Analysts pick Forte Oil, Julius Berger for high returns

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Investors looking for high returns on investment over the next one year should include Forte Oil and Julius Berger Nigeria Plc in their portfolios, investment analysts at GTI Securities have said.

An investment advisory report by GTI Securities stated that Nigerian equities will remain on the upswing in spite of intermittent profit-taking, with the release of second quarter earnings expected to further tickle the bulls.

The report noted that pressure on the South African economy and the uncertainties in the United Kingdom (UK) economy as well as stable domestic foreign exchange management, will play to the advantage of the Nigerian equities market and sustain inflow of foreign portfolio investments.

In the advisory report signed by Head of Research and Strategy, GTI Securities, Mr. Chuks Anyanwu, the securities firm indicated that Forte Oil and Julius Berger Nigeria are two of the best stocks for investors looking for high returns within a 12-month period.

According to the report, Forte Oil has the potential to generate capital appreciation of about 207 per cent with an expected target price of N170.41 by the end of the period as against its current price of about N55.58 per share.

The report also indicated that Julius Berger Nigeria could post a return of about 77 per cent within the period as the share price of the construction firm is expected to rise from its current level of N39.55 to close the period at about N70.

Analysts noted that the 414 megawatts Geregu Power Plant of Forte Oil has started to contribute significantly to the group’s top-line as power generation contribution to revenue increased by 118.61 per cent year-on-year and accounted for 19.79 per cent of total revenue in first quarter of 2017 compared to 8.39 per cent of total revenue in comparable period of 2016.

Forte Oil has 51 per cent stake in a 414 megawatts gas-fired independent power plant, which is selling power to the Nigerian power grid on a guaranteed basis.

“This trend is expected to continue with the power generation business further boosting revenue growth, especially with the present drive by the government to ensure that power generation in the country increases. Forte Oil also has the capacity to push higher fuel and lubricants volume sales through its recent retail outlet expansion financed through its issued bonds,” GTI Securities stated.

The report noted that Julius Berger Nigeria has a huge public sector portfolio, which includes several high-profile projects such as permanent site of the National Institute for Legislative Studies, Abuja, new residences for presiding officers of the National Assembly, Abuja; rehabilitation and extension of Airport Expressway, Abuja; rehabilitation of Badia Roads, Lagos;  Lagos–Badagry Expressway, Lagos and Lagos–Ibadan Dual Carriageway, Section 1, Lagos–Shagamu, among others.

“We expect that with the focus of the government on infrastructure development a lot of the allotted N1.8 trillion, 30 per cent of the total budget for 2016, will go to ongoing projects across the country. This will boost Julius Berger’s revenue base and profitability for the 2016 fiscal year. In addition to the on-going projects, the company has also won new projects: Asokoro Conference Centre, Abuja; Dangote Jetty Apapa, Lagos; Uyo–Etinan Road, Akwa Ibom; Upgrade of NLNG MOF Jetty, Bonny Island; Dualisation Oil Mill Elelenwo Akpajo Road, Port Harcourt and No Potholes Programme, Port Harcourt. These in addition to the company’s other business arms will ensure sustainability in revenue base going forward,” GTI Securities stated.

The management of Forte Oil recently said the group plans to acquire upstream assets and related downstream businesses to grow its portfolio and enhance future returns.

Group Executive Director, Finance and Risk Management, Forte Oil Plc, Mr. Julius Omodayo-Owotuga, outlined a five-point strategic growth plan that will strengthen the indigenous energy group’s existing downstream, power generation and oil-servicing businesses and expand the group portfolio to lucrative oil-mining upstream business.

Omodayo-Owotuga said the company will explore inorganic option of mergers and acquisitions to consolidate its growing market share in the oil and gas business, while strengthening its balance sheet to support long-term growth objective.

“We have five pillars of strategies going forward. We want to concentrate on high-margin products. We want to focus on lubricants.  We have been working on our LPG as we improve our facility in Abuja, Kano and Apapa. We want to strengthen our balance sheet. We want long term capital so that interest expenses will come down.  Diversification is part of our strategy to boost out revenue base. We want to buy upstream assets; we will focus on mergers and acquisition within the space available. We have been growing our market share organically. We are looking at opportunity to grow the retail outlet through inorganic strategy,” Omodayo-Owotuga said.

Already, Forte Oil has started the process to raise N20 billion in new equity funds after it successfully raised N9 billion in debt issue. Besides, it has approval to raise up to N71 billion under a N100 billion capital raising programme approved by the shareholders of the company.

Omodayo-Owotuga said the latest capital raising will further boost working capital and operations as it will provide the company with the necessary liquidity to actualise its growth strategies.

He pointed out that existing businesses in the group’s portfolio have shown strong performance, noting that Forte Oil maintained 14 per cent market share among the major marketers in the white products segment of the downstream sector as a result of ongoing strategic retail network expansion and growth of its commercial and lubricant customer base.

Omodayo-Owotuga said the company plans to raise funds from its shelf programme in tranches, on the basis of emerging opportunities, in order to ensure that investors receive optimal value for their investments.

 

 

 

 

 

(thenationonlineng)

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