Monday, October 31, 2016 2:37 PM / FBNQuest Research
Late this morning, Okomu Oil (Okomu) reported Q3 2016 results which showed sales growth of 22% y/y to N3.4bn. PBT and PAT advanced by wider margins of 188% y/y and 60% y/y to N1.2bn and N581m respectively. The strong sales growth was mainly responsible for the growth in earnings. A -16% y/y decline in operating expenses also helped.
Gross margin and net finance costs were flattish during the quarter. Sequentially, sales were down by -20% q/q which we attribute to seasonality. Q2 is usually Okomu’s strongest quarter. PBT and PAT fell by 48% q/q and 71% q/q respectively, owing to a 10% increase in total costs (cogs + opex) and a 39% q/q increase in net finance costs.
On a 9M basis, sales grew by 41% y/y. Again, PBT and PAT advanced by wider margins of 100% y/y and 89% y/y respectively due to the strong sales growth, a 428bp y/y gross margin expansion and a -27% y/y decline in net finance charges.
A breakdown of the revenue figure shows that palm oil sales were the major driver of the company’s overall topline growth. The business grew sales by 27% y/y to N2.7bn during the quarter while rubber sales grew by 5% to N653m. The rubber business now accounts for 13% of Okomu’s sales as at end-Sept 2016 vs 40% in 2011.
We believe the strong growth in palm oil sales was mainly as a result of expansion plans by the firm. In the past, Okomu management expressed plans to aggressively expand the company’s palm oil plantation. We also suspect that weaker competition from imports due to fx devaluation likely helped Okomu gain share and boosted its topline. As for rubber, we believe unfavorable global prices were mainly responsible for the weak performance of the commodity although the company may have recorded some fx gains from exports. Okomu exports all its rubber.
On an annualised basis, 9M sales are on course to meeting consensus FY estimates of N13.2bn. PBT is lagging behind by around 7% while PAT is tracking ahead by 23%.
Year to date, Okomu shares have gained 35.3%, significantly outperforming the NSE ASI which has declined -4.7%. On our published estimates, Okomu shares are trading on a 2016E P/E of 9.4x (vs c.30x for the consumer goods names) for average EPS growth of 2.2% y/y over in 2017-18E.
Thus, FBNQuest rates the stock Neutral, while estimates are under review.
Okomu Oil’s Q3 2016 results: actual vs. FBNQuest Research estimates (N millions)
1. OKOMUOIL Declares N4.18bn PAT in Q3 16 Results SP N41.00k
2. Okomu Oil Palm Plc: Optimistic Near Term; Neutral Rating Maintained
3. Earnings of Okomu Oil Palm Company Plc Surge on Solid H1’16 Margins
4. Okomu Oil Palm Plc Records Advancements in Sales, PBT & PAT Respectively in Q2'16 Results
5. OKOMUOIL Declares N3.59bn PAT in Q2 16 Results SP N31.51k
6. OKOMUOIL Near term positive outlook Maintains Neutral Rating
7. OKOMUOIL s Operating Expenses Grow by 17 in Q1 16 Results
8. OKOMUOIL Declares N1.59 bn PAT in Q1 2016 Results SP N29.00k
9. OKOMUOIL CPO Offsetting Rubber Weakness Maintains Neutral Rating
10. OKOMUOIL Records N73m Net Finance Expense in Q4 2015; Shares Rated NEUTRAL
11. OKOMUOIL Proposes 10kobo Final Dividend in 2015 Audited Results,(SP:N31.42k)
Okomu Oil Q3 15- Sales and PBT growth remain resilient despite high interest expense
OKOMUOIL Rated NEUTRAL as PBT Grows by 20 in Q3 15
OKOMUOIL records N2.5billion profit grows revenue by 12.33 in Q3 15