Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value

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Following our recent corporate visit to Ardova Plc (formerly Forte Oil Plc) where we discussed the operating landscape in the downstream sector and Ardova’s strategy for the year, we have revised our 2020 projections for the firm’s financial performance. Our revised forecasts yield a 2020 turnover of ₦207.1 billion, slightly ahead of our previous estimate of ₦204.5 billion. Similarly, we have raised our 2020 projection for after-tax profit to ₦4.1 billion (previous: ₦3.8 billion). That said, we have a revised 12-month target price of ₦30.86 (previous: ₦27.47) and maintain our BUY rating on the counter.

Management seeks cost containment in fuel operations

In 2019, Ardova significantly grew its turnover by 31% to ₦176.6 billion, with revenue from premium motor spirit (PMS) contributing about 70%. According to management, PMS sales volume advanced 46% to 952 million litres, consequently lifting Ardova’s market share to 21%, the second largest in the industry after Total Nigeria Plc, based on data provided by the Major Oil Marketers Association of Nigeria (MOMAN). Also, the firm grew aviation turbine kerosene (ATK) volume by 28% to 24 million litres. Meanwhile, the volume of automotive gas oil (AGO) sold during the year contracted by 9% to 107 million litres, dragged by constraints in logistics. Overall, the performance of the fuel business last year corroborated management’s mid-term plan to expand Ardova’s footprint in the downstream sector.

Akin to the surge in fuel operations, the lubricant segment posted a 26% y/y growth in the top line to ₦17.2 billion, taking the firm’s lubricant market share to 18%, second after the industry leader. This was driven by a 19% increase in lubes volume, coupled with the improvement in lubricant pricing (estimated average price- FY’19: ₦750/litre, FY’18: ₦707/litre).

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Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand Spur

As per 2020, management highlighted the possibility of slower volume growth in the fuel business, as the firm’s prime focus is on cost reduction and improved pricing along its product supply chain (especially PMS). Specifically, management plans to implement cost-cutting measures at its depots, with the aim of supporting margins over the course of the year. Based on this, we forecast a milder growth of 18% (FY’19: 32%) in fuel turnover to ₦188.3 billion (previous: ₦185.8 billion). On the lubricant front, our previous projection for turnover in 2020 remains unchanged at ₦18.7 billion (FY’19: ₦17.2 billion), as the stiff competition in the lubes sphere is expected to impact turnover growth.

Despite the marked improvement in Ardova’s 2019 revenue (up 31%), gross profit came in flat at ₦11.3 billion following the drop in gross margin to 6.4% in 2019 from 8.4% in 2018. With management seeking to tame costs at its depots, alongside anticipated softer ex-depot prices of PMS (the result of lower oil prices), we expect gross margin to advance 1.1 percentage points to 7.5% in 2020, bringing gross profit to ₦15.5 billion (up 38%). Furthermore, we envisage that the operating expense margin will stay flat at 6%, resulting in an operating profit of ₦5.7 billion (FY’19: ₦4.9 billion).

Read Also:  Forte Oil diversifies into solar power business

Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand Spur

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With regard to debt exposure, Ardova slashed its debt portfolio to ₦5.3 billion in 2019 from a balance of ₦18.7 billion in 2018. Despite this significant deleveraging, finance charges spiked 56% to ₦4.8 billion, inflated by a ₦1.6 billion expense on promissory notes. In 2020, we project a 79% slide in finance expenses to ₦1.0 billion, a reflection of relatively smaller and cheaper leverage. Our projection for finance costs translates to an interest coverage ratio of 5.5x (FY’19: 1.0x).

Ardova eyes LPG expansion, plans to drop sales of green products Similar to 11 Plc’s 2018 strategy, Ardova took a step to launch the liquefied petroleum gas (LPG) business in the second half of 2019, and subsequently recorded LPG turnover of ₦17 million in the fourth quarter. While the contribution of LPG operations to total revenue (FY’19: ₦176.6 billion) might seem inconsequential in the interim, we believe the prospects for growth over the long term remain strong, as the management aims to intensify the expansion of LPG operations going forward.

On the other hand, Ardova plans to discontinue the sale of its 1.5 KVA solar systems, as the target market for these green products falls short of expectations. This explains the sharp drop in sales of solar systems to ₦39 million in 2019 from ₦141 million in 2018. Nonetheless, management aims to revisit the green energy sphere in the long run through the creation of a commodity market from solar energy.

Well-positioned for a possible PMS deregulation Since 2018, Ardova has undergone considerable business restructuring, which saw the launch of Havoline lubricants products in 2018 and the disposal the Geregu power plant, the upstream business and Ghana-
based downstream operations in 2019. This left management to focus on the domestic downstream segment. As such, we have witnessed a CAGR of 47% in Ardova’s fuel turnover over the last two years. Although the downstream segment remains shackled with lean margins in the interim, we note that the gradual evolution of a low oil price era could spur the deregulation of PMS in the outer years, translating to better margins for oil marketers. That said, we believe Ardova is well-positioned to reap the benefits of a deregulated PMS market, given the firm’s current drive to expand its retail network nationwide.

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Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand Spur

Ardova trades at a discount relative to peers

Our revised projections result in a 2020 PAT of ₦4.1 billion (up 6%), yielding an ROAE of 23% (FY’19: 26%). Using a DCF valuation methodology, we arrived at a 12-month target price of ₦30.86 (BUY). Ardova currently trades at a P/E of 5.22x, offering a discount relative to its peers, Total Nigeria Plc (13.90x) and 11 Plc (5.96x).

Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand Spur

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Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand SpurArdova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand Spur

Latest News

ECOVACS ROBOTICS Introduces 9-in-1 DEEBOT T9 In Indonesia – Our Best DEEBOT Just Got Better!

“The Best Just Got Better" with the first robotic vacuum cleaners in the market to combine upgraded vacuuming and mopping capabilities in one go

 

JAKARTA, INDONESIA - Media OutReach - 13 April 2021 - ECOVACS ROBOTICS, the world's leading home service robotics maker, today launched the DEEBOT T9, the first models with intelligent 9-in-1 obstacle avoidance robotic vacuum cleaner that combines powerful vacuuming and mopping functions with a built-in mobile air freshener. The upgraded DEEBOT T9 with these cutting-edge features is more powerful and smarter than ever before.


Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand Spur


Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand Spur


Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand Spur


DEEBOT T9 raises the bar for home cleaning with 9 stunning features, including the ECOVACS' leading TrueDetect 3D 2.0, a real-time strategic obstacle detection and avoidance technology; TrueMapping 2.0 for precise navigation; ECOVACS HOME App upgraded with 3D Map, and OZMO™ Pro 2.0 Electric Oscillating Mopping System that ensures stubborn stains are removed more efficiently and quietly, compared to previous generation.


"We keep a close eye on market demand and there was a clear indication that consumers want smart products that make homecare even simpler, doing as much and as thorough as they can, in one go. ECOVACS is committed to giving consumers the latest in smart and unique cleaning experience," said David Qian, Chief Executive Officer of ECOVACS ROBOTICS. "We've introduced our new-generation technologies, combined with multiple features while adding even more to our DEEBOT T9 to make sure every inch and floor surface is covered. Our Best DEEBOT Just Got Better."


Upgraded ECOVACS HOME App with Improved Obstacle Avoidance and Navigation Technology


TrueDetect 3D 2.0 technology comes with an upgraded algorithm to quickly detect different types of obstacles and strategically avoid them. The DEEBOT T9 can detect object sizes right down to mere millimeters, which is ten times more accurate than products using traditional infra-red technology, with a detection range of 70-350 millimeters. Moreover, DEEBOT T9 can navigate smoothly in different indoor environments and lighting conditions without any interruptions, even in total darkness. TrueDetect 3D 2.0 technology allows the robotic vacuum cleaner to avoid collisions, entanglements, or disruptions, so users do not have to monitor the robot and clean it continuously.

Combining TrueDetect 3D 2.0 and TrueMapping 2.0 with 3D Maps brings a whole new level of automated cleaning efficiency and flexibility for users. They can quickly locate the robotic vacuum cleaner's exact position via the 2D and 3D Maps. They can also manage their entire cleaning task on-the-fly, by toggling between the 2D and 3D Maps with the upgraded ECOVACS HOME App.

The new ECOVACS HOME App is designed for intuitive use, enhancing the user experience and reinforces the ECOVACS branding. The App is easy to navigate, offering users an optimal cleaning route. The interface integrates all the common features so that users can access critical functions easily. They can customize the amount of water used, suction power, cleaning times, and routes for different rooms.


A Luxurious Cleaning Experience with Built-in Air Freshener


The DEEBOT T9 is the first in the industry to clean floors and freshen the air at the same time. Connected to the DEEBOT's mobile system, the air freshener gives users a vacuuming and fragrance experience that goes beyond traditional cleaning.

The air freshener's unique design releases the fragrance onto the floor directly to remove musty and pet odors, while the fan at the bottom of the air freshener unit spreads the fragrance evenly.

The air freshener uses replaceable capsules, that can last up to 60 days, featuring three kinds of fragrances. Users can choose to switch the air freshener on or off using the ECOVACS HOME App, and extend its lifespan.


Powerful In-depth Cleaning Performance with OZMO Pro 2.0 and Auto-Empty Station Compatibility


The DEEBOT T9 comes with latest OZMO™ Pro 2.0 Electric Oscillating Mopping System with a newly designed motor and movement structure that minimizes noise.

The enhanced suction power of 3000 Pa also raises the bar in cleaning performance. The high-strength fiberglass structure keeps the suction power consistent when vacuuming both hard floors and carpets. The high-frequency vibration of up to 480 times per minute increases the mopping performance, making it comparable to an electric mop.

The DEEBOT T9 uses a disposable mopping pad that can be safely discarded immediately after cleaning. The specially-designed microfibers absorb water evenly, efficiently capture dust, and reduce residual water stains. The composite structure increases friction between the mopping pad and the floor and helps the OZMO™ Pro 2.0 Electric Oscillating Mopping System effectively remove stubborn stains on the floor.

A power-up kit is available for the DEEBOT T9 that further enhances the cleaning performance and user experience. The Auto-Empty Station, which clears the robot's dustbin automatically after cleaning with minimal human intervention, is also compatible with DEEBOT T9.


Pricing and Availability


DEEBOT T9's suggested retail price is IDR 8.29 Million. It will be officially available at Shopee with special price of IDR 8.09 Million and comes with a IDR 200K discounted voucher and a free giftpack on April 17 to 18 ECOVACS X Shopee Brand Day.


It is also available at Lazada, Tokopedia, and Blibli from April 19 onwards with an IDR 200K discounted voucher and free giftpack as launch promotion until April 22.

For more information, please visit ecovacs.com or connect with us on Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand SpurFacebook and Ardova Plc (Formerly Forte Oil Plc) On Course To Return Sustainable Value - Brand SpurInstagram.


About ECOVACS ROBOTICS

Innovating Since Day One – Creating the Intelligent Home.


At ECOVACS ROBOTICS, we care about innovating solutions to enhance your lifestyle. Based on a deep understanding of use cases and consumer experiences, we design robots that help you "live smart, enjoy life."


With over 20 years of design and industry-leading research, we have led the market as homes become more intelligent and responsive. We are building a world where your home asks less of your attention, becomes more seamless and powerful, and frees you to spend more time doing what you love.


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