ugodre:

Just posted that of CCNN. Let me know what you think? Tnx

Wonderful....simply epic..Although i expected the price of CCNN to fall but it didnt..


Bros no vex but am still waiting for sterling bank analysis and other banking stocks....One down one more to go

Thanks bro

Will be back! Reserving this space for when i have time to read and analyze

ugodre: As we all now know, 2007/2008 was the year the Nigerian Stock Exchange bottomed out making Nigerians looses trillions of Naira. A lot of us have even vowed never to near that market again. However, last year the NSE All Share Index rose about 33% year to date making investors believe the stock market is now back to the good old days. While this is good, some of the problems and mistakes we made when we all went out to buy stocks are still there and will always be so far we still run capitalism. But that is not why we must not buy shares.

Warren Buffet once said the best time to buy stocks is when every one is afraid of buying and vice versa. People are still making millions even after crash. You only have to look to the fundamentals and open your ear to all the plethora of market information we come across everyday . For example, news that Government has eliminated duty and tax on Cement importation is bound to affect the business of local cement manufacturers, probably a sign to dump their shares.

On this thread, i will be posting my analysis and opinion of results of that have been released by companies quoted on the Nigerian Stock Exchange. I hope my analysis will help the uninformed and those that are investment savvy, my perspective on the the fundamentals of companies and what other factors may determine my decision to buy, hold or sell their shares. My articles will be very short, interesting and revealing to ensure you are not bored will too much financial grammar. I will also love to see your comments and perspective as to one can claim knowledge of everything.

Some of us who have specific information about companies that can help eliminate asymmetry will be most welcomed. This will help put forward a better and concise analysis of companies that we review. So guys, lets have some fun.

Warren Buffet is absolutely right, where there is transparency in the market. The corruption and opaqueness in the Nigerian market is still a huge problem. Have they cleaned up the whole mess of 2007? Were any companies/individuals prosecuted for the massive frauds? Remember fraudulent malpractices was the main reason the Nigerian market collapsed

Institutional investors with deep pockets can risk investing in the Nigerian market. Individuals have to pause before committing funds.

I'll say for now, in Nigeria people should invest in tangible businesses or assets. Things you can see. Real estate, food processing etc Even eCommerce businesses has a huge growth potential

good job ugodre,i so much like ur analysis but i would advise you demystify the stock investment terminology so as to make your analysis more comprehendable

thanks,its very insightful

occam:

Warren Buffet is absolutely right, where there is transparency in the market. The corruption and opaqueness in the Nigerian market is still a huge problem. Have they cleaned up the whole mess of 2007? Were any companies/individuals prosecuted for the massive frauds? Remember fraudulent malpractices was the main reason the Nigerian market collapsed

Institutional investors with deep pockets can risk investing in the Nigerian market. Individuals have to pause before committing funds.

I'll say for now, in Nigeria people should invest in tangible businesses or assets. Things you can see. Real estate, food processing etc Even eCommerce businesses has a huge growth potential

Not too sure i agree with you. The real estate market in Nigeria is severely overpriced, particularly in Lagos. I agree the NSE has a lot to work on, but there is a signifcant improvement from 2008. The banks have cleaned up their acts to a certain degree, and now are quite discounted in my opinion. Dividend yields of 5-7% were unheard of during the stock market boom of 2008.

Why is Zenith Bank TAX so low compared with GTB. They had comparable PBT of over 100Bn but the PAT is just worlds apart. Any explanation please?

I do not put my funds where there is no transparency.

OKOMU OIL POST FLAT PAT: YET, STOCK LOOKS LIKE A MUST HAVE!!!

Okomu Oil Plc is currently the toast of the market and the reason for that is not far fetched. They have proposed a dividend per share of N7 and a bonus issue of one for one. People like these sort of freebies and would die to be part of it. But is this justified? Okomu Oil released their 2012 Audited Accounts (IFRS) with revenues dipping 8.8% to N10.1billion. Gross Profit was however better rising slightly by 3% to N8.2billion. Profit After Tax however, dropped slightly to N3.59billion (2011:N3.9billion).

So what's with this result?

First a little about Okomu Oil. They are a leading oil palm producing company in Nigeria and have been in operation since 1979. They were privatized sometime in 1990 and have consistently delivered on profits over the last 10years. This year too saw robust profit of N3.6billion 8.5% lower than what was achieved in 2011. The reason for this is explainable . Firstly, the company saw a slight dip in revenues from N11billion to N10billion even though in the last five years revenues have grown with a CAGR (Compounded Annual Growth Rate) of 19% growing from N4.7billion in 2008 to N10.1billion in 2012. In fact it jumped from N6billion to N11.1billion in 2011 alone, the highest jump in its history, mainly due to a 144% jump in export earnings from Rubber. So 2012, may just be a slight blip or some correction in revenue expectability. Another reason could be the drop in inventory turnovers, as they only turned inventories1.7X in 2012 compared to 2.85x in 2011. Thus, it took them an estimated 207days to clear inventories as against 127days in 2011.



Secondly, profitability however failed to beat 2011's record of N3.9billion due to rising operational cost. Employee cost rose sharply by 25% to N1.97billion probably as a reward to employees after the magical 2011. Other expenses also jumped to N1.6billion (2011: N1.35billion). So whilst revenue dipped slightly, operating cost rose. Luckily, PAT was still N3.5billion thanks and in no small measure to a huge drop in cost of sale. It could be that they have finally found a way to reduce direct export cost maybe due to various incentives available to export oriented business in the last year or so. Their annual report when published will help explain this.



Should Shareholders be worried about this performance?

Despite the drop in revenue and rising cost, this result probably represents the reality of the current business environment they will be operating in. Investors also, should not see this as a bad result but should view the result in a larger context and ask if shareholder value was impaired. So far, that didn't seem to have happened. Operating profit margins are high and so is profit margin. In fact, for every N100 in revenue they make a profit after tax of N35.4 (2011: N35.3). Return on Average Equity (ROAE) was 16% and if you deduct accounting entries brought about by IFRS, it rises to 23.6%. The company is also debt free with Equity making up 81% of total assets. The company also sits on a cash machine, generating N5billion in operating cash in 2012 (2011: N4.5billion). It currently sits on N3.9billion of cash enough to pay dividends estimated at about N3.3billion (almost all of the earnings made this year). On the back of this, Investors should be ecstatic. They could have still made shareholders happy without even giving out bonus shares. The Bonus payment may just be a trio objective to rewarding existing shareholders by distributing part of its revenue reserves of about N17.6billion whilst also increasing the liquidity of their stock. This will also boost return on equity in the coming years.



Is it worth buying?

Now this may depend on your appetite. The share price has risen over 216% in the last year and currently trades at N95. In terms of whether it is expensive it sure isn't considering the fundamentals I just put out!!! At N95 (April 5 price) the share price is only 12x its current earnings per share and with the planned bonus and dividend payments people who buy now will cherish the stock. Unfortunately though, only about 476million of their shares is outstanding making it seem illiquid. Out of its average N45billion market cap, only N872million of it was traded in the last month in terms of value.

Nevertheless, if I had the cash, I'd be on the sidelines waiting to buy....NOW!!



Okomu Oil Plc posted its audited accounts on the website of the NSE

*NOTE: I WILL BE REVIEWING THE COMPANY RESULTS MORE OFTEN IN THE COMING WEEKS AS THEIR ANNUAL REPORTS ARE PUBLISHED AND 2012 FIRST & SECOND QUARTER RESULT IS ANNOUNCED

Born 2be Rich:

Wonderful....simply epic..Although i expected the price of CCNN to fall but it didnt..


Bros no vex but am still waiting for sterling bank analysis and other banking stocks....One down one more to go

Thanks bro

Will try to analyse that this weekend.

occam:

Warren Buffet is absolutely right, where there is transparency in the market. The corruption and opaqueness in the Nigerian market is still a huge problem. Have they cleaned up the whole mess of 2007? Were any companies/individuals prosecuted for the massive frauds? Remember fraudulent malpractices was the main reason the Nigerian market collapsed

Institutional investors with deep pockets can risk investing in the Nigerian market. Individuals have to pause before committing funds.

I'll say for now, in Nigeria people should invest in tangible businesses or assets. Things you can see. Real estate, food processing etc Even eCommerce businesses has a huge growth potential

Good reminder. That is why I started this thread. No matter how much lies they embed in their financials, by analysing them we shall expose the lies one by one. That is why we must all strive to understand the fundamentals...even in Real Estate!

samguru: good job ugodre,i so much like ur analysis but i would advise you demystify the stock investment terminology so as to make your analysis more comprehendable

thanks,its very insightful

Let me know where you need explanation and I can help. Using some of those terms are almost impossible but I will try to simplify in subsequent post. Cheers

jacobs123: Why is Zenith Bank TAX so low compared with GTB. They had comparable PBT of over 100Bn but the PAT is just worlds apart. Any explanation please?

Their respective annual report when published will help explain. Taxation is a function of how much expenses the tax man allows you to write off before they tax you. That is where tax efficiency comes in. It appears for now that Zenith Bank was more tax efficient in this case.

Emmy9ite: I need a stock broker. How can i get one?

Go to cashcraft or call this number 08056055344 Tope

Impressive analysis, great effort sir.

Any info about UBA?

Wherever money and financial intelligence is discussed, you must reserve a front row seat for Mr. 9free

Ugodre, please clarify me on how PE ratio and EPS affects share price and its profitability.

Hi guys! Pls i need a statistician dats good at interpreting t-test and ANOVA. I wouldnt mind paying for the service. The task involves critiquing a statistical report of a journal article. Pass d message pls. My email is: mailay2day@yahoo.com

Wat about first bank how did they do?

rossi49ja: Ugodre, please clarify me on how PE ratio and EPS affects share price and its profitability.

EPS: Earnings Per Share. Imagine that you have a business you co own with some friends. You own 500shares or 50% of the company and your friend owns another 50% 500 shares. That means you both own a combined 1000shares. If at the end of the year your business makes a profit of N100k, then your earnings per share for the business will be N100,000 divided by the 1000shares which is N100.

Price Earnings. Now if your friend decides he no longer wants the business and ask you buy his 50%(500shares) for N250,000. It means,you pay N500 for each share he owns.

P.E ratio helps you determine if his share price is expensive or not.it simply is the price per share divided by the earnings per share. In this example, N500/N100 = 5x. In other words you are paying a price equivalent to 5 times the profit the business makes.

Whilst this may seem,unreasonable at first investors look at the future earnings potential of the company. Now imagine that in five years that company makes a profit of N500k or earnings per share of N500. Your N500 share price divided by the earnings per share of N500 is just 1 meaning the premium you paid five years earlier has been justified. Meanwhile whilst you bought that share from him at N500, the value may also rise more than that as people now want to pay a premium for the new earnings of N500k.At the same 5x that shares you paid N500 may now be worth N2,500 assuming everything remains the same.

So,basically p.e ratio is used to determine the value of a share to see whether it is expensive. A higher p.e ratio may also been that investors place a higher growth potential in the earnings of the company. News businesses typically have high p.e's whilst large and older ones do not.

Hope you get the drift.

cheers

Great Analysis.

Can you please do one for Union Bank?

[size=30pt]easykobo[/size]

ugodre:

EPS: Earnings Per Share. Imagine that you have a business you co own with some friends. You own 500shares or 50% of the company and your friend owns another 50% 500 shares. That means you both own a combined 1000shares. If at the end of the year your business makes a profit of N100k, then your earnings per share for the business will be N100,000 divided by the 1000shares which is N100.

Price Earnings. Now if your friend decides he no longer wants the business and ask you buy his 50%(500shares) for N250,000. It means,you pay N500 for each share he owns.

P.E ratio helps you determine if his share price is expensive or not.it simply is the price per share divided by the earnings per share. In this example, N500/N100 = 5x. In other words you are paying a price equivalent to 5 times the profit the business makes.

Whilst this may seem,unreasonable at first investors look at the future earnings potential of the company. Now imagine that in five years that company makes a profit of N500k or earnings per share of N500. Your N500 share price divided by the earnings per share of N500 is just 1 meaning the premium you paid five years earlier has been justified. Meanwhile whilst you bought that share from him at N500, the value may also rise more than that as people now want to pay a premium for the new earnings of N500k.At the same 5x that shares you paid N500 may now be worth N2,500 assuming everything remains the same.

So,basically p.e ratio is used to determine the value of a share to see whether it is expensive. A higher p.e ratio may also been that investors place a higher growth potential in the earnings of the company. News businesses typically have high p.e's whilst large and older ones do not.

Hope you get the drift.

cheers

This is where i srruggle with the fact that nestle and nigerian breweries are selling at p/e's of 28. As their growth rate is barely 20%. Whereas the banks have growth rates of more than 50%. Surely there has to be a price correction for the nestle, cadbury and the likes. Or am i too pessimistic??

Pls do an analytical review of First Bank of Nigeria seconded by Japaul Oil. Thank you.

shigidi:

This is where i srruggle with the fact that nestle and nigerian breweries are selling at p/e's of 28. As their growth rate is barely 20%. Whereas the banks have growth rates of more than 50%. Surely there has to be a price correction for the nestle, cadbury and the likes. Or am i too pessimistic??

no you are not. Price correction will come but it depends on demand and supply. Nestle stock is one most institutional investors want to own but its not very liquid making it scarce

This is where i srruggle with the fact that nestle and nigerian breweries are selling at p/e's of 28. As their growth rate is barely 20%. Whereas the banks have growth rates of more than 50%. Surely there has to be a price correction for the nestle, cadbury and the likes. Or am i too pessimistic??

I personally would prefer a low p/e ratio 4 banks, becos we don't know d actual truth about their bad loans. I believe d banks are inherently risky. One day d madness of investiing large sums of money in gov bonds and TB would reduce, and when dis stops everyone go answer him papa name.

Great work man!

akintun: This is where i srruggle with the fact that nestle and nigerian breweries are selling at p/e's of 28. As their growth rate is barely 20%. Whereas the banks have growth rates of more than 50%. Surely there has to be a price correction for the nestle, cadbury and the likes. Or am i too pessimistic??

I personally would prefer a low p/e ratio 4 banks, becos we don't know d actual truth about their bad loans. I believe d banks are inherently risky. One day d madness of investiing large sums of money in gov bonds and TB would reduce, and when dis stops everyone go answer him papa name.

But this is where i think sanusi did well.he has brought transparency to a large degree. I agree with you though, imagine access bank that just declared a PAT of 40bn projecting 9bn PAT for q2 2013! Something smells a bit fishy there. Shouldnt profit growth be continuing? Q2 2012 was roughly 15bn.

Pls can we have that of union bank. Thank u so much

deda: Pls can we have that of union bank. Thank u so much

.

Union bank sir.

shigidi:

But this is where i think sanusi did well.he has brought transparency to a large degree. I agree with you though, imagine access bank that just declared a PAT of 40bn projecting 9bn PAT for q2 2013! Something smells a bit fishy there. Shouldnt profit growth be continuing? Q2 2012 was roughly 15bn.

Guy, look closely at interest rates in Bonds, T/Notes and T/Bills market and you will understand why projected profit growth should be declining.