TOTAL: Q2 2015 buoyed by other income line


Monday, August 24, 2015 08:57AM / FBN Capital Research   

2015/16E EPS raised by 22% on average:
Total Nigeria’s (Total) Q2 2015 earnings were strong, primarily due to a positive surprise on the other operating income line which was up 5x y/y at N2.6bn. Management stated that subsidy re-imbursements by the federal government (FG) during the quarter was around N2.0bn.

Going forward, we have not factored any significant subsidy reimbursements into our full year estimates given its unpredictability. Nonetheless, we have raised our EPS forecasts over the 2015-16E period by around 22% but our price target by 24% to N160.0 because we have rolled forward our valuation to 2016.

Total shares have outperformed the index this year, gaining 8.8% ytd (ASI: -13.8%). They are trading on a 2015E P/E multiple of 11.4x for a flattish EPS growth in 2016E. We retain our Neutral rating on the stock.

Q2 2015 PBT up 79% y/y:
Q2 2015 results showed that although sales declined 13% y/y, both PBT and PAT were up 79% y/y and 57% y/y respectively. Other operating income grew c.400% y/y and more than offset the topline decline and a modest y/y growth in operating expenses.

Sequentially, we observe a similar q/q trend as sales declined by 14% q/q while both PBT and PAT came in stronger. Compared with our estimates, while the underlying numbers were broadly in line with our forecasts, PBT and PAT came in well ahead our estimates.

The positive surprise on the other operating income line was the sole driver behind the variance.

We understand that importation of petroleum products has picked up in Q3 2015. In addition, products scarcity which lasted for around 4 months has fully abated. As such we retain our double-digit topline growth forecast for H2 vs. H1.

Following management’s guidance, we also expect Total’s tax rate to return to normal levels of around 32-35%, down from an average of 54% in H1 2015.

We estimate that sales are likely to come in flattish y/y for full year 2015E, but expect EPS to rise by around 4% y/y to N13.6.

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