NASCON Allied Industries Plc, may deliver a flat 2018 full year result, going by first and second quarter results released. NASCON is our stock pick for the week.
About the company
NASCON Allied Industries Plc (Formerly known as National Salt Company of Nigeria) was incorporated in Nigeria as a limited liability company on 30 April 1973. It was fully privatized in April 1992 and became listed on the Nigerian Stock Exchange on 20 October 1992.
At a general meeting held on 29 September 2006, the shareholders approved the acquisition of the assets, liabilities and business undertakings of Dangote Salt Limited and the issue and allotment of additional NASCON PLC shares as the purchase consideration.
Dangote Industries Limited (DIL) owns about 62.19% of the company’s 2.65 billion shares. DIL is ultimately controlled by Aliko Dangote.
Recent results
Results for the half year ended June 2018 show that revenue rose from N12.7 billion in 2017 to N12.8 billion in 2018. Profit before tax rose from N2.8 billion in 2017 to N3.2 billion in 2018. Profit after tax also rose from N1.9 billion in 2017 to N2.2 billion in 2018.
Pricing
Current Share Price: N18.50
Year High: N24.75
Year Low: N18.50
Year to Date: 0.0%
One Year Return: 65.81%
Price outlook
The stock is currently trading at a year low of N18.50. The stock market closed down 5.97% last month and is currently trading at a year low. If bearish sentiments persist, the stock could dip further.
Valuation
NASCON is currently trading at a price to earnings ratio of 8.77 times earnings. This is slightly lower than the average PE on the exchange of 9.4 times earnings.
The stock is trading at a much higher premium compared to its peers such as Dangote Sugar, which is trading at 4.7 times earnings and Flour Mills of Nigeria, trading at 4.87 times earnings.
Outlook
NASCON had a fantastic FY 2017 result. Revenue increased from ₦18.2 billion in 2016 to ₦27 billion in 2017. Profit before tax jumped by over 100% from ₦3.5 billion in 2016 to ₦7 billion in 2017. Profit after tax also rose massively from ₦2.4 billion in 2016 to ₦5.3 billion in 2017.
However, 2018 full year numbers could come in slightly flat, going by the half-year results. While half-year 2018 results show a slight increase year on year, Q2 2018 results show a slight decline compared to the comparative period of 2017. Q3 2018 results would provide more clarity, as to the possibility of the company exceeding FY 2017 figures.
While NASCON is operating in a niche area, an influx of smuggled salt, if left unabated, could lead to lower profits.
