11 Plc ( formerly Mobil Oil Nigeria) reports Q2 2017 results

Event: 11 Plc ( formerly Mobil Oil Nigeria) reports Q2 2017 results

Implications: Negative reaction by the market expected

Positives: Q2 sales up 13% y/y to N31.0bn

Negatives: PBT and PAT both declined by around -5% y/y to N3.6bn and N2.5bn respectively

 

This morning, 11 Plc (11) reported Q2 2017 results which showed that while sales grew 13% y/y to N31.1bn, PBT and PAT both declined by around 5% y/y to N3.6bn and N2.5bn respectively. A gross margin contraction of -694bps y/y to 12.2% more than offset benefits coming through from topline growth, a double-digit opex decline and a doubling in other income y/y. Sequentially, sales and PBT were both up 23% q/q and 60% q/q respectively. However, PAT was up more significantly on a q/q basis. Unlike in Q1, there were no acquisition-related costs. In Q1, 11 posted an actuarial loss of c.N2.0bn following the migration of a significant portion of the firm’s Defined Benefit Scheme to a Defined Contribution Scheme. During the quarter, NIPCO (parent) opened a tender offer to acquire minority interests for an offer price of N417.12 per share. This offer applies to 40% of the firm’s outstanding shares.

Compared with our estimates, while sales beat our N23.5bn forecast by 32%, PBT was broadly in line with our forecast. A negative surprise on the cogs line offset positives coming through from topline growth. On an annualised basis, 11’s H1 PAT of N2.5bn tracks well behind consensus earnings estimate of N7.9bn. As such, we expect downward revisions to consensus 2017E estimates on the back of these numbers. At current levels, on our published estimates, 11 shares are trading on a 2017E P/E multiple of 16.2x for an EPS growth of 13.1% in 2018E. Year to date, 11 shares have shed -9%, underperforming the NSE ASI by 48%. We rate the stock Underperform.

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Ezeadichie Onyeka Michael is the Co-Founder of Haelsoft, a Professional Services Company in Nigeria that provides Information and Technology Services for small and big size companies in Nigeria(Africa). He is an Entrepreneur and Venture Capitalist with Expertise in Web Technology and Digital Marketing. He has developed & Implemented Digital Marketing Strategies(Campaigns) for top brands across sectors in Finance, Telecommunication, Ecommerce who operate in the African market. His professional experience includes key roles at Google Business Group(Nigeria), Google Women on the Web (Nigeria), Edubridge Consultant and Wild Fusion where he has trained over 500 Entrepreneurs on how to use various Web Technology products to succeed online. Customer centricity, User Experience, Conversion optimization are 3 pronged framework he applies around the often-frenetic world of web analytics to ensure that clients stay competitive in the market. He believes that investing in talent is the key to long term success for brands across Nigeria (Africa).

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