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Vitafoam returns to a 5-year high

Vitafoam Nigeria Plc hit a 5-year high on the Nigerian Stock Exchange, this week. The stock closed at N5 in Tuesday’s trading session.

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Vitafoam Nigeria Plc, Vitafoam returns to a 5-year high

Vitafoam Nigeria Plc hit a 5-year high on the Nigerian Stock Exchange, this week. The stock closed at N5 in Tuesday’s trading session. The last time the stock traded at that level was on the 4th of September, 2015.

Vitafoam returns to a 5 year high

Bouncy Numbers

The key driver behind the stock’s rally is a sharp rise in its full-year results. Vitafoam’s financial year ends in September. For the financial year ended September 2019, revenue was up by 13.8%, from N19.5 billion in 2018 to N22.8 billion in 2019. Profit before tax jumped from N793 million in 2018 to N3.4 billion in 2019. Profit after tax also rose from N601 million in 2018 to N2.3 billion in 2019.

The company declared a N0.42 kobo dividend from an earnings per share of N1.82, amounting to a payout ratio of 23%.

Key drivers

Key drivers behind the results were higher revenue and lower finance costs. Finance costs dipped from N1.3 billion in 2018 to N1 billion in 2019, down 23% year on year. The increased revenue came from freight income which amounted to N779 million in 2019.

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The company also earned N779 million as freight income within the year.

[READ MORE: Lekoil’s stock drops by 73% on London Stock Exchange)

Where will the price move from here?

The interplay of three factors will determine the stock’s price direction: Performance of the market as a whole, the stock’s valuation compared to the larger market, and its Q1 2019/2020 results.

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Year to date, the NSE All-Share Index is up by over 9%. Single-digit rates on treasury bills have led to a movement of funds from the fixed income market to the equities space. Savvy investors are positioning in stocks for short term play during the earning season.

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The expectation of most analysts is that rates may remain at the current level for the first half of the year. Thus, there may be room for further upside for the market as a whole. When the tide rises, all boats are lifted. Year to date, Vitafoam is up by 13.6%, outperforming the NSE All-Share Index. A pullback at this point would not be far-fetched.

Vitafoam posts improved profit, set to pay N525 million in dividend 

While it has hit a 5-year high, there may be room for further upside, as the stock is trading at a price-earnings ratio far lower than the average on the Nigerian Stock Exchange (NSE). Vitafoam is trading at a PE ratio of 2.7 times earnings. The average PE on the NSE is 7.8 times earnings.

Holding the earnings constant, the PE ratio can be used to estimate the number of years it will take for the company to pay back the amount paid for each share. That would translate to 2 years and 7 months.

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Vitafoam’s Q1 2019/2020 results should be out in a few weeks from now and will be a pointer as to the company’s ability to sustain last year’s performance. The results are for the three months ended December 2019, which witnessed increased consumer spending.

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Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training.He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE).He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy.You can contact him via [email protected]

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Companies

Flour Mills moves to diversify funding sources with N29.8 billion bond listing

Flour Mills Nigeria Plc lists N29.8 billion bonds to diversify funding sources from the Nigerian capital market.

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Flour Mills makes one of the largest contributions to COVID-19 relief fund

Flour Mills Nigeria Plc’s fresh N29.8 bond listing will help the nation’s leading food business company to explore diversified funding sources from the Nigerian capital market, with the hope of enhancing growth and the development of the company.

This statement was made by the Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the listing of the Tranche A and Tranche B bonds valued at N29.8 billion on the Nigerian Stock Exchange (NSE).

The food and the agro-allied company which has remained Nigeria’s largest and oldest integrated agro-allied business with a broad profile and robust Pan-Africa distribution issued these bonds under its N70 billion Bond Issuance Programme.

Olusanya said that the company would continue to explore funding opportunities inherent in the capital market to ensure business growth and continuity.

While speaking about the Credit Rating of the Programme, he disclosed that FMN’s credit rating, as well as the operational financing of the Group, have improved considerably.

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According to him, the bonds floated by Flour Mill will help to strengthen the company’s capital base and provide the needed working capital required by the Company. He added that Flour Mills Group will continue to deleverage and replace short term financing with longer-tenured and lower price funding to optimize capital structure and reduce financing cost.

He noted that Flour Mills will continue to explore opportunities to raise fundings via the capital market as this enables the company to diversify its funding sources and continue to play a role in the capital market as a significant player in it.

What they are saying

The Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the virtual event, said;

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  • “We are delighted with the response from the market, we are happy to be listed.
  • “We are introducing an N29.9 billion listing under an N70 billion bond issuance cover; we will continue to raise funding to diversify our funding sources.
  • “The company remains passionate about feeding the nation to improve the quality of living for Nigerians through increased production and investments in backward integration.”

What you should know

  • With the successful issuance of the new N29.8bn Tranche A and Bonds, FMN has utilized its bond issuance program registered in 2018.
  • It is important to note that the Senior Unsecured bond listing includes an N4.89bn under Series 4 Tranche A of the bond issuance programme, at a 5.5% rate for 5 years, due by 2025, and a 25bn under Series 4 Tranche B of the same program at a 6.25% rate for a tenure of 7 years, due by 2027.
  • The bond proceeds will be used to refinance existing debt obligations. It will also help the company take collaborative actions to diversify the company’s financing options beyond expensive short term debt.

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Business

Lafarge moves to divest 35% shareholding in CBI Ghana

Lafarge Africa Plc has resolved to sell off its 35% shareholding in Continental Blue Investment Ghana Limited.

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Lafarge Africa provides grant for startups, Lafarge Africa’s latest earnings report reveals 8.5% decline in gross profit , Lafarge Africa gets new CFO one month after resignation of former finance director, Lafarge Plc reveals why it invited Italian man with Coronavirus to Nigeria, Lafarage Africa group Plc posts a revenue of N213 billion in 2019, profit up N17 billion, Lafarge moves to sell 35% shareholding in Continental Blue Investment Ghana Limited

The Board of Lafarge Africa Plc has resolved to sell off its 35% shareholding in Continental Blue Investment Ghana Limited, in order to cut down on costs impacting the Group’s profit.

This disclosure was made in a notification tagged- “Notice of Divestment in Continental Blue Investment Ghana Limited”, which was issued by the Company Secretary, Mrs. Adewunmi Alode.

According to the statement, the Board of Directors of the Group made the decision to divest its 35% shareholding in Continental Blue Investment Ghana Limited (“CBI Ghana”), in line with the resolutions made at the emergency board meeting which held yesterday 20th, January 2020.

This move was made to set off the cement manufacturer on the path of sustainable growth and profitability, as Lafarge’s investment in CBI Ghana has depleted significantly over the years.

What you should know

  • This is not the first time the company has had to sell off an unproductive investment in an effort to cut down on deadweight cost, as key players in the Cement industry like BUA and Dangote Cement continue to show strength and resilience through their effective cost minimization strategy which worked well in 2020.
  • Recall that in August 2019, Lafarge Africa sold off all its stakes in Lafarge South Africa Holdings (LSAH). This move helped the company to cut down costs coming from its South African subsidiary, which had been making billions of naira worth of losses for years.

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Companies

Multiverse forecasts N39.5 million profit in Q1 2021

The management of Multiverse Plc has projected a revenue of N76 million and a profit of N39.5 million in Q1 2021.

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Multiverse Mining and Exploration Plc has projected that in the first quarter of 2021, the mining and exploration company will generate N76 million in revenue, and post a profit of N39.5 million.

These projections were made by the company in a recent earnings forecast issued by the Management, and signed by the Corporate Secretaries of the company.

Key highlights of the earnings forecast for Q1 2021

  • Total revenue is projected at N76 million.
  • Turnover from agency sale is projected at N1 million.
  • Agency cost is s projected at N850 thousand.
  • Total expenses are projected at N7.8 million.
  • Operating Profit is projected at N67.3 million.
  • EBIT (Earnings Before Interest and Taxation) is projected at N67.3 million.
  • Interest Expense is projected at N27.8 million.
  • Profit after tax is projected at N39.5 million.

Key assumptions made to support the earnings forecast and projection of the company

The earnings forecast was made on the ground that there won’t be any significant change in the economic policies of the Federal Government, while the monetary policies of the CBN would not be altered significantly.

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The company also maintained that there would not be any industrial unrest that would affect its production and sales volume, while the profit of the company would not be pressured by rising costs of inputs, as prices of materials used in production shall be stable in the period under review.

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