Nigeria | NGX

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.

Aided by its improved ability to deal with global cost shocks, NB reported its best first-quarter earnings growth in 18 years in Q1’22. NB's recent traction and that of its peer (GUINNESS) have re-ignited optimism over the brewery sector outlook for 2022 and provoked revisions to our estimates. The net impact of these revisions increased our 12-month Target Price (TP) for NB to N67.14 (vs N52.60 previously). The new TP also suggests a potential total return of 24.6% (17.6% in capital appreciation and 7.0% in dividend yield) over the next 1 year and an upgrade to a “BUY” rating on the counter.

According to the European Commission, research on future scenarios suggests that climate changes could have notable effects on environments, plants, animals, and sectors that depend on agriculture, aquatic life, energy, tourism, and water. In line with this position, countries/ international agencies are ardently pushing for a renewed commitment to sustainability via initiatives like the UN SDGs1, the COP2 climate summits, and the Glasglow Financial Alliance for Net Zero (GFANZ). In addition, a few fund managers have mandates that are influenced by ESG (Environmental, Social, and Corporate Governance) considerations. Therefore, this class of investors is likely to pay greater attention to fundamentally sound and value-adding companies that simultaneously tick the boxes on ESG.

This report assesses Nigeria’s position on the energy trilemma: security, affordability, and environmental sustainability of its energy systems. We also explore possible panaceas to current inhibitors hindering Nigeria from fully optimizing its balance on these fronts.