The share price of Oando Plc has tanked in the wake of the recent allegation that Jams Ibori has a majority stake in the company. Even before the allegation, the company’s share price has by some quarters remained cheap relative to its earnings per share as it’s P.E ratio is one of the lowest in the industry. Even its price to book ratio is heavily discounted trading below 50. To put this into perspective the likes of Total, Mobil and Conoil all trade at Price to Book ratios that are 11x, 13.7x, 27.9x respectively. And so, with all the negative publicity is the current price of N9 a bargain?? Lets find out.
- Valuation is done based on DCF of future retained earnings per share. This is added to the terminal value and the current Book Value per share.
- Expected Average Dividend Payout of 50% annually
- Buyer of the share is only a minor shareholder with no influence that can be liken to any form of control
- In view of the high debt to equity ratio I assumed an expected yield is 20%
- Projected dividend is deducted from earnings to arrive at projected retained earnings
- Inflation rate is projected at 9% average for the next 5 years
- A premium of 10% is added to the DCF derived Projected Book Value per share to arrive at a higher valuation figure
- Shares bought will be held for a minimum of 5years