80mn to 85mn
11.61 percent
$ 7 billion
Monday 18 June 2018
C002D5556
BUSINESS DAY 27
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ECONOMY
Mobil and Forte Oil beat downstream industry average as others lag
BALA AUGIE
Our analysis this week is centred on the major players operating in the downstream oil and gas industry.
Investors that crave for stocks that magnify their income should pay attention to this short and lucid analysis.
Firms are operating in a volatile and unpredictable macroeconomic environment. For instance, the partial removal of subsidy by government deal a blow on earnings as many oil marketers couldn’ t adjust to the new template of the regulator.
What’ s more, the delay in subsidy payment by federal government resulted in accumulated debt in the balance sheet of firms that borrowed money from banks to finance the importation of petroleum products.
Total and Forte record strongest profit margins Forte Oil Nigeria Plc’ s gross profit margin of 18.64 percent recorded in December 2017, which is higher than the 13.85 percent recorded the previous year, beats industry average of 15.74 percent, according to Market and Intelligence’ s calculations.
The indigenous oil and gas giant’ s pretax and after tax margin of 8.20 percent and 8.89 percent are more than the industry average of 3.36 percent and 3.15 percent respectively.
Forte is the only firm in the entire industry that has succeeded in utilizing shareholders’ resources in generating higher profit. In other words, return on equity( ROE) increased to 22 percent in December 2017 against 7 percent as at December 2016.
The improvement in profit margins amid cap on
price petroleum products by the regulator shows Forte’ s corporate strengths and power brands as it continues to curtail costs.
11 plc( formerly known as Mobil Nigeria plc has a gross profit margin of 12.19 percent in as at December 2017 beat industry average of 10.50 percent, according to Market and Intelligence’ s Calculations.
Pretax profit margin of 8.89 percent and after tax margin of 6.15 percent are well above the industry average of 3.36 percent and 3.15 percent respectively.
Mobil has zero debt in its capital structure, which means it gives the leeway to borrow to fund future expansion plans.
The company announced last week that it was reopening its Liquefied Petroleum Gas( LPG) business. The company last operated in this segment 20 years ago. The strategic plan could help add impetus to earnings.
Conoil Nigeria Plc’ s, MRS Nigeria Plc’ s, and Eterna Oil Nigeria after tax margins of 0.69 percent, 0.78 percent, and 0.59 percent are lower than the 3.36 percent industry average.
Share price and Valuation Forte Oil is trading at 3.11 times book value, while its share price hit an all-time high of N47.70 in February of 2016, only to touch down at N52.62 percent as at the last trading day on June 14, 2018.
Total has a price to book( P / B) ratio OF 2.19 times, as share price hit an all-time high of N329 in October 2016, but closed at N202.90 at June 14 2018.
Mobil is trading at 2.19 times book value, while share price hit an all-time high of N360 in April 2017, but traded at N183 as at last trading day.
Conoil’ s PB ratio is trading at 1.2 times, while share price appreciated the most in November 2013 when it touched at N76. However it is trading at N32 as at Thursday June, 2018.
Eterna has a PB ratio of 0.66 times, while its share
price hit an all-time high of N6.93 as at May 11 2018. It closed at N6.30 on the last trading day of the week.
Investors and market participants do not attach value to MRS’ equity relative to its book value of equity as the firm’ s has zero PB ratio.
MRS’ s share price hit an all-time high of 70 in July 2014, while it closed at N34.25 on the last closing day before the festive period. It is the most beleaguered among its peer as it continues to grapple with high gearing ratio, weak sales, tepid operating performance.
The company was unable to pay cash dividend but gave its owners bonus shares or scrip issue.
SHORT TAKES
80mn to 85mn
Soaps and cosmetics maker PZ Cussons on Thursday said its full year pre-tax profit is expected to be at the lower end of the 80 million to 85 million pound range it previously provided, as conditions in Nigeria have worsened. The company said while higher oil prices in Nigeria have contributed to increased foreign exchange reserves and a relatively stable exchange rate, liquidity has not flowed down into the economy.
11.61 percent
Annual inflation in Nigeria slowed to 11.61 percent in May, its lowest level in more than two years and its 16th straight monthly drop, the National Bureau of Statistics said on Wednesday. It fell from 12.48 percent in April. A separate food price index showed inflation at 13.45 percent in May, compared with 14.80 percent in April. Food inflation has been in double digits for almost three years, but has slowed for more than six months.
$ 7 billion
African Trade Insurance expects its annual insured trade and investment portfolio to double to $ 7 billion within five years, driven by new members including Ghana and Nigeria. The company expects the annual portfolio would rise by $ 1 billion this year to $ 3.5 billion and double to about $ 7 billion by 2022. The investment risk insurer is owned by 14 African nations and other organisations such as the African Development Bank.
BusinessDay MARKETS INTELLIGENCE( Team lead: BALA AUGIE- Analyst: DIPO OLADEHINDE, ENDURANCE OKAFOR, BUNMI BAILEY Graphics: DAVID OGAR) BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income / credit, economics, regulation and factors that influence investor’ s decision-making
Email the BMI team patrick. atuanya @ businessdayonline. com