The Chairman of Forte Oil Plc, Femi Otedola has reportedly been taken out of the Forbes Billionaire list following a drop in his net-worth. According to Forbes, the former billionaire saw his value plummet after a drastic crash in the share price of Forte Oil Plc, a company he owns as a majority shareholder.
For those who have followed Forte Oil’s meteoric rise in its share price from just about N20 to over N330 in under 6 years, it’s not inconceivable to associate the rise to Mr Otedola’s fortunes and quests to join the Forbes Billionaires club. This of course does not belittle the amazing accomplishment of the company’s young management who have within the same period turned the company into one of Nigeria’s leading Integrated Energy firms.
Source: Bloomberg.
As the chart above depicts, Forte Oil’s share price has a direct correlation with his foray into the Forbes Billionaire list. Back in January 2016, Mr Otedola was named as the highest gainer among African Billionaires in 2015. According to Forbes, which tracks Africa and the world’s top billionaires, it was revealed that the Chairman of Forte Oil saw his fortunes rise by a whopping 75% at the end of 2015 to $1.81 billion from $778 million a year earlier.
Forte Oil’s share price was at an all time high of N325.91 when he first made the list. The share price rose from a low of about N232 in December and then went on a bull ride just as Forbes was gearing up to announce their Billionaire list. He achieved his desires as the share price of N325 made him an instant Billionaire.
As expected, the share price plunged again in February only for it to start rising again in March in time for another announcement. By March, the share price rose to another all time high of N337 affirming Mr Otedola’s position as one of the top 5 Nigerians on the Billionaire list.
It’s hard to sustain this position especially after the CBN decided to float the Naira. Once that was done, it became a lost battle for anyone trying to defend their share price. Alhaji Aliko Dangote has also suffered a similar fate. A billionaire at N197 doesn’t guarantee that you remain a billionaire at N315/$1.
As the chart above depicts, Forte Oil’s share price has remained depressed since the CBN made the announcement to “float the Naira” in June 2016. Firstly, the share price dropped below N200 before crawling back up. The fight to climb back fizzled out as it remained below N200 eventually falling below N140 after it announced a somewhat disappointing third quarter results. This effectively yanked him off the billionaire list and he is said to now have a net-worth of about $530 million
He is not alone in this as we expect both Folorunsho Alakija Abulsamad Rabiu who have a net-worth of $1.6bn and $1.1bn respectively as at March 2016 , to also drop out of the list.
Investors in Forte Oil will be looking at how all this pans out especially as the share price of under N140 still values the company at a high price earnings ratio of 39x. What this means is that any one buying the shares at N140 is pricing it at 40x its profit per share. Compare this to a GTB that is priced at 5.5x its profits per share. Forte Oil was once priced at 99x its profits per share and one would be foolhardy to bet against the share price going back up. However, this seems like a lost battle until at least, the Naira regains some form of stability. For now, one will have to hope that the bears do not ravage the share price below N100 by year-end.
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