Period Estimated: Full Year Ended 31st December 2020
Rating: Hold
Current Market Price: N225.00

Latest Dividend: N16.00
Year High: N244.90
Year Low: N198.10
Fair Value: N202.12
Equity Analyst:  Tunde Segun Jeariogbe

Key Investment Ratios

• In this report, we observed the full-year financials of Dangote Cement Plc for the year ended 31^st December 2020, compare same with figures released at the end of 2019 to establish growth, make projections, valuation and recommendations accordingly.
• Unlike the previous year where it earned lower than the dividend paid, the management of Dangote earnings N16.20 per share, as against N11.77 in the prior year.
• Placing the current numbers side-by-side the immediate that of the corresponding year, it is safe to conclude that the performance was impressive since virtually all its financial indicators stood above those of the corresponding year.
• See below for detailed analysis:

Dividend Information

• At the end of the 2020 financial year, Dangote Cement shareholders will be rewarded with N16.00 per unit held.
• According to the information released through the Nigerian Stock Exchange’s platform, the closure date for the said dividend is 28^th April 2021, following which the qualification date is 27th April 2021, while the payment date is 27^th May 2021.
• The said dividend is the same as 98.76% of the total amount earned per share through the 2020 financial year. In our opinion, this is rather a very high payout ratio
• Nevertheless, the N16.00 dividend is only 7.27% of the price of Dangote Cement shares on the exchange as at the time the result was released to the investing public.
• Unlike the previous year where the sustainable growth rate slid because the company paid far higher than it earned, the sustainable growth rate is currently positive but low at 0.38%

Company figures

• The Turnover reported for the year’s is estimated at N1.03 trillion, 15.98% above the N891.67 billion posted in the corresponding year.
• Similarly, Cost of Sales grew by 15.26% to N437.97 billion, versus N379.98 billion in the comparable year.
• Operating Profit for the year was valued at N366.73 billion, same as 22.29% above the N299.89 billion estimate at the end of the preceding year.
• Finance Cost used throughout the year stood at N43.98 billion, 23.73% lower than the N57.67 billion reported at the end of the 2019 financial year.
• Profit before Tax is estimated at N373.31 billion, as against N250.49 billion achieved at the end of the preceding year.
• Tax Expense allowance grew by 94.65% to N97.24 billion, versus N49.95 billion in the corresponding year.
• Thus, a total of N276.08 billion was reported as Profit for the year, same as 37.68% growth over the N200.52 billion earned at the end of 2019.

• Current Assets as at the end of the 2020 financial year is valued at N550.13 billion, which is 35.26% above the N406.73 billion reported in the corresponding year
• Non-Current Assets stood at N1.47 trillion, an improvement of 10.32% over the N1.33 trillion of 2019.
• Current-Liabilities was valued for N829.81 billion, as against N630.79 billion in the corresponding year.
• Non-Current Liabilities equally grew by 41.88% to stand at N301.66 billion compared to N212.62 billion in the prior year end.
• Net Assets dipped by a marginal 0.78% to N890.97 billion, from N897.93 billion in the comparable year.
• Retained Earnings currently valued at N779.27 billion, inched up by 0.31% when compared to N776.83 billion in 2019.

Financial Strength/Solvency Ratios

• The debt ratio was estimated at 55.95%, the same as 15.51% above the 48.43% in the corresponding period of 2019, which implies that Total Liabilities is the same as 55.95% of Total Assets at the end of 2020.
• Total Debt to Equity was equally estimated at 126.99% as against 93.93% estimated in the comparable year. This simply implies that more debt was used through the just concluded period.
• It was established that Equity is the same as 44.05% of Dangote Cement’s Assets Value, as against estimate from 2019 full year performance indices which yielded 51.57%. This is a 14.57% drop in investors’ interest within the year compared.
• Nevertheless, going by the estimated beta value, we can conclude that Dangote Cement shares are less liquid than its industry peers on the Nigerian Stock Exchange.

Profitability Ratios

• EBITDA margin estimate for the quarter stood at 35.46%, marginally dropping from the 33.63% estimated from the 2019 full-year numbers.
• Pre-Tax Margin is valued at 36.10%, a 28.50% improvement over the 28.09% estimate of 2019.
• Cost of Sales was 42.35% of turnover; a mere 0.63% below the 42.62% estimated in 2019, and a confirmation of the management’s effort to control direct costs.
• Return on Equity stood at 30.99%, as against 22.33% achieved in 2019.
• See the table below for details:

Efficiency Ratios

• Operating Expenses to Turnover value is same as 20.70%, a 13.95% improvement in management efficiency from the 24.05% estimated in 2019.
• Turnover to Total Assets Ratios stood at 51.14%, from 51.21%, representing a marginal improvement in management efficiency within the two years compared.
• Working Capital Ratio a ratio that indicates a company’s effectiveness in using working capital, was estimated at -3.7x, as against the -3.98x estimated in 2019.
• See below for details:

Investment/Valuation Ratios

• At the end of the 2020 business cycle, Earnings Per Share improved by 37.68%% to N16.20, from the previous N11.77 each.
• P/E-Ratio, however, dipped by 6.00% to 13.58x, from 14.45x. Note that the high P/E-Ratio is an indication of positive investor sentiments for Dangote Cement shares.
• The said Earnings per Share yielded 7.36% of the current market price of Dangote Cement shares on the bourse as of the time the result was made available.
• The company’s Book Value is currently estimated at N52.29 per share, which is far below its Market Value on the exchange, which also indicates the robust investor sentiments/preference for the company as noted above.
• Confirming the seemingly over-priced status of Dangote Cement shares on the floor of the exchange is its Price to Book Value, which stood far above unity at 4.21 times.

Valuation

Considering the outstanding improvement observed on the performance indices of Dangote Cement’s, we maintained our preservative valuation approach, while placing a fair value on each unit of its shares. Also, we increased our expectations in anticipation of continued growth in the ongoing financial year. Thus, we have valued each unit of Dangote Cement’s share price at N202.12 and rated it a Hold.