October 30, 2018/Cordros Report
Event: 11 Plc (MOBIL) recently reported 9M-18 results, showing significant growth in revenue (+41.7% y/y to NGN125.04billion), and PAT (+71.2% y/y to NGN7.87 billion). On q/q basis however, revenue (-4.2% to NGN39.13 billion), and PAT (-10.0% to NGN2.42 billion) declined.
- The reported increase in sales is attributable to sustained product availability amongst major marketers over 9M-18. However, we believe a moderation in petroleum products supply by the NNPC (NNPC remains the sole importer of PMS) in Q3-18, compared to Q2-18, likely dragged revenue q/q.
- Gross margin remained pressured, contracting 189 bps y/y (183 bps q/q), following faster growth in cost of sales (+44.8% y/y) — compared to revenue (+41.7% y/y) — which was pushed by increase in PMS landing cost amidst higher global crude oil prices (+39.3% on average in 9M-18 vs. 9M-17).
- OPEX grew 21.7% y/y in Q3-18, with the ratio-to-revenue coming in at 6.9% (vs 8.0% at 9M-18), implying increased operational efficiency. The increase in OPEX was however offset by (1) gross profit growth, (2) increase in other income (+23.9% y/y) following a 17.1% y/y increase in rental income (NGN6.14 billion) from the company’s investment properties and service stations, and (3) a NGN499 million profit from disposal of PP&E, resulting in EBIT growing by 26.4% y/y.
- MOBIL recorded net finance income of NGN398 million (from NGN162 million the previous year), reflecting a 70.1% y/y increase in interest income and an 81.6% decline in finance costs.
- Consequently, in the absence of any exceptional charges, as in 9M-17, PBT came in at NGN11.65 billion (+70.5% vs. y/y). A tax charge of NGN3.78 billion yielded an effective tax rate of 32.4%, compared to 32.7% in the prior year, and led to PAT of NGN7.87 billion (+71.2% y/y) being reported.
- Year-to-Date, MOBIL’s stock (-10.07%), though declining, has outperformed both the Oil & Gas index (-10.22%) and the broader All Share Index (-13.20%).
Comment: At first glance, with think 11 Plc’s performance is positive. Annualized, the company’s 9M-18 EPS is above 2017FY (+41%) and 2018 consensus estimates (+2%). We however expect neutral market reaction. NOT RATED. Ongoing initiation.
| Income Statement (NGN’bn) | 30-Sep-18 | 30-Sep-17 | y/y % ∆ | q/q % ∆ | Q3-2018 | Q2-2018 | Q1-2018 |
| Revenue | 125.04 | 88.25 | 41.7% | -4.2% | 39.13 | 40.83 | 45.08 |
| Cost of Sales | -112.26 | -77.56 | 44.8% | -2.2% | -35.70 | -36.50 | -40.06 |
| Gross Profit | 12.78 | 10.69 | 19.5% | -20.7% | 3.43 | 4.33 | 5.02 |
| Other Income | 6.58 | 5.31 | 23.9% | -8.9% | 2.14 | 2.35 | 2.08 |
| OPEX | -5.99 | -4.61 | 29.9% | -9.5% | -2.84 | -3.14 | -2.57 |
| Other non-operating expense/income | 0.50 | -0.02 | 2166.8% | -1960.5% | 0.53 | -0.03 | 0.00 |
| EBIT | 11.25 | 8.90 | 26.4% | -8.7% | 3.48 | 3.81 | 3.96 |
| Finance Income | 0.41 | 0.24 | 70.1% | -32.5% | 0.12 | 0.17 | 0.12 |
| Finance Cost | -0.01 | -0.08 | -81.6% | 633.6% | -0.01 | 0.00 | 0.00 |
| Net Finance Cost/Income | 0.40 | 0.16 | 145.7% | -38.6% | 0.11 | 0.17 | 0.12 |
| Exceptional Item | 0.00 | -2.23 | 0.00 | 0.00 | 0.00 | ||
| Profit before tax | 11.65 | 6.83 | 70.5% | -9.9% | 3.59 | 3.98 | 4.08 |
| Taxation | -3.78 | -2.23 | 69.1% | -9.8% | -1.16 | -1.29 | -1.32 |
| Profit after tax | 7.87 | 4.60 | 71.2% | -10.0% | 2.42 | 2.69 | 2.76 |
| Ratios | 30-Sep-18 | 30-Sep-17 |
|
| Q3-2018 | Q2-2018 | Q1-2018 |
| Gross margin | 10.2% | 12.1% | 8.8% | 10.6% | 11.1% | ||
| OPEX margin | 6.9% | 8.0% | 6.7% | 7.0% | 7.0% | ||
| EBIT margin | 9.0% | 10.1% | 8.9% | 9.3% | 8.8% | ||
| PBT margin | 9.3% | 7.7% | 9.2% | 9.8% | 9.0% | ||
| PAT margin | 6.3% | 5.2% | 6.2% | 6.6% | 6.1% | ||
| Cost of sales margin | 89.8% | 87.9% | 91.2% | 89.4% | 88.9% | ||
| Interest cover | 759.13x | 110.33x | 301.73x | 2423.15x | 2318.55x | ||
| Tax rate | 32.4% | 32.7% | 32.5% | 32.4% | 32.4% |
