Company: Dangote Sugar Plc
Rating: Hold
Current Market Price: N16.55

Latest Dividend: N1.10
Year High: N16.60
Year Low: N8.50
Fair Value: N13.70
Equity Analyst: Tunde Segun Jeariogbe

Key Investment Ratios

• This report observes the nine-month financial statistics of Dangote Sugar for the period ended 30^th September 2019, compared same to figures released in a similar period of 2018 for the purpose of establishing growth.
• Meanwhile, we have carefully valued each unit of Dangote Sugar, by exploring its past full-year financials, thus achieving growth rates on various key financial items for projection.
• With 1.44m metric tons of refining capacity, Dangote Sugar is Nigeria’s largest producer of household and commercial sugar.
• The firm also operates the Savannah Sugar Company Limited, an integrated sugar production facility, with an installed factory capacity of 50,000 tonnes.

Company figures

• At the end of its operations for 2019 nine-month, the management of Dangote Sugar reported a turnover of N117.42 billion, which is just 0.57% above the N116.75 billion reported at the end of the corresponding period of 2018.
• The cost of sales was stable through the two periods compared, as it only grew by a marginal 1.50% to N88.40 billion, as against the previous N87.09 billion.
• Operating Profit through the period was estimated at N22.90 billion, the same as 5.70% below the N24.28 billion in the previous third quarter.
• Operating Expenses equally inched north by marginal 9.22% to stand at N6.24 billion as against N5.71 billion.
• Finance Cost reported at the end of the period stood at N121.85 million, less than the N135.13 million used through the 2018 third quarter.
• Profit before Tax was therefore estimated at N22.96 billion, same as 12.36% below the N26.20 billion in the corresponding quarter.
• After making provision for tax expense, a total of N14.70 billion was reported for the period, as against N16.70 billion in the similar period of 2018.

• Current Asset is currently valued at N93.62 billion, the same as 9.08% below the N102.97 billion estimated at the end of the first nine months of 2018.
• Non-Current Assets held by Dangote Sugar is currently valued at N76.03 billion, up from N74.53 billion in the same period of last year.
• Current-Liabilities stood at N62.55 billion, 6.56% below the N66.94 billion stated in the corresponding period.
• Non-Current Liabilities dropped by a marginal 1.11% to N6.62 billion, as against N6.70 billion.
• Net Assets posted for the period, therefore, stood at N100.47 billion, which was lower than the N103.86 billion reported in 2018.
• Retained Earnings dropped by 3.51% to N88.65 billion, versus N91.87 billion in 2018.

Financial Strength/Solvency Ratios

• Debt Ratio is currently estimated at 1.72% same as the 0.41x estimated in a similar period of 2018. This implies that Total Liabilities is the same as 41% of Total Assets.
• Total Debt to Equity was equally estimated at 0.69x as against 0.71x estimated in the comparable quarter. This simply implies that both Equity and Debt used to service assets through the two periods were almost at par through the two periods under comparison.
• It was established that Equity is the same as 59% of Dangote Sugar’s Assets Value, for both periods compared.
• Nevertheless, we can conclude that Dangote Sugar is less liquid as the estimated Beta value stood below market Beta.

Profitability Ratios

• EBITDA margin estimated for the period stood at 19.50%, lower than the 20.80% estimated from 2018 nine months earnings numbers.
• Pre-Tax Margin equally dropped by 12.86% to 19.56, as against the 22.45% estimated in the corresponding period.
• The cost of Sales was 75.29% of the Turnover figure this is only 0.93% above the 74.60% estimated in 2018. This is a confirmation of the management effort to control its direct costs.
• Return on Equity stood at 14.63%, compared to 16.09% of 2018.
• See the table below for details:

Efficiency Ratios

• Operating Expenses to Turnover value is the same as 4.80%, this is 10.56% efficiency improvement over the 4.34% estimated from the corresponding nine-month result.
• Turnover to Total Assets Ratios stood at 69.21%, as against the previous 65.77%, a 5.23% growth in efficiency over the comparable period.
• Working Capital Ratio a ratio that indicates a company’s effectiveness in using its working capital was estimated at 3.78x, a 16.60% improvement over the 3.24x estimated at the end of 2018 nine-month.
• See below for details:

Valuation

Our blend of valuation techniques maintained our previously estimated fair value of its shares. Thus we have valued each unit of Dangote Sugar at N13.17and have rated it a Hold.