Economy
FY17: Unilever Nigeria EPS to Grow 94.7% to N1.58k—Analyst
By Dipo Olowookere
A research analyst at Renaissance Capital, Mr Adedayo Ayeni, has predicted that Earnings Per Share (diluted for the additional 1.9 billion shares issued in recent capital call) of Unilever Nigeria Plc is expected to grow by 94.7 percent year-on-year to N1.58k in the 2017 financial year.
Traders in the stock market are expected the company to release its 2017 financial statements soon and Mr Ayeni anticipates the company to record sales growth of 35.7 percent y-o-y and net profit growth of 112.6 percent y-o-y.
Recall that Unilever Nigeria carried out rights issue and Mr Ayeni believes that the excess cash obtained from the exercise will lead to the firm ending the fiscal year with a net cash balance of N29.8 billion and N31.2 billion next year.
He said with management not disclosing any major expansion capex plans for FY18 and the Blue Band plant in Agbara completed and commissioned in December 2017, capex should moderate to depreciation from FY18.
“We therefore cut our modelled capex to match depreciation in FY18-22. This therefore supports the strong cash-build which we see for Unilever in FY18-22 with FCF forecast to post 25.7 percent CAGR.
“Unilever’s management is now faced with the decision of what to do with the excess cash from the rights issue and the expected build-up from FCF.
“We have modelled that it continues to earn interest income which is the main driver of our earnings revision estimates in FY18 and FY19.
“There is the risk that it could pay extraordinary dividends in FY18 as we now estimate it will end FY17 and FY18 with net cash/equity of 38.9 percent and 40.6 percent, respectively,” the analyst said.
Furthermore, RenCap said given the slowdown in sales growth observed for Nestle Nigeria in the food segment in 4Q17 and that it was yet to see material increases in the price of Knorr in the current quarter, it revises its estimates for Unilever.
“We cut our sales forecasts by an average of 1.7 percent in FY17-18 and by 6.2 percent in FY19. We raise our EBITDA forecast by 2.3 percent in FY18 and 10.6 percent in FY19 as we view management’s drive to contain costs and move the production of Blue Band margarine to Nigeria as pleasing and supportive of medium- to long-term margin capture,” it said.
RenCap said it was mindful of tailwind FX risks associated with Unilever’s FX exposure.
In a meeting with management in 2017, it admitted that its FX effective rate was closer to N285/$ when most of the consumer companies under our coverage were sourcing FX at rates above N300/$.
“With FX rates now above ~NGN335/$ for most consumer companies and price increases in FY18-20 expected to be sub-inflationary, we expect EBITDA margin to decline to 14.7% in FY18.
However, we raise our net profit forecast by 20.4 percent and 33.5 percent in FY18 and FY19 with expectations of healthy interest income on significant cash balance driving the material revisions,” RenCap stated.
In addition, the investment firm said it has revised its estimates for Unilever with key changes driven by the expected impact of a stronger cash-build on interest income, capex cuts to match depreciation in forecast years and medium-term margin expansion.
“As a result, we up our TP by 3.0% to NGN40.5/share. The increase is further driven by a lower risk-free rate of 13.7% and upward revision to FY18E EPS.
“We maintain our SELL rating as we believe its valuation is still stretched given the recent re-rating. On our estimates, Unilever trades on FY18 P/E and EV/EBITDA multiples of 29.0x and 18.0x, respectively.
“While still trading below its five-year average forward P/E of 39.2x, we are still unable to justify the stock’s valuation at his level vs Nestle Nigeria (SELL; TP: NGN1,262.9; CP: NGN1,380.0), which we estimate trades on FY18 P/E of 26.6x,” it said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rose by 2.30 per cent, spurring the NASD Security Index (NSI) to close higher by 96.61 points to 4,296.34 points from 4,199.73 points, and raising the market capitalisation by N57.99 billion to N2.578 trillion from N2.521 trillion.
The market was up yesterday despite a lower activity level, as the volume of securities traded slumped by 94.7 per cent to 1.3 million units from the previous 23.9 million units. The value of securities slipped by 57.2 per cent to N29.2 million from the preceding session’s N68.2 million, while the number of deals executed by market participants increased by 6.7 per cent to 32 deals from the 30 deals carried out on Thursday.
At the close of transactions, Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with a turnover of 3.4 billion units worth N8.4 billion, trailed 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 70.8 million units traded for N4.9 billion.
GNI Plc was also the most traded stock by volume on a year-to-date basis, with 3.4 billion units sold for N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
During the trading day, there were three price gainers and two price losers, led by Afriland Properties Plc, which shed N1.48 to sell at N15.17 per share compared with the previous session’s N16.65 per share, and Food Concepts Plc, which slid by 7 Kobo to close at N2.69 per unit versus N2.76 per unit.
Conversely, FrieslandCampina Wamco Nigeria Plc improved its value by N9.50 to trade at N150.00 per share compared with Thursday’s closing price of N140.50 per share, CSCS Plc went up by N7.95 to N89.65 per unit from N81.70 per unit, and 11 Plc soared by N6.94 to N206.95 per share from N200.01 per share.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited lost its footing by 0.07 per cent on Friday as a result of renewed profit-taking by investors.
The fall happened after Thomas Wyatt and Guinness Nigeria led other price losers group comprising 27 stocks at the market yesterday due to selling pressure.
Thomas Wyatt Nigeria shed 10.00 per cent to quote at N2.70, Guinness Nigeria drowned by 9.99 per cent to close at N329.00, Ikeja Hotel slipped by 9.96 per cent to N42.50, Zichis shed 9.94 per cent to trade at N26.37, and McNichols depreciated by 9.91 per cent to N5.00.
On the flip side, International Breweries gained 9.92 per cent to finish at N13.30, NEM Insurance appreciated by 9.61 per cent to N27.95, Jaiz Bank grew by 6.36 per cent to N9.20, UPDC expanded by 6.33 per cent to N4.20, and Livestock Feeds increased by 6.32 per cent to N9.25.
Business Post reports that investor sentiment remained bullish despite the loss recorded during the session, as there were 27 price decliners and 30 price advancers, representing a positive market breadth index.
Yesterday, market participants transacted 441.3 million equities for N19.4 billion in 44,938 deals compared with the 1.7 billion equities worth N112.0 billion traded in 44,780 deals a day earlier. This showed that the trading volume contracted by 74.04 per cent, the trading value declined by 82.68 per cent, and an uptick in the number of deals by 0.35 per cent.
Access Holdings led the activity chart on Friday after selling 40.2 million shares valued at N1.0 billion, Sterling Holdco traded 30.3 million stocks worth N228.8 million, Fidelity Bank sold 26.3 million equities for N505.6 million, Zenith Bank transacted 22.3 million shares valued at N2.5 billion, and First Holdco exchanged 19.0 million stocks worth N1.3 billion.
During the last trading session of the week, the consumer goods sector rose by 0.49 per cent, the insurance counter increased by 0.06 per cent, and the industrial goods index closed flat, while the banking and energy indices lost 0.78 per cent and 0.52 per cent, respectively.
As a result, the All-Share Index (ASI) shrank by 159.97 points to 243,798.76 points from 243,958.73 points, and the market capitalisation moderated by N103 billion to N156.445 trillion from N156.548 trillion.
By Adedapo Adesanya
The Naira performed poorly against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, July 10, losing N1.19 or 0.09 per cent to close at N1,379.62/$1, in contrast to Thursday’s exchange rate of N1,378.43/$1.
It also depreciated against the Pound Sterling in the official market during the trading session by N3.80 to trade at N1,850.62/£1 compared with the previous day’s N1,846.82/£1, but gained 43 Kobo on the Euro to sell at N1,575.66/€1 versus the preceding day’s N1,576.09/€1.
At the GTBank FX desk, the Naira weakened against the Dollar yesterday by N1 to quote at N1,386/$1 compared with the previous session’s N1,835/$1, and maintained stability in the black market at N1.400/$1.
Data showed that interbank FX turnover fell by about 10 per cent on Friday to $71.044 million from $78.708 million the previous day. Also, interbank forex market deals reduced to 87 from 106 trades executed at the window on Thursday.
The total forex inflows into the Nigerian foreign exchange market have been fluctuating, with about $1 billion in total inflows reported last week.
Total FX inflows settled at $0.99 billion last week, according to the research subsidiary of Coronation Merchant Bank, with Foreign Portfolio Investors (FPIs) accounting for the largest share at 35.81 per cent, or $0.35 billion.
Exporters accounted for 28.72 per cent or $0.28 billion, while the CBN contributed 11.15 per cent or $0.11 billion. Non-Bank Corporations also made up a notable 10.92 per cent of total inflows, reflecting continued support from both market-driven and official sources.
In the cryptocurrency market, Bitcoin rose above $64,100, retesting the price level that rejected it on Monday, with a clean break above, opening the path toward the June 15 high of $67,250. It gained 0.3 per cent to sell at $64,114.16.
Ethereum (ETH) appreciated by 1.6 per cent to $1,798.81, Dogecoin (DOGE) grew by 0.6 per cent to $0.0742, Binance Coin (BNB) added 0.6 per cent to sell for $576.47, Cardano (ADA) also grew by 0.6 per cent to $0.1674, and Ripple (XRP) jumped by 0.4 per cent to $1.10.
But Solana (SOL) lost 1.1 per cent to settle at $77.95, and TRON (TRX) declined by 0.2 per cent to $0.3296, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
