Vetiva Capital Places ‘Buy’ Rating on Dangote Cement Shares

The stock market returned to the bears’ territory yesterday after opening positively on Monday. Consequently, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) shed 0.70 per cent to close lower at 36,455.25.

In all, 29 stocks depreciated while 16 appreciated. Although Dangote Cement Plc was among the price losers, falling N1.00 to close at N235 per share, Vetiva Capital Management Limited has placed a ‘buy’ rating on the counter.

In its latest recent earnings review of Dangote Cement Plc, Vetiva cited operational efficiency of the group, strong cement prices and improving contributions from pan-African operations as key performance drivers of the company’s half year (H1) 2018 results.

The report noted that Dangote Cement Plc recorded a three per cent earnings growth to N113 billion despite early rains, while the group earnings before interest depreciation and amortisation (EBITDA) rose 21 per cent to N246 billion ( eight ahead of Vetiva’s estimate).

Speaking on the report, the Head of Research at Vetiva Capital Management Limited, Olalekan Olabode said: “EBITDA was particularly strong in the Nigeria operations, rising 19 per cent year-on-year( y/y) to N227 billion, supported by healthy cement prices and continued improvement in fuel efficiency. Operations in the pan African business also remained strong within the period despite some operational challenges in a few countries, with EBITDA rising 32 per cent y/y to N26 billion.” Following Dangote Cement half year (H1) performance, Vetiva has revised its estimates. “We revise our volume estimate for the Group to 26.2 million MT and our FY’18 revenue estimate to N958 billion. Given this, Vetiva Research now expects an full year 2018 (FY’18) Group EBITDA of N490 billion, a strong 26 per cent y/y growth estimate. “We raised our interest expense from N27 billion to N39 billion, after taking into account the FX losses in second quarter (Q2) and the recently issued commercial papers (Series 1:N12.04 billion at 12.40 per cent per annum , Series 2: N37.96 billion at 12.65 per cent PA).