Culled—Proshare

April 3, 2018/FBNQuest Research 

Event: 11 PLC (11) reports Q4 2017 results
Implications: Positive reaction by the market likely
Positives: Q4 sales and PBT both up 66% y/y and 22% y/y to N37.0bn and N4.3bn respectively
Negatives: Limited 

Last week, 11 PLC published Q4 2017 results which showed that sales were up 66% y/y to N37.0bn while PBT grew by 22% y/y to N4.3bn. A -364bp y/y gross margin contraction and a -17% y/y decline in other operating income were not enough to offset benefits coming through from the strong topline growth. 11’s sales held up surprisingly, unlike in prior quarters when petroleum product shortages occurred.

We believe the new ownership/management deserve most of the credit. Below the PBT line, there were no one-off expenses during the quarter, similar to Q2 and Q3. Perhaps, this suggests that there are likely no more significant acquisition-related costs. PAT came in flattish y/y. Sequentially, while sales were up 16% q/q, PBT and PAT both grew by 37-38% q/q. In addition to topline growth, a 20% q/q growth in the other operating income line provided support for the improved q/q trend.

The Q4 PBT beat our N2.9bn estimate by 49%. The variance was driven by positive surprises on the sales and other operating income lines. 11’s full year PBT of N13.4bn also beat consensus PBT estimate of N10.9bn. Hence, we expect upward revisions to consensus 2018 estimates and a positive reaction by the market to these numbers. 11 proposed a dividend of N8.00 (ahead of our forecast of N5.5); this works out to a dividend yield of 4.3%. 11 shares have shed -4.5% ytd compared with the ASI’s +8.5% gain.

We rate the stock Neutral. Our estimates are under review. 

11 PLC Q4 2017 results vs. FBNQuest Capital Research estimates (N millions)

Source: NSE, FBNQuest Capital Research estimates