Rating: Hold
Current Market Price: N17.00

Latest Dividend: N1.50
Year High: N21.80
Year Low: N16.4
Fair Value: N24.57
Equity Analyst:  Tunde Segun Jeariogbe

Key Investment Ratios

• This report observes the full-year financials of Dangote Sugar Refinery for the year ended 31^st December, 2020, compares same to figures released in the similar period of 2019 to establish growth, and make projections where necessary.
• Meanwhile, we have conservatively valued each unit of its share price, by exploring the previous full-year financials, to see the growth trajectory on various key financial items, also for the purpose of projection.
• Generally, the result is an appreciable improvement over the preceding year’s numbers. The result becomes even more attractive when review against the background of the various challenges that businesses faced globally during period covered by this report.
• See below for details and comparison that our conclusion on Dangote Sugar’s performance indices is based.

Dividend Information

• At the end of the year’s operations, the board of Dangote Sugar announced a final cash dividend of N1.50 per share, 36.36% better than the N1.10 paid in the preceding year.
• The said dividend is same as 61.19% of the total amount earned on each unit of its shares in the year under review, representing a higher ratio than prior year’s 59.03%.
• Meanwhile, as of the time the result was released through the NSE, the dividend proposed was equivalent to 8.29% of the share price on the Nigerian Stock Exchange. Note that the yield is almost equal to previous year’s
• We believe that the yield is fair, especially when compared to several other riskless investment within the country at the moment
• Thus, Sustainable growth rate had been estimated at 9.27%, higher than 8.47% in the corresponding year.
• Closure date for the said dividend is 18^th March 2021, implying that the qualification date is 17^th March, 2021, while investors’ account will be credited between 18^th & 19^th May, 2021

Company figures

• At the end of 2020 full-year, the company reported a turnover of N214.29 billion, 33.03% better than the N161.05 billion of the prior year.
• Cost of sales grew by 30.74% above that of the previous year to N160.55 billion, from N122.80 billion.
• Operating Profit through the year was estimated at N44.43 billion, same as 48.47% below the N44.43 billion in the previous year.
• Operating Expenses equally increased by 12.26% to N9.68 billion, as against N8.62 billion.
• Finance Cost stood at N1.91 billion, up from the N454.44 million used through 2019.
• Profit before Tax was therefore estimated at N45.62 billion, 52.99% above the N29.82 billion in the corresponding period of 2019.
• After making provision for the tax expense, a total of N29.77 billion was reported as profit for the year, as against N22.36 billion in 2019.

• Current Assets is currently valued at N176.29 billion, a 75.83% improvement on the N100.26 billion estimated at the end of 2019.
• Non-Current Assets held was valued at N101.73 billion, as against N93.43 billion in 2019.
• Current-Liabilities stood at N142.02 billion, same as 83.17% above the N77.53 billion stated in the previous year.
• Non-Current Liabilities grew by 40.37% to N11.27 billion, as against N8.02 billion in 2019.
• Net Assets improved through the year to N124.71 billion, 15.33% above the N108.13 billion in preceding year.
• Retained Earnings equally improved by 16.69% to N112.32 billion, versus N96.25 billion in 2019.

Financial Strength/Solvency Ratios

• The debt Ratio is currently estimated at 55.14%, 24.82% above the estimate in the corresponding year.
• Total Debt to Equity was estimated at 122.29%, compared to 79.13% in the comparable year, implying that more debt was used to service the company’s assets through the year, compared to equity. This is an impressive performance and is a major contributor to the company’s impressive performance at the end of the year.
• It was established that Equity is the same as 44.86% of Dangote Sugar’s Assets Value at the end of 2020, and 55.83% in 2019.
• Nevertheless, we can conclude that Dangote Sugar is less liquid, given the estimated beta value at below unity.

Profitability Ratios

• EBITDA margin estimated for the period stood at 20.74%, higher than the 18.58% estimated in the 2019 financial year.
• Pre-Tax Margin equally grew by 15.00% to 21.29% against the 18.51% estimated in the corresponding year.
• Cost of Sales was 74.92% of the Turnover, a marginal 1.72% above the 76.23% estimated in 2019, confirming that little or no effort was put into adjusting the company’s direct cost through the two periods compared.
• Return on Equity stood at 23.88% against 20.68% of 2019, in the aftermath of the increased debt used through the years under review.
• See the table below for details

Efficiency Ratios

• Operating Expenses to Turnover value is the same as 4.52%, or 15.61% improvement in efficiency, over the 5.36% estimated from the preceding year.
• Turnover to Total Assets Ratios stood at 77.08%, from 83.16%, which is a 7.32% drop in management efficiency through the year when compared to the prior year.
• See below for details:

Investment/Valuation Ratios

• At the end of the 2020 full-year cycle, Dangote Sugar’s Earnings per share improved by 31.55% to N2.45, as against N1.86 in the previous year.
• P/E-Ratio grew by 6.66% having moved to 7.38x from 6.92x, increasing academic investment periods in Dangote Sugar and investors’ preference for its shares
• The said Earnings per Share yielded 13.54% of the current market price on the exchange as of the time the result was made available to investors.
• The Book Value of Dangote Sugar shares is currently estimated at N10.27, far below the market value on the exchange, as well as our conservative fair value.
• Confirming a seemingly over-priced status of Dangote Sugar shares on bourse is the Price to Book Value which is far above unity (1.76x).

Valuation

Our blend of valuation techniques built marginally over our previously estimated fair value of Dangote Sugar’s shares. Thus we have valued each unit of Dangote Sugar’s shares at N24.57 and rated it a Hold, given that the gap between our estimated fair value and the current market price is almost same.

Dangote Sugar Five (5) Years Financial History