DANGOTE CEMENT CAPACITY EXPANSION TO DRIVE PRICE AND DIVIDEND PAYOUT.

History

Dangote Cement Plc is a world class cement production company and Nigeria’s largest cement manufacturer with ambitious plans to expand into 14 other African countries.  A fully integrated quarry-to-depot producer, the company has production capacity of about 20 million tonnes yearly in Nigeria.

The company is currently investing more than four billion dollars to expand its production and import capacity to around 50 million tonnes a year by the end of 2015.  This investment would increase capacity in Nigeria to at least 32 million tonnes, with new capacity being added to Ibese and Obajana, and a new factory being planned for Calabar, in Cross River state. 

Dangote Cement was listed by introduction on the floor the exchange on October 26, 2010 and had remained the most capitalised company with N3.07 trillion capitalisation which is equivalent to $15.41 billion.

DANGOTE CEMENT
Share Holding Structure
Alhaji Aliko Dangote	0.17%
Other Nigerian Citizens & Ass.	99.83%
Other Statistics
Shares Outstanding (MN)	17,040,507,405
Opening Price (2014)	N220
Closing Price (2014)	N200
Closing Price as at April 17, 2015	N180
Date Listed[I1]	26TH October, 2010
Year End	December 31st

2014 Performances Analysis

The giant cement company thriving on strong business strategies and influence of the Nigerian great business tycoon Alhaji Aliko Dangote struggled during the pre-election period as its share price nosedived with the general market regardless of the seemingly strong numbers, from a high of N244.50 in August 2014 to as low as N150.90, which made it possible for new traders and investors to invest in the company in 2014 till the first quarter of 2015.

Its strong influence on the market as the most highly capitalized equities singled it out among other equities.It may have gained the interest of the entire traders since it carried the market along with its trending pattern.  Please note that the N7 dividend reward stands relatively strong when compared to the selling price and the market price largely accounted for investors’ confidence and sentiments for the equity.

Five Years Financial Performance Analysis.

Looking at the company's scorecard, the increased capacity to satisfy Nigeria’s rising demand for cement and end its historic reliance on imports and even turning the country into a net exporter had reflected on the numbers posted.
The regular release of its financials in compliance with the post listing requirement made the company's corporate governance strong in that investors could forecast and plan their investment. 

The sales revenue of the company for the period under review grew consistently from N235.70 billion it was listed to N391.69 billion, an increase of 66.18 per cent. Also, its bottom line was up by 67.58 per cent to N184.69 billion from N110.21 billion in 2010 after it had hit a profit level in excess of N200 billion in 2013.
The shareholder’s funds for the period was up by 179.84 per cent from N211.51 billion in 2010 to N591.89 billion.

Since the listing of the company in 2010, it has consistently rewarded shareholders with dividend which was supported by improving numbers.  The company since it got listed had paid a total dividend of N19.50, excluding the bonus of one new ordinary share for 10 shares held in 2011

DANGOTE CEMENT PLC  FIVE YEARS FINANCIAL POSITIONS
	2014	2013	2012	2011	2010
Date Released	March,26,2015	March 26,2014	April 22, 2013	April 4, 2012	April 06, 2011
Price @ Released	151.00	230	116.5	103	125.5
Turnover	391,687,060,000	386,177,220,000	298,454,068,000	235,914,000,000	235,704,000,000
Profit After Tax	184,688,927,000	201,198,088,000	145,024,234,000	125,909,831,000	110,208,000,000
Total Equity	591,886,155,000	550,093,270,000	404,536,401,000	295,827,810,000	211,509,000,000
Dividend	6	7	3	1.25	2.25
Bonus	NIL	NIL	Nil	1;10	NIL

Estimated Performance Ratios

Dangote Cement earnings power per share for the period of five years grew by 52.46 percent to N10.84 from N7.11 in 2010, after the said earnings per share had recorded all high of N12.99 in 2013 on N7 dividend.   The company had four years of straight up trend in earnings before sliding down marginally in 2014 due to increased investment in its capacity building and harsh business environment.

The company recorded a PE ration of 13.93x in 2014 reducing investors waiting period from all high of 17.71x (times) in 2013 and 2010 respectively.  On the other hand, the said earnings per share was same as 7.18 per cent of its price at the released date.
The book value as at the last financial was N34.73, the highest so far in the company's existence as a quoted entity, which is grossly low compared to its market value. The growing net assets and robust retained earnings would further boost the company's business to earn more.

The estimated ratio also revealed that the company's profit margin for the period has consistently been above benchmark internationally ranging from 46.76 per cent to 53.37 percent which is healthy and shows the commitment of management in reducing cost to support profitability.

On the strength of the figures posted, the stock is fairly priced at N220 each, considering fund managers and investor’s preference to consistent dividend and competent management to drive profitability.

DANGOTE CEMENT PLC- ESTIAMATED RATIOS
	2014	2013	2012	2011	2010
Earnings Per Share	10.84	12.99	9.36	8.13	7.11
PE Ratio	13.93	17.71	12.45	12.67	17.64
Earnings Yield	7.18	5.65	8.03	7.89	5.67
Book Value	34.73	32.28	26.11	19.09	13,65
ROE	0.31	0.37	0.36	0.43	0.52
Profit Margin	47.16	52.10	48.59	53.37	46.76
Year End	Dec	Dec	Dec	Dec	Dec

Technical View

Dangote Cement at the beginning of 2013 started its rally that lasted to August 2014 where the stock hit N250 mark. This up trend was supported by strong financials that were made available on quarterly basis.  But in the last nine months, the stock have been trending down making lower lows to N141.90 in the month of February before reversing up and  currently side-trending at the level of N180. 
Meanwhile, the short to medium trending pattern holds strong support around N151.40.  At this point, the stock is attractive for positioning and more attractive when the share price declines further.
Bollinger Bands are 84.40 percent wider than normal and DANGCEM closed below the upper band by 26.9 percent. 
The large width of the bands suggest high volatility as compared to DANGCEM's normal range, as other indicators like RSI is showing over bought at the current value of 75.05, CCI, MACD and Money flow are  signaling sell as funds exit from the stock.

Recommendation /Analyst Opinion

The sector within which the company operates is undoubtedly very important to the current economic diversification of the country.  The infrastructure gap to support agricultural development, manufacturing and housing by the government and private sector are very pertinent.  This demand will drive market share and profitability in the new dispensation.  We recommend hold for now and new position when the stock adjust lower as the stock currently trades 16.61x (times) of its earnings.  The stock stands amongst the best instruments for long term positions as the company future looks brighter to support high investment returns.

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