Friday, March 29, 2019 01:32PM / NSE
Initial Reaction – FBNQuest
Okomu’s FY 2018 results came in weaker than expected. FY PBT of N10.3bn came in behind consensus’ N11.1bn forecast and missed our estimate of N11.2bn by around 6.3%. The firm proposed a dividend of N3.00 (vs. our N3.20 estimate) which implies a yield of around 4%. Notwithstanding, we expect a negative reaction by the market because to our minds the magnitude of the dividend is insufficient to offset the disappointment of these results.
Gross margin expanded by +511bps y/y to 41%. However, it appears that there has been a reclassification of items between the cogs and opex lines.
While Q4 sales declined -2.8% y/y, PBT and PAT both declined by -18% y/y and -63% y/y respectively. The topline decline, the third in a row, was primarily driven by lower rubber sales which fell by around -11% y/y to N879m. Rubber exports are constrained due to on-going road works to Nigeria’s busiest export terminal in Apapa, Lagos. Similar to Q3, palm oil sales were relatively flattish during the quarter which continues to provide some evidence supporting our view that imported competition is growing. Sequentially, the trend was broadly similar, driven however by a significant gross margin contraction.
Year-to-date, the stock has gained +5%, outperforming the broad index by c.7%.
We rate the stock Outperform. Our estimates are under review.
Okomu Oil’s Q4 2018 results: actual vs. FBNQuest Capital Research estimates (N millions)
Source: NSE, FBNQuest Capital Research estimates