DANGOTE CEMENT: STANDS TALL TO GROW DIVIDEND DESPITE CHALLENGING BUSINESS ENVIRONMENT
Nigerian net exporter of cement released it full year earnings report for period ended December 31, 2016 to the investing community earlier than the release date of its 2015 numbers, to foster it believe in high quality corporate governance in creating value for shareholders by consistently keeping to its post listing obligation that helps investors to forecast and plan their investment.
The company continue investment in capacity expansion and widening of its distribution network in many Africa countries and beyond have sustain the growing sales revenue records that have equally impacted the profitability ratios on yearly basis regardless of the huge cost operation and challenging economic of African countries as a result of fall in commodity price of crude oil in 2016 before the rebound that is given hope again to the region and spot of security problem in some countries in the region.
Dangote Cement delivered impressive full year result while others in the manufacturing industry are wallowing in huge loss positions and declining earnings to reflect the recessive economy and high cost of production resulting from FX shortage, huge cost energy and power to provide independent power to keep production process as gas supply was a problem due Niger Delta restiveness. In all these, the company market dominance as a result of relatively low price regime help to keep it patronage despite upward adjustment price during the year under review to factor in the increasing cost of production which we believe will drop in this current financial year.
The numbers revealed improved performances, compared to the previous year, as the top and bottom line were up, despite the harsh business environment in the country and region, sales turnover stands tall over the corresponding period by 25 per cent to N615.10 billion from N491.73 billion in 2015. Profitability growth for the year was marginal at 3 percent from N181.32 billion in 2015 to N186.62 billion as high financing, sales and operational cost have increased by 36 per cent, 60.46 percent and 39 percent respectively to N45.38 billion, N323.82 billion and N119.34 billion to hamper its profit for the year despite tax credit that supported the bottom line. Shareholders fund soared as a result of increasing investment assets to N797.35 billion from N644.72 billion in 2015 representing 24 percent growth. Its earnings per share for the period grew to N10.95 from N10.64 in the previous year. The EPS for the full year is a replica of price at 15.43x, which has extended investors waiting period but still okay, especially considering the fact that it is higher than the 13.94x recorded in 2015. The book value per share for the period stood at N46.79 from N37.83 in 2015. Profit margin of 30.34 percent is an indication of management efficiency in cutting cost. The strong retained earnings position of N677.48 billion is good to support expansion and dividend payment.
DANGOTE CEMENT PLC
2016 AUDITED REPORT
COY
2015
2016
2015
2016
(N)
(N)
% Chg
(N)
% Chg
Date Released
March 1, 2016
Feb 28, 2017
March 1, 2016
Feb 28, 2017
Price As At Released Date
148.83
168.99
13.55
148.83
168.99
13.55
Turnover
491,725,000,000
615,103,000,000
25.09
491,725,000,000
615,103,000,000
25.09
Profit After Tax
181,323,000,000
186,624,000,000
2.92
181,323,000,000
186,624,000,000
2.92
Shareholders' Fund
644,720,000,000
797,345,000,000
23.67
644,720,000,000
797,345,000,000
23.67
ESTIMATED RATIOS
Earnings Per Share
10.64
10.95
2.91
10.64
10.95
2.91
PE Ratio
13.94
15.43
11.05
13.94
15.43
11.05
Earnings Yield
7.51
6.48
-13.72
7.51
6.48
-13.72
Book Value
37.83
46.79
23.68
37.83
46.79
23.68
ROE (%)
28.12
23.41
-16.75
28.12
23.41
-16.75
Dividend Per Share
8.00
8.50
6.25
8.00
8.50
6.25
Profit Margin
36.87
30.34
-17.71
36.87
30.34
-17.71
Year End
Dec
Dec
Dec
Dec
Source: Company Financial & Investdata Research
The company influence on the market is noticeable as the most capitalised stock that stands out in revenue and profit. It has gained the interest of traders and institutional investors that use the stock to manage risk in their portfolio as it carried the market along with its trending pattern.
The company influence on the market is noticeable as the most capitalised stock that stands out in revenue and profit. It has gained the interest of traders and institutional investors that use the stock to manage risk in their portfolio as it carried the market along with its trending pattern.
The N8.50 dividend reward stands relatively ok representing about 5 percent of its share price as at released date, which supports investors’ confidence and sentiments for the equity considering the nature of it product and infrastructural gap that need to be bridged to grow the economy and drive economic diversification.
Technical View
Dangote Cement is one of the main drivers in markets since the beginning of the year. The price action recently formed a symmetrical triangle chart pattern that support trend reversal and continuation but we have noticed that the stock price has been declining since Q2 of 2016 to reflect the market and economic situation. Breakout of the triangle and downtrend resistance line is imminent as it appears to be finding buying support around the N165 level. The shares could be in the process of bottoming out and on that basis worth buying for the medium to long term with a stop below the lows.
Dangote Cement is one of the main drivers in markets since the beginning of the year. The price action recently formed a symmetrical triangle chart pattern that support trend reversal and continuation but we have noticed that the stock price has been declining since Q2 of 2016 to reflect the market and economic situation. Breakout of the triangle and downtrend resistance line is imminent as it appears to be finding buying support around the N165 level. The shares could be in the process of bottoming out and on that basis worth buying for the medium to long term with a stop below the lows.
Dangote Cement trending momentum and directional is weak as ADX is currently below 20 at 17.11, MACD is bullish and MFI is looking up to indicate that funds are entering the stock while RSI is reading 52.72 to show relative strong. However, a breakout of downtrend line is near, as other indicators like RSI and MACD are signaling buy while SO and CCI are indicating sell.
Recommendation /Analyst Opinion
The company cost management supported it position in 2016, but in this current financial year we see a better improvement in government expenditure and increasing partnership with FG on concrete road construction as central to further earnings growth of the company. Also, tax credit and concessionary plan as the government want to accelerate infrastructure development in the current year even via partnerships with the private sector, DANGCEM will be a net beneficial and better positioned to sufficiently drive growth in 2017. Before now, the company has successfully signed agreement with the FG over the construction of Lokoja-Obajana-Kabba-Ilorin road using concrete. According to FGN, Dangote would embark on the road construction in exchange for some tax remissions which we noticed in 2016 account representing at N5.7 billion just for one year. We have recommended hold before now, but based on the expectations, among others, we upgrade to BUY position for new entrants with long term investment goal.
The company cost management supported it position in 2016, but in this current financial year we see a better improvement in government expenditure and increasing partnership with FG on concrete road construction as central to further earnings growth of the company. Also, tax credit and concessionary plan as the government want to accelerate infrastructure development in the current year even via partnerships with the private sector, DANGCEM will be a net beneficial and better positioned to sufficiently drive growth in 2017. Before now, the company has successfully signed agreement with the FG over the construction of Lokoja-Obajana-Kabba-Ilorin road using concrete. According to FGN, Dangote would embark on the road construction in exchange for some tax remissions which we noticed in 2016 account representing at N5.7 billion just for one year. We have recommended hold before now, but based on the expectations, among others, we upgrade to BUY position for new entrants with long term investment goal.
DANGOTE CEMENT
Share Holding Structure
Alhaji Aliko Dangote
0.16%
0.16%
Dangote Industries Ltd
90.93%
90.93%
Other Nigerian Citizens & Ass.
8.91%
8.91%
Other Statistics
Shares Outstanding (MN)
17,040,507,405
17,040,507,405
Opening Price (2016)
N170
N170
Closing Price (2016)
N173.99
N173.99
Closing Price as @ March,22 2017
N165
N165
Date Listed
26TH October, 2010
26TH October, 2010
Year End
December 31st
December 31st
Source: Company Financial & Investdata Research
Five-Year Financial Analysis.
Looking at the company's financials for five-year period, the continued investment in capacity building of the company to meet demand for cement for infrastructural development have turn Nigerian to exporter of clement. Today, African continent market has boosted revenue as a result of increasing metric tons produced per annum. The company corporate governance which is the driver and sustenance of performance that create value for shareholders have supported it share price and help investors to project and forecast.
Five-Year Financial Analysis.
Looking at the company's financials for five-year period, the continued investment in capacity building of the company to meet demand for cement for infrastructural development have turn Nigerian to exporter of clement. Today, African continent market has boosted revenue as a result of increasing metric tons produced per annum. The company corporate governance which is the driver and sustenance of performance that create value for shareholders have supported it share price and help investors to project and forecast.
For the period under review, the sales revenue grew consistently from N298.45 billion in 2012 to N615.10 billion, representing an increase of 106.10 per cent. Also, its profitability level was up by 29 per cent from N145.02 billion in 2012 to N186.62 billion after it hit a profit level in excess of N200 billion in 2013. Net assets for the period was up by 97per cent to N797.35 billion from N404.54 billion in 2012.
Within the period of five years, the company has consistently rewarded shareholders with dividend, supported by improving numbers. It had paid a total dividend of N32.50 per share to shareholders.
DANGOTE CEMENT PLC FIVE YEARS FINANCIAL POSITIONS
2012
2013
2014
2015
2016
2013
2014
2015
2016
Date Released
April 22,2013
March 26, 2014
March 26, 2015
March 1, 2016
Feb 28, 2016
April 22,2013
March 26, 2014
March 26, 2015
March 1, 2016
Feb 28, 2016
Price @ Released
116.50
230
151.00
148.34
168.99
116.50
230
151.00
148.34
168.99
Turnover
298,454,068,000
386,177,220,000
391,687,060,000
491,725,000,000
615,103,000,000
298,454,068,000
386,177,220,000
391,687,060,000
491,725,000,000
615,103,000,000
Profit After Tax
145,024,234,000
201,198,088,000
159,501,493,000
181,323,000,000
186,624,000,000
145,024,234,000
201,198,088,000
159,501,493,000
181,323,000,000
186,624,000,000
Total Equity
404,536,401,000
550,093,270,000
591,885,155,000
644.720,000,000
797,345,000,000
404,536,401,000
550,093,270,000
591,885,155,000
644.720,000,000
797,345,000,000
Dividend
3
7
6
8
8.50
3
7
6
8
8.50
Bonus
Nil
Nil
Nil
NIL
NIL
Nil
Nil
Nil
NIL
NIL
Estimated Performance Ratios
Earnings power for the five-year period grew by 17per cent to N10.95 from N9.36 in 2012, after it had recorded an all-time high of N12.99 in 2013 and a dividend of N7 was paid them. The company had up and down trend in earnings for the period due to increased investment in its capacity building and harsh business environment. Price Earnings Ratio for the period moved from 12.45x in 2012 to 15.43x in 2016 to elongate investors waiting but down from all-time high of 17.71x in 2013 and 16.30x in 2014 respectively. This was attributed to different prices as at the released date. The book value as at the last financial year was N46.79, the highest so far in the company's history representing 79.20 percent from N26.11 in 2012. However, this is relatively low, compared to its share price. The growing net assets and robust retained earnings would further boost the company's business to earn more and grow shareholders’ funds. The estimated ratio also reveals that Dangote Cement's profit margin for the period has consistently been above the benchmark internationally but on a downtrend in the past four years from 52.10% in 2013 to 30.34%. This is healthy and shows the commitment of management to reduce cost that support profit line and create value. On the strength of the numbers posted and expectation of better financial in 2017, the stock is fairly priced at N210 each, considering fund managers and investor’s preference for consistent dividend, competent management to drive profitability and clear business model of the company to give insight.
Earnings power for the five-year period grew by 17per cent to N10.95 from N9.36 in 2012, after it had recorded an all-time high of N12.99 in 2013 and a dividend of N7 was paid them. The company had up and down trend in earnings for the period due to increased investment in its capacity building and harsh business environment. Price Earnings Ratio for the period moved from 12.45x in 2012 to 15.43x in 2016 to elongate investors waiting but down from all-time high of 17.71x in 2013 and 16.30x in 2014 respectively. This was attributed to different prices as at the released date. The book value as at the last financial year was N46.79, the highest so far in the company's history representing 79.20 percent from N26.11 in 2012. However, this is relatively low, compared to its share price. The growing net assets and robust retained earnings would further boost the company's business to earn more and grow shareholders’ funds. The estimated ratio also reveals that Dangote Cement's profit margin for the period has consistently been above the benchmark internationally but on a downtrend in the past four years from 52.10% in 2013 to 30.34%. This is healthy and shows the commitment of management to reduce cost that support profit line and create value. On the strength of the numbers posted and expectation of better financial in 2017, the stock is fairly priced at N210 each, considering fund managers and investor’s preference for consistent dividend, competent management to drive profitability and clear business model of the company to give insight.
DANGOTE CEMENT PLC- ESTIAMATED RATIOS
2012
2013
2014
2015
2016
2013
2014
2015
2016
Earnings Per Share
9.36
12.99
9.36
10.64
10.95
9.36
12.99
9.36
10.64
10.95
PE Ratio
12.45
17.71
16.30
13.94
15.43
12.45
17.71
16.30
13.94
15.43
Earnings Yield
8.03
5.65
6.13
7.51
6.48
8.03
5.65
6.13
7.51
6.48
Book Value
26.11
32.28
34.73
37.83
46.79
26.11
32.28
34.73
37.83
46.79
ROE (%)
36.00
37.00
27.00
28.12
23.41
36.00
37.00
27.00
28.12
23.41
Profit Margin (%)
48.59
52.10
40.73
36.87
30.34
48.59
52.10
40.73
36.87
30.34
Year End
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Source: Company Financial & Investdata Research
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