Lagos – Presco, the leading palm oil company in Nigeria is outperforming the market after a nine month bottom line that looked little different than the equivalent position Year-on-Year. But the stock is trading at multiples that could send the stock trading higher if full year results turns out better than the equivalent period.
Even if at the close of trading Tuesday March 19, 2019 the stock was on the top losers table after losing N7 to ebb at N68; it had done enough over the last six months to outperform the All Share Index (ASI), making returns of 16 per cent to investors compared to a negative 4 per cent by the ASI.
This continued a trend seen much earlier, but with the ASI improving by 3 per cent over its February performance while Presco had a 4 performance improvement.
With the stock trading at 2.69 multiple, according to data compiled by Bloomberg, there is significant scope for a rise in price in the near term as it appears undervalued.
This is all the more so when the company has been consistent in improving bottom line even though the nine months results ending last September show profit as stagnant.
Meanwhile in the nine months ending September, Presco had a setback in revenue, which shrank 4 percent to N16.24 billion from N16.92 billion. But because the company was able to tame Cost of Goods Sold (COGS) by 20 percent to N3.94 billion from N4.9 billion, gross profit inched up 2.7 percent to N12.3 billion from N11.9 billion. Rising gross profit pushed gross profit margin to 75 percent from 70 percent, giving top line a respectable berth.
Operating margin of the oil palm producing company improved by an inch rising to 52 per cent from 50.2 per cent despite a setback in operating profit, which fell by 2.1 per cent to N8.4 billion from N8.5 billion. This is obviously from allowing costs to rise.
The company’s pre-tax profits also fell in the process by 6 per cent to N7.5 billion from N7.9 billion, leading to pre-tax margin of 46 per cent from 47 per cent. Net profit followed the descent by falling 1.5 per cent to N5.3 billion from N5.4 billion, pulling up net profit margin to 32.5 per cent. This is robust against n inflationary environment of over 11 per cent that persisted for most of last year.
In the company’s six months showing ending June, revenues […]