Portland Paints Plc has struggled over the years, largely due to finance costs. The company seems to have bounced back, but potential investors may have to wait a while for a dip in price, consistent profits, and an eventual dividend payment, before taking a position.
Portland Paints and Products Plc is our STOCK PICK for the week.
About the company
Portland Paints Plc was incorporated as a private limited liability company on the 3rd of September, 1985. The company’s name was changed to Portland Paints and Products Plc on the 24th of April, 2008 following its conversion to a public limited liability company.
The company’s core activities are the sales and marketing of paints and marine protective coatings for the maritime sector. Portland Paints is a subsidiary of UAC of Nigeria Plc.
Recent results
Results for the half year ended June 2018 show that revenue increased from N1 billion in 2017 to N1.4 billion in 2018. Profit before tax jumped from N18.5 million in 2017 to N130 million in 2018. Profit after tax also increased from N12.5 million in 2017 to N85 million in 2018.
Current Share Price: N2.80
Year High: N2.98
Year Low: N2.05
Year to Date: 27.27%
One Year Return: 33.33%
Chances of the stock going up
Possibilities of the stock going up are quite slim, as the stock market is in a bearish mode. The All Share Index is down 15.23% year to date. The stock has also out performed the NSE, year to date, so investors would be better off cashing their profits. Then re-entering.
Despite the bearish market, the stock is unlikely to decline significantly as it has a thin free float. The parent company, UAC of Nigeria Plc in November 2016 launched a mandatory take over of 2 million shares, and currently owns about 85% of the issued shares.
The stock is currently trading at 6.04% below its year high of N2.98, and would need to dip at least 50% below that price, to be attractive for entry as a fundamental investor.
Price-earnings valuation
Portland Paints is trading at a PE ratio of 17.68 times earnings, which is near twice the average price-earnings ratio on the NSE.
Outlook
Portland Paints may post an improved performance compared to the 2017 financial year, but the road ahead remains tough. The company operates in a niche market, and growth remains sluggish in the larger economy.
Portland Paints has struggled over the years, largely due to high finance costs, and had to embark on a N1 billion rights issue last year. Proceeds were used to restructure its balance sheet and fund an expansion programme.
H1 2018 results show finance expenses dropped sharply from N36.8 million in 2017 to N3.6 million in 2018.
While the company is likely to have a much improved full-year result, year on year, investors would be better off waiting for a few more years to see consistently good results before taking a position.
Portland Paints tends to pay minuscule dividends; so investors keen on bumper dividends would be better off with other stocks. The company last paid a dividend of N0.20 (twenty kobo) for the 2011 financial year.
