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Oando’s third quarter performance excites shareholders, operators

By Peter Egwuatu

Shareholders and operators in the Nigerian capital market have expressed confidence that Oando Plc performance for the current financial year end 2009 will surpasses the previous year if the current rate of growth in the performance indices are maintained.

Shareholders and operators in the market have also advised the company to be very careful in choosing a date for its proposed rights issue.

According to them, “ The timing for the rights issue is necessary as it will determine the level of patronage in the offering.”

Specifically,  Oando Plc regarded as one of the Nigeria’s leading integrated energy provider, recently  recorded 19 per cent increase in Profit After Tax (PAT) for the unaudited third quarter results ended September 30, 2009. The company posted N6.64 billion in net profit compared with N5.56 billion the same period the year prior.

According to the research unit of Vetiva Capital Management Limited, one of the  major players in the Nigerian capital market, as projected,Oando’s  non-marketing portfolios have continued to actively contribute to the group’s performance in line with the company’s diversification strategy; besides improved operational efficiency and superior working capital management, this result is attributable to increased contributions from natural gas and monetisation of our upstream businesses.

Oando, which has a primary listing on the Nigerian Stock Exchange (NSE) and a secondary listing on the Johannesburg Stock Exchange (JSE)  Limited  also reported a 7 per cent  increase in turnover of N343 billion for the same period, compared with N320 billion in the corresponding quarter in 2008.

In addition, the company recorded an impressive 107 per cent in the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) to N20 billion compared with N9.5billion  recorded within the same period in 2008.

The difficult times notwithstanding, according to Vetiva has sustained Oando’s diversification programme and industry leadership as the period witnessed further investments both  in the natural gas and upstream businesses.

According to Vetiva, “ The Company’s profitability was bolstered by one-off fees from the mobilization of its contracted rigs, as well as Exceptional Income earned on debt factoring from an upstream company.

Contributions from its operational upstream asset (OML 125) continued to impact the Group’’s earnings positively. However, interest costs on its acquisition of this upstream asset which was previously being capitalized, was recorded as a charge against earnings for the 2009 financial year.

“ Oando’s profitability margins were pressured lower on the back of increased product costs for its Marketing and Supply & Trading Divisions. And our outlook, we revised our full year 2009 turnover and PAT forecast to N436.33 billion and N9.04 billion respectively, translating to an Earning Per Share (EPS)of N9.99 and a forecast  Dividend Per Share (DPS ) of N7.45 .Our fair value range stands at N120.60 –– N140.04. “We retain our previous
Overweight rating on the stock and recommend a Buy at its current market price.

The stock currently trades at a Price Earning (PE) multiple of 9.03x and a Forward PE multiple of 9.41x, relative to a Sector Average of 12.50x..”

It should be noted that during this quarter, the group signed an MOU with Gazprom, Europe’s largest gas operator, to jointly develop projects in multiple sectors of Nigeria’s oil and gas industry. It also made inroad into Ghana’s gas market with its selection as Strategic Partner to the Ghana National Petroleum Corporation (GNPC) to develop assets and infrastructure to harness natural gas resources from the country’s offshore Jubilee oilfield.

Meanwhile, the upstream division further strengthened its presence in the sector as it secured approval from Nigeria’s Ministry of Petroleum Resources to acquire 75% working interest in Exile’s 40 per cent interest in the Akepo field.

Commenting on the results Mr. Adewale Tinubu, Group Chief Executive Officer said: “Our third Quarter 2009 results emphasized the versatility of our integrated and diversified business portfolio, which thrived in the face of a challenging local operating environment mired by the ongoing banking sector reforms.”

According to him “ The Upstream portfolio continued to impact on the group’s performance as the Exploration & Production division lifted its maiden equity crude oil cargo from OML 125. The Energy Services division commenced its $150M drilling contract with an International Oil Company, whilst the Gas & Power division continued to increase revenue as new customer connects were secured in Lagos.

“We eagerly await the commissioning of our first captive power plant in Lagos and the completion of our new pipeline system in South-East Nigeria.

The expansion and monetisation of our Upstream division will continue to be the bedrock of future growth plans as we increase crude oil production rates from further development of our Upstream assets. We remain confident of a positive year end.” Tinubu stressed.


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