Dangote Sugar Refinery Plc yesterday said it would achieve a profit before tax of N5.136 billion for the second quarter (Q2) ending June 30, 2012, just as analysts at FSDH Securities Limited have rated the share price of the company above its current market value.
According to its profit forecast made available by the Nigerian Stock Exchange (NSE), Dangote Sugar projected a turnover of N38.251 billion and profit before tax of N5.136 billion. The firm disclosed that a profit after tax of N3.492 billion should be expected at the end of the Q2.
The shares of the company rose by 14 kobo or 3.8 per cent to close at N3.73 per share Tuesday.
However, analysts at FSDH Securities Limited, in a review of the performance of the company and its future prospects, said that the fare value for the stock was N6.94 per share.
In arriving at N6.94, the analysts said that they reviewed top line and bottom line of the company in relation to its third quarter results ended September 31, 2011.
According to them, they used two valuation methods which are
Discounted Future Earnings (DFE) and Discounted Free Cash Flow (DCF).
They projected a Turnover, Earnings Before Interest and Tax (EBIT), Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) and Profit After Tax (PAT) for the periods ending December 2011, 2012, 2013, 2014 and 2015.
They also estimated turnover of N106.25 billion, N120.74billion, N137.21billion, N153.19billion and N168.73billion respectively.
Similarly, they estimated EBIT of N18.83 billion, N25.03billion, N28.44billion, N28.69billion and N31.60 billion, and EBITDA of N20.41 billion, N26.61billion, N30.02billion, N30.27billion and N33.18billion for same period.
“Using 12 billion shares in issue, the DCF Model generates N8.05 per share and the DFE Model generates N5.59 per share. Applying a weight of 55 per cent to the DCF and 45 per cent to the DFE, we arrived at a value of N6.94 per share, which is our fair value.”
According to them, buying the stock at the current market price holding it to their fair value of N6.94 and adding the present value of the five-year forecast dividends, investors would earn a total return of 128.44 per cent.
“We therefore, place a BUY on the shares of Dangote Sugar at the current market price,” they said.