FO hits above N70 as investors commit to price recovery, shuns correction


Tuesday, October 22, 2013 15.35 PM / Research


Forte Oil (FO) Plc regained market optimism, after a previous day’s flat position – immediately after the release of a stellar performance; as both the investors and shareholders held their posture very firm, reaffirming the strong position of the driving zeal - an indication of strong commitment towards the price recovery mission of the firm while the bargain tendency overrides the previous low-key bargain sentiments observed yesterday in the technical analysis chart.


The stock continued to dominate price performance within its sub-sector, leading Oando and Conoil to top today's market activities.


In addition, the stock absorbed every possible bearish sentiment foresaw yesterday while it maintained a strong bid posture throughout rally periods – an indication of an unflinching zeal behind the bargain momentum as supply appeared drying up day-by-day.


This trend cannot be divulged from sentiments now pervading the market with the realisation that the firm’s expansion into the power sector – through its stakes in the Geregu I and II streams (through AMPERION Power Distribution Company Ltd) as a key game changer.


It is expected that this move would impact income stream positively by as much as N5billion in 2014; apart from the regular income stream arising from its normal operations which analyst believe should hit a PAT of N4.2billion this year and stay in the region of N5.1billion in 2014. This insight into the ‘real transformation’ of the entity seems to have given investors an added impetus to support the bid position the firm has assumed; and has invariably boosted investors' outlook towards the firm.


The stock clocked above N70.00kobo to close at N70.88kobo, setting a new 52-weeks high with a 608.80% gain within this period.


We may be about to witness a race to a new price push comparable to others in the sector which unfortunately are not as diversified or engaged in the new energy boom sector of the economy – power.


Without appearing to douse the optimism, it would appear that the stock is technically trading, albeit in a stronger position at the moment, in an overbought region. The analyst are not in any doubt of a possible correction in the near term irrespective of the bargain zeal, given that the same market information will encourage a hold by institutional investors.


However, given the upside potential in paying a premium for the stock at current price in view of the ‘analyst price target’, we do not rule out a buy pressure building up from activities from institutional investors who recognise the significant upside in such a shareholding in their portfolios.


Investors should brace up for a very interesting session with FO Plc securities as the good money is on the upside.


Note: All Equity Report(s) on Forte Oil Plc will be published in Wk1 November 2013, seeking to gauge the opinions/recommendations of analysts, fund managers and institutional investors on the stock.


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