Rating: Hold
Current Market Price: N168.00

Latest Interim Dividend: N4.00
Year High: N168.00
Year Low: N130.00
Fair Value: N110.68
Equity Analyst:  Tunde Segun Jeariogbe

Introduction/ Key Financials

• In this report, we observed the half-year financial statistics of Total Nigeria Plc for the period ended 30^th June 2021, compare same with the figures released in the corresponding quarter of 2020 for proper growth analysis
• Meanwhile, for projections and valuation analysis, we explored the full-year financial numbers. It is noteworthy that notwithstanding the improvement observed in the Oil & Gas sector of the economy, we have remained conservative in our approach.
• It is important to note also that, compared to the negative earnings reported at the end of the 2020 half-year, the management reported impressive numbers this time around.
• In our opinion, performance is chiefly enhanced by improvements recently recorded in the sector in recent times.
• See below for details:

Company figures

• The company achieved 41.82% growth in Revenue to N151.33 billion, from N106.70 billion in a similar period of last year.
• Cost of Sales increased by 33.43% to N125.82 billion, compared to N94.30 billion reported at the end of the 2020 half-year.
• Operating Profit on the other hand is estimated at N12.52 billion, as against the period N716.81 million Loss.
• Operating Expenses increased by 11.78% to the current N15.38 billion compared to N13.76 billion in the corresponding quarter.
• A total of N842.01 million was reported as Finance Cost through the six-month period, far below the N1.95 billion used in the similar period of 2020.
• Profit before Tax turned positive at N11.77 billion, as against the previous loss before tax of N796.92 million.
• Having made allowance for income tax within the period, the management of Total Nigeria reported N8.06 billion as the Net Profit for the period, compared with the Loss after Tax of N537.18 million at the end of the first six months of last year.

• Current Assets jumped over that of the corresponding period by 75.68% to N142.10 billion from N80.89 billion.
• Non-Current Assets dipped by a marginal 1.09% to N44.79 billion, as against the 2020 half-year’s N45.28 billion.
• Current Liabilities on the other hand grew by 55.03% from the previously reported N95.76 billion to N148.46 billion.
• Non-Current Liabilities appreciated to N5.62 billion, same as 14.37% above the previously reported N4.91 billion.
• On the strength of the above, the estimated Net Assets is N32.82 billion, 28.68% above the N25.50 billion estimated in the similar period of 2020.
• Retained Earnings equally jumped by 28.87%, as it is currently valued at N32.65 billion against N25.33 billion in the corresponding quarter

Interim Dividend Details

• As noted above, the board of Total Nigeria Plc announced a total of N4.00 interim cash dividend at the end of the period under review. None was paid in the corresponding period of last year.
• The said dividend is the same as 16.68% of the total earnings reported at the end of the period.
• The dividend translated to a yield of 2.38% of the price of Total Nigeria’s share price on the Exchange as of the time the result was made public.
• According to the corporate action released separately through the Exchange also, the closure date for the dividend is between 16th – 20th August 2021.
• While the qualification date is 13th August, the payment date is scheduled for 13th September 2021.

Financial Strength/Solvency Ratios

• Debt Ratio at the close of the period is estimated at 82.44%, a 3.33% difference over the 79.79% estimated from the 2020 half-year earnings.
• Nevertheless, the Total Debt stated at the end of the period is the same as 469.46% of the Equity Ratio. This is the same as 18.94% higher than the 2020 estimate. Please understand that it also implies that more debt was used in servicing the company’s Assets through the period as against Equity
• We also estimated Equity Ratio which shows that Net Assets through the Period is same as 17.56% of the Total Asset of the company, this is lower than the 20.21% estimated in 2020.
• With our Beta estimate of 0.53x on Total Nig. Plc shares on the floor of the exchange, one can safely conclude that the shares of Total enjoyed less patronage on the floor of the exchange, in our opinion, this is strictly due to the high price and the shareholding structure

Profitability Ratios

• EBITDA margin estimated for the period stood at 8.28%, this is an outstanding growth over the negative margin posted in the comparable period
• In the same trend, Pre-tax Margin stood at + 7.78%
• Effective Tax Rate varied largely due to the Loss position recorded in the corresponding period.
• Cost of Sales ratio remained stable in the two periods compared, please note that the ratio only deviated by marginal 5.92%.
• Return on Equity is currently estimated at 24.57%, as against Loss on Equity in the corresponding quarter.

Efficiency Ratios

• Measuring management’s efficiency we have tested few efficiency ratios as shown below,
• Operating Expenses to Turnover Ratio was 10.17%, same as the 21.18% improvement in efficiency over the previous estimate of 12.90%.
• Turnover to Total Assets was also considered. Thus, the company achieved a 4.25% drop in management efficiency from 84.56% to 80.97%.
• See below for other efficiency ratios:

Investment/Valuation Ratios

• Compared to the previous half-year, the management of Total Nigeria Plc earned N23.76 per unit share, an outstanding growth over the Loss per share of the corresponding quarter
• Our half-year adjusted PE/Ratio stood at an impressive 7.07x.
• Estimated half-year earnings yielded 14.14% of the share price on the Exchange as at the time the result was released.
• Presently, the estimated half-year Book Value Per Share stood at N96.67, the same as 28.68% of last year’s N75.13 each. Please note that the Book Value stood far below both the current market price and our fair value for the stock.
• Confirming the above position is the estimated Price to Book Value at above unity.
• See the below table for details

Valuation

As noted above, having considered the financials, with conservative projections and good consideration of visible risk elements, we have fairly priced each unit of Total Nigeria Plc share price at N110.68. Meanwhile, considering the improved aura currently surrounding the sector, we have rated it a Hold.