Company: Dangote Cement Plc (DANGCEM)
Rating: Hold
Current Market Price at Earnings Release: N234.70
Intrinsic Value: N182.86
Latest Cash Div: N16.00
By: Jeariogbe Tunde Segun (Equity Analyst)

Financial Highlights
• Group revenue up 11.87% to ₦901.21 billion
• Group EBIT up 11.34% to ₦338.69 billion
• Earnings per share up 91.1% to ₦22.91
• Finance Cost dropped by 5.56% to N49.778 billion
• Dividend Payout Ratio:72.03%
• Dividend Yield: 6.82%
• Sustainable Growth Rate:11.06%

Dividend Information
• Amount Paid: N16.00/Units Shares
• Qualification Date: 3rd June, 2019
• Payment Date: 18th June, 2019
• Agm Date: 17th June, 2019
• AGM Venue: Eko Hotel, 1415 Adetokunbo Ademola Street, Victoria Island, Lagos

Strength
• Dangote Cement, a low-cost producer is one of the world’s top 20 cement companies by installed capacity, with secured clinker sufficiency in Nigeria. It is well positioned to absorb exogenous shocks without incurring material earnings variability.
• Thanks to rapid fixed capital accumulation, the company conveniently increased its capacity to 46 million tonnes per annum (mtpa) up from 8mtpa in 2011.
• Dangote Cement is Africa’s leading integrated cement group, with plants in 10 countries, in addition to four export markets are served from Nigeria.
• DCP has 39 subsidiaries, 32 of which are directly owned. The remainder comprises;
• Dangote Cement South Africa (Pty) Limited’s six subsidiaries (mainly engaged in mining and exploration, cement production, and investment property) and
• Dangote Industries (Zambia) Limited’s limestone mining subsidiary.

Corporate Figures
• Turnover for the period grew by 11.87% over the comparable year to N901.21 billion, as against N805.58 billion in 2017.
• At N338.69 billion, Operating Profit stood 11.34% above what was reported in 2017, from the previous N304.20 billion.
• Profit before Tax (PBT) for the year under review was estimated at N300.80 billion, compared to the N289.59 billion of 2017.
• Helped by the N89.51 billion tax credit received through its Obajana Plant, profit for the year soared over comparable year by 91.10% as the total profit reported for the year stood at N390.32 billion against N204.24 billion.
• Similarly, Total Comprehensive Income soared over previous financial year by 91.44% to stand at N381.17 billion against N200.67 billion.

• Retained Earnings improved by 32.72% to N848.69 billion, compared to the N639.46 billion of 2017.
• Current Assets grew marginally to N428.83 billion, 4.52% better than previous year’s estimate.
• Non Current Assets on the other hand inched north by 0.80% to hit N1.265 billion against N1.255 billion.
• Current Liabilities dipped marginally by 4.80% having moved from the previous N520.47 billion to N495.50 billion.
• Meanwhile Non Current Liabilities dropped appreciably to N212.34 billion as against the N364.04 billion reported at the end of 2017 financial year.
• Since liabilities dipped while Assets improved, estimated Net Assets for the year increased by 26.27% to stand at N986.61 billion compared to N781.36 billion reported in 2017

Liquidity/Risk Ratios
• At the end of 2018 financial year, Total Debt is same as 71.75% of Equity, implying the higher use of debt above equity through the year under analysis.
• Trying to test the company’s ability to offset its Current Liabilities as at when due, we estimated the Current Ratio and the Ratio stood below unity implying little challenges in settling its current financial obligations.
• Confirming the strong patronage of Dangote Cement shares on the floor of the Nigerian Stock Exchange, was its 1.15x Beta value, which is above unity and close to industry average.
• With the estimated Interest Coverage of 21.73x, one can safely conclude that it can conveniently service its interest yielding liabilities and even assess more if required.

Profitability Ratios
• Compared to other manufacturing companies, the 42.53% Cost of Sales Margin achieved by Dangote Cement is impressive. Making this more interesting is the fact that current Margin is 2.46% below the estimate from the corresponding year.
• Profit before Tax Margin estimated from the year is 7.15% below that of 2017.
• Return on Average Equity improved of 2017 estimate by 51.35% at the current estimate of 39.56%.
• Return on Average Equity is good at 23.04%, which is 87.88% above the 12.26% return achieved in 2017.

Efficiency Ratios
• Total Asset Turnover grew by 9.98% to 53.19%, from 48.36% at half year.
• Equity Turnover also dipped by 11.40% to 91.34% as against 103.1%.
• Equity was multiplied 1.72 times through 2018 financial year, about 19.45% below the 2.13 multiple achieved in 2017.
• Fixed Assets was equally built by 9.98% to 53.19% as against the 48.36% of 2017.

Investment Ratios
• As in the company’s earnings figures, estimated Earnings per share (EPS) is 91.1% above 2017 estimate. As stated in the table below, EPS is currently N22.91 from N11.99
• The above stated EPS generated a yield of 11.90% of the current market price of Dangote Cement share price on the floor of the exchange as at the date this result was released to the market. Please note that the yield in 2017 was 4.52%.
• Price to Earnings Ratio was fairly revalued by the investing public as it now stands at 8.40x from the previous estimate of 22.11x
• Ordinarily, the very large Price to Book Value ratio (3.32x) and the far gap between the Book Value and the current market price of Dangote Cement should simply imply an overvalued price, but considering the fact that this position had been successfully maintained for years, it should academically imply investors’ preference/sentiments in its shares rather than an overpriced interpretation.
• Current Opex Margin is 43.31%, that is, 70.82% above the 25.35% estimated in the corresponding year of 2017. This is a welcome development

Valuation
• Although the management of Dangote Cement had released 72.03% of its full year earnings to investors as Cash Dividend, our blend of valuation techniques downgraded the value of its shares from the previous N210.35. One major ratio that accounted for the low valuation is the dividend yield which came out low despite the high payout ratio. We have therefore valued each units of Dangote Cement share price at N182.86.