EUR 56.22 For Business Accounts Only

PRESCO PLC 9M'16 - Record FY’16 profit in sight

• PRESCO’s 9M’16 numbers further underscored the positive view on the Nigeria Oil Palm industry with earnings beating our estimates across all lines.Q3 gross margin alone improved to 66% (H1’16: 63%) amidst further increase in local palm oil prices over the 3-month period - we estimate an average of 20-30% increase in local palm oil prices over the period. Further consolidating on the previous strong quarters, 9M’16 revenue rose 48% y/y to N11.9 billion, 7% ahead of our estimate.
• Regardless of how Q4 pans out, we think PRESCO’s FY’16 earnings growth would be very impressive, to be buoyed by strong topline growth. We believe Q4 revenue could be as strong as Q3 given our positive outlook on demand and palm oil prices. That said, we revise our FY’16 revenue estimate to N16.1 billion (Previous: N15.4 billion). Excluding revaluation gains (Ytd: N4.4 billion), we see FY’16 PAT at N4.7 billion (Previous: N4.2 billion). We have also reviewed our-post FY’17 earnings estimate amidst a much more optimistic outlook on local demand for palm oil. Consequently, we revise our FY’17 and FY’18 EPS (excluding revaluation gain) to N5.08 (Previous: N4.03) and N5.49 (Previous: N4.47). Overall, we raise our target price to N53.29 (Previous: N46.02)