Rating: Hold
Current Market Price: N74.95

Latest Dividend: N2.00
Year High: N77.40
Year Low: N55.05
Fair Value: N55.15
Equity Analyst:  Tunde Segun Jeariogbe

Introduction/Key Financials

• In this report, we have carefully observed the half year financial performance indices of Okomu Oil Palm Plc, for the half-year ended 30^th June, 2020, compared same with figures released in the corresponding period of 2019, for the purpose of establishing a trend.
• Nevertheless, we have carefully chosen our valuation approach, while using the full-year financials for projections and other valuation processes.
• Understand that the current half-year numbers represent a higher performance when placed side-by-side the half year figures from the corresponding period of 2019.

OKOMU OIL
Bourse	Nigerian Stock Exchange
Code Name	OKOMUOIL
Sector	AGRICULTURE
Market Classification	MAIN BOARD
Nature of Business	Development of Oil and Rubber Plantations. Palm oil Milling, Palm Kernel Processing and Sale of Wet Cup Lumps
Date of Incorporation	December 3rd 1979
Date Listed	September 9th 1997
End of Accounting Year	31ST DECEMBER
Website	www.okomunigeria.com
Registrar	Cardinastone (Registrars) Limited
Auditor	Crowe Dafinone
Share Price@Relsd (N)	70.50
Earnings per Share	4.20
Intrinsic Value(N)	55.15
Share Outstanding	953,910,000
Market Capitalisation	67,250,655,000

Company figures

• The Turnover reported for the period stood 57.92% above the comparable quarter. In other words, Turnover for the quarter was N13.52 billion, as against the previous N8.56 billion.
• Cost of Sales is currently valued at N1.08 billion, which is lower than the N1.69 billion estimated at the end of 2019 half year business session.
• Operating Profit is 99.54% above that of the comparable quarter of 2019. In other words, a total of N5.80 billion was report as Operating Profit, up from N2.91 billion in the corresponding period.
• Operating Expenses value reported at the end of the period is same as N6.63 billion, which is 67.43% above the N3.96 billion used through the comparable quarter.
• Finance Cost used through the period is valued at N310.64 million, which is 207.25% above the N101.10 million reported in its 2019 half year numbers.
• Profit before Tax is currently estimated at N5.50 billion, as against N2.83 billion achieved at the end of 2019 half year.
• Having made allowance for Tax Expense, the management of Okomu Oil reported a profit for the period of N4.00 billion as against N2.52 billion last year.

OKOMU OIL
Statement of Comprehensive Income
	2020(000)	2019(000)	%CHG
Turnover	13,526,670	8,565,460	57.92
Cost of Sales	1,082,981	1,691,683	-35.98
Operating Profit	5,809,594	2,911,469	99.54
OPEX	6,634,095	3,962,308	67.43
DEPRECIATION	13,051,403	10,381,695	25.72
FINANCE COST	310,649	101,105	207.25
NET FINANCE INCOME	(305,121)	(76,324)	299.77
PBT	5,504,473	2,835,151	94.15
TAX	1,497,551	306,200	389.08
PAT	4,006,922	2,528,951	58.44
TOTAL COMP INCOME	4,006,922	2,528,951	58.44
Statement of Financial Position
Current Assets	15,884,682	8,943,471	77.61
Non Current Assets	33,605,982	30,152,325	11.45
Total Assets	49,490,664	39,095,796	26.59
Current Liabilities	4,936,101	3,786,499	30.36
Non Current Liabilities	11,623,669	5,476,410	112.25
Total Liabilities	16,559,770	9,262,909	78.78
Net Assets	31,279,382	28,181,375	10.99
Retained Earnings	28,935,331	25,837,324	11.99
Shares Outstanding	953,910,000	953,910,000

• Current Assets at the end of the period was valued at N15.88 billion, same as 77.61% above the N8.94 billion assets valuation at the end of 2019 half-year financials.
• Non-Current Assets, on the other hand, stood at 11.45% above the corresponding period valuation at N33.60 billion against N30.15 billion.
• Current Liabilities equally climbed by 30.36% over that of the corresponding period, as it is currently valued at N4.93 billion versus N3.78 billion.
• Non-Current Liabilities is valued at N11.62 billion versus N5.47 billion in the corresponding period.
• Net Assets at the end of the period was estimated at N31.29 billion, this is 10.99% above the N28.18 billion stated in its 2019 half year result.
• Retain Earnings also improved over comparable quarter by 11.99% to stand at currently stated N28.93 billion versus N25.83 billion.

Financial Strength/Solvency Ratios

• Okomu Oil’s Debt Ratio was is estimated at 33.46%versus 23.69% in the corresponding period.
• Total Debt for the period is estimated to be 52.94% of the Equity Value, this is same as 61.07% of the estimated 32.87% in the comparable period
• Equity Ratio, a ratio that tests the proportion of Equity on Total Assets, shows that Equity is same as 63.20% of the Total Assets Valuation, versus 72.08% in the similar quarter of 2019.
• Patronage of the share price of Okomu Oil seems low at the current beta value of 0.50x, this could be linked to the low shares outstanding of the equity.

Financial Strength/Solvency Ratio
TICKERS	2020	2019	%CHG
Debt Ratio	33.46%	23.69%	41.23
Total Debt to Equity Ratio (MRQ)	52.94%	32.87%	61.07
Equity Ratio	63.20%	72.08%	-12.32
TICKERS	2020	Industrial Average	%CHG
Beta Value	0.50	0.76	-34.21

Profitability Ratios

• EBITDA margin estimated for the period stood at 42.95%, same as 26.36% above the 42.95% estimated in 2019.
• In the same trend, Pre-tax Margin increased by 22.94% to stand at the current estimate of 40.69%, as against 33.10%, this is a confirmation of improvement in profitability within the compared periods
• Cost of Sales stood at 8.01% of the company’s Turnover figure this is a 59.46% improvement in profitability when compared to the 19.75% estimated at end of 2019 half year business session.
• Return on Equity is currently estimated at 12.81% higher than the 8.97% in 2019.
• See below for detailed profitability ratios:

PROFITABILITY RATIOS
TICKERS	2020	2019	%CHG
EBITDA MARGIN	42.95%	33.99%	26.36
PRE-TAX MARGIN	40.69%	33.10%	22.94
EFFECTIVE TAX RATE	37.37%	12.11%	208.68
CS toTO	8.01%	19.75%	-59.46
ROE	12.81%	8.97%	42.75
ROA	8.10%	6.47%	25.16

Efficiency Ratios

• Measuring management efficiency we have tested few efficiency ratios as shown below:
• Operating Expenses to Turnover Ratio was confirmed at 49.04%, a 6.06% efficiency drop from the previous estimate of 46.26%.
• Turnover to Total Assets was also considered. Thus, the company achieved a 24.75% improvements in efficiency having moved from 21.91% to 27.33%
• The Working Capital Turnover of Okomu Oil could be considered low when compared to estimate from industry peers. Note that, the ratio improved from 1.66x to 1.24x.
• Based on general standards, Okomu Oil Working Capital Ratio is Good at 3.22x, an improvement from 2.36x estimated in the previous half-year earnings. This is a confirmation that it will not face difficulty in settling its current liabilities.

EFFICIENCY RATIOS
	2020	2019	%Chg
OPEX TO TO	49.04%	46.26%	6.02
TO TO TA	27.33%	21.91%	24.75
Working Capital Turnover	1.24	1.66	-25.62
Working Capital Ratio	3.22	2.36	36.25

Investment/Valuation Ratios

• Compared to the last half-year, the management of Okomu Oil earned N4.20 per unit, this is 58.44% growth from the N2.65 half year earnings achieved in 2019.
• Since the share price of Okomu Oil adjusted substantially during the two periods observed, half-year adjusted PE-Ratio reduced to 16.78x from 19.16x.
• Meanwhile, the half-year earnings is estimated to have yielded 5.96% of the price of Okomu Oil on the Nigerian Stock Exchange (NSE), as of the time the result was made available to the investing public.
• Presently, the estimated half-year Book Value of Okomu Oil per share stood at N32.94, same as 10.99% growth from the N29.54 of last half year. Note that the Book Value stood far below both the current market price and our fair value for Okomu Oil
• Confirming the above is the estimated Price to Book Value that stood above unity.
• See below table for details

Investment/Valuation Ratios
Tickers	2020	2019	%Chg
Price at Released	70.50	52.00	35.58
EPS	4.20	2.65	58.44
TCIP/SHARE	4.20	2.65	58.44
P/E-Ratio	16.78	19.61	-14.43
Earnings Yield	5.96%	5.10%	16.87
BV/Share	32.79	29.54	10.99
PBV	2.15	1.76	22.15

Valuation

As noted above, having considered the financial stand of Okomu Oil Plc, with conservative projections and good consideration of visible risk elements, we have fairly priced each unit of Okomu Oil share price at N55.15and have rated it a Hold, since this below the current market price.