By Peter Egwuatu

Vetiva Capital Management Limited, has predicted that with Conoil Plc management resolve to increase its distributive capacity its market share would be enhanced.

According to Vetiva, “We anticipate that management’s resolve to increase distributive capacity would boost its market share in the retail space.

It gave guidance in 2009 of plans to upgrade 300 existing outlets and acquire 250 additional outlets. It also intends to construct a mega station in every capital city in the country, with a full-fledged service range (including high tech dispensing equipments, a lubricants bay, internet cafes, confectioneries, supermarkets etc).

“ Moreover, the first phase of its offshore program has commenced with plans to expend about $50 million on the construction of about five mega stations in Togo and Ghana respectively.

Improving storage capacity to impact cost line. In addition to its retail expansion drive, ongoing investments in storage capacity construction and upgrade would cut-back present and future costs associated with the use of third party storage facilities. While upgrades of depot facilities in Apapa, Warri and Kaduna should bring on-stream a combined additional capacity of 160,000 MT, it is also constructing new storage tanks in Apapa, Port-Harcourt and Calabar to complement capacity in those locations. In addition, Conoil in the 2009 financial year procured new bowsers to boost the speed of its service delivery to airlines in a bid to improve its aviation sale business.”

In its analysis of the petroleum sector, Vetiva stated “With a 43% share price appreciation in the current year, the counter’s gains in its sector at current levels rank second only to Total, which has climbed 51% Year to Date (YTD). Coming off a 2009 year low, it has outpaced the Petroleum Marketing sector and the broader market, which have gained

11.89% and 14.02% YTD respectively. While some focus was being placed on its 2009 to second quarter 2010 its late disclosure as well as the negative overriding market sentiments shaved off 37% from its year high of N56.14.

Though we remain cautious on the timeliness of its financial disclosures and inaccessibility to the company’s management, our valuation midpoint which is slightly below its year high trading point. offers a 37% upside, thus compelling an “Overweight” rating.”

In the area of dividend payouts, Vetiva said “ Similar to other petroleum marketing majors, the company’s consistent dividend payout history is also a key selling point for investors in the high cash generative business. It has maintained payout ratios between 38% and 74% between 2004 and 2009. We estimate a 50% payout in FY’10 (slightly higher than 45% in FY’09). This amounts to a Dividend Per Share (DPS) of N1.87 (25% YoY growth), translating to a dividend yield of 4.74%”.