11 Plc First Glance: Impressive PAT Growth in 9M-18

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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%

opan



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