Mobil Oil Nigeria’s PBT grows by 114 %
..As stakeholders await new corporate identity
For Mobil Oil Nigeria Plc which recently came under the control of NIPCO Plc, which acquired controlling shares of EXXON Mobil, result for the year ended 31 December 2016 showed remarkable performance amidst tighter operating environment.
As stakeholders await new corporate identity for Mobil Oil Nigeria, the company’s 2016 results came in better than many stakeholders had expected, with gross margin expansion and improved real estate income which grew 40 per cent y/y to N6.0billion.
The company’s Q4 2016 Profit before tax (PBT) and Profit after tax (PAT) rose meaningfully, y/y and q/q: In Q4, sales grew 18 per cent y/y to N22.2billion.
The topline growth combined with a gross margin expansion of 226 points y/y to 17 per cent and other income growth of 82 per cent y/y led to the PBT growth of 114 per cent in 2016.
Rental income from investment properties, which was up 42 per cent in 2016 to N6.0billion subsequent to completion of renovation works on major investment property, was the primary driver for other income growth.
Generally, Mobil’s strong y/y performance was mainly driven by strong white product unit volume sales growth. Sequentially, while sales grew modestly, PBT and PAT were up 80 per cent q/q and 122 per cent q/q respectively.
Last week, NIPCO Investments, owner of NIPCO Plc, a leading Independent marketer NIPCO Investments, owner of NIPCO Plc, leading Independent marketer, pronounced the completion of its acquisition of ExxonMobil’s 60 per cent majority stake in Mobil Oil for N90billion or US$301m.
Meanwhile, going by the transaction note from the company, analysts assume an exchange rate of N300/US$ was applied which works out as an agreed sale price of N417 per share, representing a 40 per cent premium to Mobil’s share price of N300.00 before the announcement.
In the short-term, it has been taken that both entities are to operate independently under the NIPCO group. However, the Mobil business will now be called Double 1 Plc (II Plc). The new management’s focus would be to expand Mobil’s retail footprint and grow the company’s lubricants business.
Beyond the transaction price, further details of NIPCO’s acquisition were not provided to the market; as such it is difficult to determine what sort of impact the deal could have on Mobil’s operations and financial position.
There is a possibility that some level of leverage was applied. Following the positive earnings surprise in Q4 2016, we have raised our EPS forecasts over the 2017-18E period by 12%. Our new price target of N215.0 is up by a similar magnitude.
From current levels, we see an implied downside potential of -40% and retain our Underperform rating on the stock. Notwithstanding, we appreciate that a tender offer to minority shareholders at a price similar to the acquisition deal price is a strong possibility, influencing trading patterns over the next few weeks. Year-to-date Mobil shares have appreciated +29%, outperforming the NSE ASI by around 33%. The shares are currently trading on a 2017E P/E multiple of 17.7x for an EPS growth of 8% in 2018E.
