Period Estimated: Quarter Ended 30th June, 2020
Current Market Price: N134.2
Latest Dividend: N16.00
Year High: N180.40
Year Low: N116.00
Fair Value: N169.72
Equity Analyst: Tunde Segun Jeariogbe
Key Investment Ratios
- In this report, we look into the six months financial statistics of Dangote Cement representing the period ended 30thJune, 2020, compared same with similar numbers released at the end of 2019second quarter, to establish growth, while the full-year numbers were explored to achieve valuation and recommendation.
- Generally, the income statement is a marginal improvement over the numbers released in the comparable quarter of 2019
|Bourse||Nigerian Stock Exchange|
|Market Classification||PREMIUM BOARD|
|Nature of Business||Production and Sale of Cement|
|Date of Incorporation||November 4th 1992|
|Date Listed||October 26th 2010|
|End of Accounting Year||31ST DECEMBER|
|Registrar||United Securities Limited|
|Auditor||Ahmed Zakari& Co. , Deloitte Nigeria|
|Share Price@Relsd (N)||134.20|
|Earnings per Share||7.40|
- The turnover reported for the first period is estimated at N476.85 billion, same as 1.95% above the N467.73 billion posted in the corresponding quarter of last year.
- Similarly, Cost of Sales inched up by 4.79% to N202.42 billion, versus N193.17 billion in the comparable quarter.
- Operating Profit for the period was valued at N173.49 billion, same as 1.75% above the N170.49 billion estimate in 2019 half-year.
- Finance Cost used through the period stood at N20.85 billion, 6.29% above the N19.61 billion stated at the end of 2019 second quarter.
- Profit Before Tax was estimated at N162.85 billion, as against N155.48 billion achieved at the end of the first six months of 2019 business session.
- Tax Expense allowance grew by 1.27% to N36.70 billion, versus N36.24 billion in the corresponding quarter.
- Thus, a total of N126.14 billion was reported as Profit for the period, a marginal growth over the N119.24 billion earned at the end of the 2019 second quarter.
|Statement of Comprehensive Income|
|Cost of Sales||202,420||193,172||4.79|
|NET FINANCE INCOME||(10,628)||(14,958)||-28.95|
|TOTAL COMP INCOME||114,078||117,276||-2.73|
|Statement of Financial Position|
- Current Assets as at the end of 2020 Q2 is valued at N435.50 billion, which is 16.26% below the N374.60 billion in the corresponding quarter.
- Non-Current Assets stood at N1.36 trillion, a marginal improvement of 6.85% over the N1.28 trillion in 2019.
- Current-Liabilities was valued for N796.57 billion, as against N498.64 billion in the corresponding quarter.
- Non-Current Liabilities equally dipped by 17.54% to N269.25 billion, as against N326.54 billion in the comparable quarter.
- Net Assets of Dangote Cement equally dropped by marginal 11.05% at the current estimate of N739.36 billion, as against the N831.24 billion in the comparable quarter.
- Retained Earnings reduced by 9.27% as it is currently valued for N631.09 billion against N695.54 billion in 2019 second quarter business session.
Financial Strength/Solvency Ratios
- Debt Ratio is currently estimated at 59.04, same as 18.52% above the 49.82% estimated in the corresponding quarter of 2019, which implies that Total Liabilities is same as 59.04% of Total Assets at the end of the quarter.
- Total Debt to Equity was equally estimated at 144.15% as against 99.27% estimated in the comparable quarter. This simply implies that more debt was used through the just concluded period.
- It was established that Equity is same as 40.96% of Dangote Cement’s Assets Value, estimate from 2019 second quarter performance indices yielded 50.18%, which is an 18.38% drop in investors’ interest within the two quarters compared.
- Nevertheless, going by the estimated beta value, we can conclude that Dangote Cement is more liquid than its industry peers on the floor of the exchange.
|Financial Strength/Solvency Ratio|
|Total Debt to Equity Ratio (MRQ)||144.15%||99.27%||45.21|
- EBITDA margin estimated for the quarter stood at 36.38%, a marginal drop from the 36.45% estimated from 2019 second quarter earnings numbers.
- Pre-Tax Margin is valued at 34.15%, a marginal improvement above the 33.24% estimate in 2019.
- Cost of Sales was 42.45% of the Turnover figure, this is only 2.78% above the 41.30% estimated in 2019. This is a confirmation of the management’s effort at controlling its direct cost.
- Return on Equity stood at 17.06%, as against the 14.35% achieved in 2019.
- See below for details:
|EFFECTIVE TAX RATE||29.10%||30.40%||-4.27|
|CS TO TO||42.45%||41.30%||2.78|
- Operating Expenses to Turnover value is same as 21.75%, this is a 3.40% improvement in management efficiency from the 22.51% estimated from the 2019 second quarter’s financial indices.
- Turnover to Total Assets Ratios stood at 26.42%, as against the 28.24% marginal improvement in management efficiency within the two compared periods.
- Working Capital Ratio, a ratio that indicates a company’s effectiveness in using its working capital, was estimated at -1.32x a 64.98% drop from the -3.77x estimated in 2019.
- See below for details.
|OPEX TO TO||21.75%||22.51%||-3.40|
|TO TO TA||26.42%||28.24%||-6.45|
|Working Capital Turnover||(1.32)||(3.77)||-64.98|
|Working Capital Ratio||0.55||0.75||-27.23|
- At the end of the 2020 second quarter business cycle, the earnings per share of Dangote Cement inched up by 5.79%% to N7.40 from the previously estimated N7.00.
- Our six months adjusted P/E-Ratio dipped by 25.45% having moved to 18.13x from 24.32x. It is important to note that the high P/E-Ratio is an indication of positive investors’ sentiments for Dangote Cement shares.
- The said Earnings per Share yielded 5.52% of the current market price of Dangote Cement shares on the floor of the exchange as at the time the result was made available to the investing public.
- The Book Value of Dangote Cement shares is currently estimated at N43.39, which is far below the market value of the Coy on the floor of the exchange. This excess is generated by investors’ 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 the Price to Book Value which stood far above unity (3.09x).
|Price at Released||134.20||170.17||-21.14|
Considering the marginal improvement observed on the performance indices of Dangote Cement’s, we maintain our preservative valuation approach while placing a fair value on each unit of its shares. Also, we lowered our growth expectations to accommodate the expected drop from the general risk suffered by most manufacturing companies from the COVID-19 pandemic. Thus, we have valued each unit of Dangote Cement’s share price at N169.72 and rated it a Hold.