2017: Conoil Slips Into ‘Over-Priced’ Amid Under-performing Numbers

2017: Conoil Slips Into ‘Over-Priced’ Amid Under-performing Numbers


Post Views: 360 Company: CONOIL PLC Rating: Hold Current Market Price at Earnings Release: N31.80 Intrinsic Value: N23.37 Latest Cash Div: N2.00 By Je...

Breaking: Zenith Bank Nets N193bn Profit, Offers N2.50 Dividend
Investdata Price & Earnings Tracking For Week Ended May 4, 2018
Corporate Actions In Nigeria As At April 27, 2018

Rating: Hold
Current Market Price at Earnings Release: N31.80
Intrinsic Value: N23.37
Latest Cash Div: N2.00
By Jeariogbe Tunde Segun (Equity Analyst)

Key Financial Tickers
• This report fully observed the recently released audited financial position of Conoil Plc.
• Going by the exchange’s mandated release period for equities with December financial year, the result is late. On the other hand, it should be noted that Conoil have traditionally released its full-year performance in the month of June.
• The management of Conoil announced a N2.00 cash dividend for the full year 2017 business activities. This is obviously lower than the N3.10 paid in 2016
• The register of shareholders will be closed for the said dividend next Friday, June 15, 2018. In other words, the qualification date for the dividend is Thursday, June 15, 2018.
• The company’s annual general meeting will hold at Le Meridien Ibom Hotel and golf Resort, Uyo, Akwa-Ibom State, on Friday, 13th July 2018, while
• The proposed cash dividend shall be electronically paid to qualified shareholders on July 23, 2018, exactly 10 days to the AGM.

Corporate Figures
• Safe for the fact that Turnover grew, other financial statistics released by the management of Conoil shows a lower performance when put beside the 2016 financials. Most importantly, all income statement underperformed comparable year’s.
• Turnover figure improved over comparable year by 35.86% from the N85.023 billion in 2016 to N115.513 billion in the just released year
• It was hampered by slightly bigger cost of sales, higher finance cost and over burdening Administrative expenses incurred during the reported year;
• The Operating Profit stemmed below 2016 estimate by 26.53%, dropping from N6.045 billion to N4.441 billion.
• Profit before Tax is 46.16% below 2016’s as it is currently estimated at N2.304 billion as against the previous N4.28 billion
• In the same way, the N1.578 billion reported as Profit after Tax is 44.38% below the N2.837 billion earned in 2016 financial year
• Retained earnings equally decreased by a mild 4.01% from what the company holds in 2016.
• The reduction in Retained Earnings was due to the bigger Cash Dividend paid in 2016, compared to the 2017. The N3.10 per share paid out amounted to N2.151 billion while N1.578 billion was earned through 2017.
• Non-Current Assets was down by 4.85% from last year’s estimate. The figure is currently valued at N5.483 billion, as against the previous N5.762 billion.
• Similarly, Current Assets is 10.46% below previous estimate, as it moved from N64.070 billion to N57.372 billion
• Non-Current Liabilities is 12.58% below last year’s reported value, as it moved from N983 billion to the current N916 billion
• Along the same trend, Current Liabilities dropped against comparable year by 12.58% having moved from N50.384 billion to N44.045 billion
• Net Assets Reported for the year is now 17.892 billion same as 3.10% below the N18.465 billion reported in 2016 financials.

Liquidity/Risk Ratios
• Total Debt to Equity estimated from the company’s financial for the year is moderate at 21.97% below industry average. Our current estimate is 53.34% as against the 68.36% industrial average
• Current Ratio is currently above one and slightly above industry average. This established the company’s ability to settle without stress its current liabilities as at when due
• Unlike industry peers, the company’s shares are fairly liquid at 1.01 beta value. Please note that industry average is below one
• Although far below the strength of its industrial peers, Conoil still possesses the financial muscle to service its interest-bearing liabilities. This assertion is backed by the estimated Interest Coverage of 7.31x which implies that it has 7.31x of what is required to service its debt.

Profitability Ratios
• Typical of the Oil & Gas industry, the Cost of Sale Margin is high at 88.70% of the Turnover value. Please observe that the rate is on a slight increase above last year’s estimate
• As noted above, increased administrative expenses hit dip into the company’s figure, thereby bringing the Profit before Tax margin to 2%, this is 60.37% lower than the 5.03% made last year
• Similarly, Profit Margin is 1.37% as against the previous estimate of 3.34%
• Both Return on Average Equity and Assets are lower as shown in the table below:

Efficiency Ratios
• Despite the reduced profitability rate, the management of Conoil achieved a better efficiency ratio as against the previous year. Please note that the improvement was achieved due to the improved Turnover figure.
• Total Assets Turnover stood at 50.94% above last year estimate. Currently it is estimated at 183.78% as against the 121.75% in 2016.
• Equity was also effectively multiplied 3.51x slightly lower than the 3.78x achieved in the 2016 financial activities
• Fixed Assets Turnover also geared up by 42.79% as the ratio is currently estimated at 21.07% as against the current 14.75%

Investment Ratios
• Following the earnings trend as noted above, the amount earned per unit share of Conoil is currently N2.27 same as 44.38% below the N4.09 earned through the 2016 financial activities
• The said earnings yielded 7.15% of the current market price this is below the 10.12% yield estimated in 2016
• Nevertheless, investors’ preference could be said to be higher, going by the improvement in the PE/Ratio that now stood at 13.98x as against the 9.88x at the end of the last financial year
• Price to Book Value reflected an overpriced status as the ratio stood above 1, although slight adjustment was achieved during the year as the share price reduced within the year
• Thus the estimated Book Value of Conoil Share Price is currently estimated at N25.78 this is 18.93% below the current market price of Conoil as at the time this result was made available to the investing public.

• While trying to place a justifiable price tag on each unit of Conoil Share, we considered the consistent dividend payment status of the company. The high payout ratio was equally considered along with the recent drop in cash dividend. Thus adopting our valuation model, we placed each units of Conoil Share Price at N23.37 and therefore rate the equity as Hold.