We maintain our optimism on WAPCO and forecast a price induced margin expansion to 22.3% (+1.1 ppts YoY). In our view, WAPCO has been playing within a sellers' market since H2'20, a period that has been characterised by relatively inelastic demand response to price changes. As a result, margins continue to expand despite a high inflationary environment.
Following the release of its Q1’22 numbers, we revise our FY’22 earnings forecast to N24.87 billion (vs N22.70 billion previously). This new projection hinges on expected improvement in generating capacity, cost optimization, and improved cash generation. Thus, we raise our 12- month target price to N1.36 and retain our BUY rating on the counter.
ETI’s Q1'22 result reflected a continuum in revenue consolidation from FY’21. The overall earnings improvement highlighted strong growth in its digital banking segment vis-à-vis non-interest income, and improved net interest margins on the back of the ascension in yields in most parts of its Pan African subsidiaries. We forecast a FY'22 earnings of $392.0 million (vs $394.1 million previously) on the potential impact of higher yields and sus- tained digital banking traction. Further aided by the sustained containment of operational cost, we estimate that dividend payout in FY’22 could poten- tially surpass that of the previous year (0.16 US cents).
The impressive Q1’22 sales performance of the company’s corporate customers (2.3x YoY) and aviation (2.7x YoY) segments provides further backing to our 2022 call. The result also underlines an increasing focus on margin accretive products and the targeting of relatively wholesale customers. This strategy is likely to support revenue growth for the rest of 2022, particularly because price negotiations are easier in these select segments than in the retail market, which is often blighted by public backlash against attempts to raise prices.
We retain our optimism for OKOMU, raising our FY’22 earnings forecast to N20.1 billion (vs N17.1 billion previously). Our PAT adjustment primarily reflects higher than expected CPO prices and output due to supply constraints across the global vegetable oil market. These adjustments resulted in an increase in our 12-month target price (TP) to N183.22 (N154.3 previously) and a BUY rating on the counter.
In Q1'22, SEPLAT bettered the corresponding period of last year on all financial metrics (save for PAT, which was blighted by a higher tax charge). For context, PBT grew by over 2.3 times despite the production setbacks that forced liquids output from OMLs 4, 38 & 41, and OML 53 down by 11.0% and 5.8% YoY, respectively. According to SEPLAT, production in the former was disrupted by outages in the Trans Forcados Pipeline (TFP), which experienced a downtime of 23.0%. Gas volumes were also down 6.1% YoY, impacted by lower demand due to price renegotiation, and supply constraints caused by equipment accessory issues at Oben. Therefore, the key to the company's robust performance was a materially higher realisable oil price, which completely masked the effect of volume weakness on earning.
