The analysis and investment firm CardinalStone, based in Nigeria, invited investors to sell the shares of Total Nigeria from their portfolios. The main argument put forward is that this company listed on the Lagos financial market currently has a market value representing 21 times its last net result. This indicator is on average 8 times for companies in the same sector in Nigeria which have performed better.
Indeed, 2019 was a rough year for this subsidiary of the French group Total, active in the segment of petroleum product distribution and service station management in Nigeria. Its net income for the period was 2.4 billion naira ($ 6.58 million).
This result must be assessed on two points. First, it is down 69.9% compared to that of 2018. Then, it was only possible due to an exceptional income of 2.8 billion naira, generated by the company following the sale of one of its assets during the fourth quarter of 2019. When this transaction is excluded, Total Nigeria posts a loss of naira 341.4 million against a gain of 184.9 million during the year 2018.
Investors cannot hold on to the hope of a solid increase in income and subsequently margins for 2020. According to the Nigerian Institute of Statistics, inflation rose 12.1%; which puts pressure on the consumption capacity of businesses and households.
A reduction in demand is to be expected. At the same time, downstream petroleum product marketers are waging a tough battle for market share. Finally, most of the fuel sold in Nigeria is imported, and supply charges are likely to increase, due to new environmental rules for maritime transport.
Source: Agence Ecofin