Omnia | Better late than never
In our view, OMN is currently under-priced. However, the reversal of its H119a working capital position influences our view. The Group expects its new nitrophosphate plant to be completed in March 2019. The Group also disclosed that its nitric acid facilities are not running at its targeted 90% capacity. The nitrophosphate plant uses nitric acid as a feedstock into its production process and should increase the Group's nitric acid plant capacity usage by c.4%. We expect agricultural margins to expand by 100-150bp by FY21f. Management will focus on diversifying the Group's revenue streams internationally which we view as positive. Furthermore, we believe the restructuring of Protea Chemicals will be positive for the Group.OMN is trading at an 9.8x rolled forward PE (0.82x PE relative) to our one-year forward earnings. Our DCF valuation delivers a one-year target price of R139.74, implying a total return of 72.3%. The total return is 56.7% more than our estimated market return of 15.6%. Accordingly, we upgrade from a MARKET PERFORM to an OUTPERFORM rating.
Omnia Holdings engaged in the business of services and solutions for the agricultural, mining and chemicals industries. Co.'s segments include: Agriculture, which comprises Omnia Fertilizer and Omnia Specialties, produces and trades in granular, liquid and specialty fertilizers for a range customer base of farmers, co-operatives and wholesalers; Mining, which comprises BME, a manufacturer and supplier in southern and West Africa of explosives, related accessories and blasting services to the mining, quarrying and construction industries; and Chemicals which comprises Protea Chemicals, a manufacturer and distributor of specialty, functional and effect chemicals and polymers.
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