Margin Improvement Spurs Impressive H1'17 results for Forte Oil Plc; BUY signal

Tuesday, August 01, 2017  7.49AM / CardinalStone Research  

Forte Oil Plc. (FO) H1'17 results - Turnover fell by 22.2% to N65.6 billion, in line with our estimate of N66.9 billion (1.8% deviation). After tax earnings rose by 84.0% to N4.1 billion, at par with our estimate of N5.4 billion (2.8% deviation).  

Other Highlights: 

• Revenue was down by 7.3% QoQ whilst PAT rose by 97.5% QoQ;
• The  petroleum marketing division struggled in H1'17 evidenced by the 44% drop in revenue to N41.3 billion. Its contribution to aggregate revenue dropped to 63% (H1'16:88%);
• However, the strong showing in the higher margin lubricant and power divisions continued from Q1'17 levels as revenues rose by 23% YoY and 284% YoY to N6.3 billion and N16.8 billion respectively.  Respective contributions to aggregate revenue jumped to 10% (H1'16: 10%) and 26% (H1'16: 5%); and
• Power revenues benefitted from improved pricing and higher capacity utilisation.

The quarterly breakdown of FO's result is shown below; 

Based on our last review, FO has a target price of N110.17 (BUY). For further information, contact research@cardinal-stone.com

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