Iraq, Venezuela, and Kuwait decreased”, OPEC said.
“At the same time, total non-OPEC DoC crude oil production averaged 14.01 mb/d in November 2024, which is 219 tb/d higher, m-o-m. Crude oil output increased mainly in Kazakhstan and Malaysia,” the organisation added.
In a related development, OPEC trimmed its 2024 and 2025 oil demand growth forecasts for the fifth time this year.
Now, the cartel expects the world’s oil demand growth at 1.61 million barrels per day from the previously 1.82 million barrels per day.
For 2025, OPEC says the world oil demand growth forecast is now at 1.45 million barrels per day, a 900,000 barrels per day cut from the previously expected 1.54 million barrels per day.
On the changes, OPEC says that the downgrade for this year owes to more bearish data received in the third quarter of 2024 while the projections for next year relate to the potential impact that will arise from US tariffs.
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.
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