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RenCap Rates Dangote Cement Positive, Projects N200 Share



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  • RenCap Rates Dangote Cement Positive, Projects N200 Share

Rencap Securities (Nigeria) Limited has maintained its ‘outperform’ rating on shares of Dangote Cement Plc (DCP) has projected that the shares will hit N200 each. DCP closed at N167 per share last Friday.

But Rencap said after a recent meeting with the management and Group Chief Financial Officer of DCP, Mr. Brian Egan, to discuss recent increase in cement prices and volume impact in Nigeria and other operations in Africa, “we maintain our outperform rating and N200 target price.”

According to Rencap, DCP expects strong revenue growth in full year 2016, given the solid demand seen in Nigeria.

“Earnings before interest, tax, depreciation and amortaisation EBITDA) margins, as we expected, will likely be lower from the impact of naira depreciation and increased use of low-pour fuel oil (LPFO) due to gas shortages. Management said gas supply is now stable in Nigeria (a surprise to us) following the conversion of its kilns to be coal-compatible. DCP said it planned to buy coal domestically from mines operated by Dangote Industries Limited (DIL) in Kogi from April. However, we are cautious on this move as locally sourced coal does not burn as fast as imported coal and is therefore less efficient,” the investment banking firm said.

Rencap added that the DCP said the capital expenditure of $400 million in 2016 was mainly used to: fund the Congo plant, complete the Tanzania plant, and convert the Obajana, Ibese and Unicem plants to be coal-compatible.

“In Nigeria, foreign exchange (fx) sourcing challenges remain, although to a lesser extent than previously. Dangote gets a portion of its required FX from exports and money abroad, but says repatriation also remains a challenge,” it said.

Rencap explained that the South African market remains fragmented, with EBITDA margins under 20 per cent (27-29 per cent target from second half of 2016 onwards according to Dangote’s South African subsidiary Sephaku Cement), with cement prices down to $50/t.

“Cement prices remain depressed in Zambia, and while infrastructure investment in Ethiopia continues to drive volume growth, intra-regional political instability poses a risk. To address the problem of repatriating fx to Nigeria from Ethiopia, management is working on an alternative that will see it obtain naira for its birr in a deal with Ethiopian Airlines. Following the ban on the importation of coal in Tanzania, there is a shortage of viable coal, as the local coal supplier, Tancoal, cannot supply the entire market. Management (DCP) is therefore working on obtaining gas from April. Congo’s integrated plant (1.5mn tpa) will be operational in February, while Sierra Leone’s import facility (0.7mn tpa) will come on stream in 1Q17,” Rencap said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Crude Oil

Crude Oil Rises to $72 a Barrel on Strong Demand Recovery



Brent crude oil - Investors King

Oil prices rose on Friday to fresh multi-year highs and were set for their third weekly jump on expectations of a recovery in fuel demand in the United States, Europe and China as rising vaccination rates lead to an easing of pandemic curbs.

Brent crude futures edged up 13 cents to $72.65 a barrel to 1145 GMT, a day after closing at their highest since May 2019.

U.S. West Texas Intermediate (WTI) crude futures were up 14 cents to $70.43 a barrel, a day after their highest close since October 2018.

U.S. investment bank Goldman Sachs expects Brent crude prices to reach $80 per barrel this summer as vaccination rollouts boost global economic activity.

The International Energy Agency said in its monthly report that OPEC+ oil producers would need to boost output to meet demand set to recover to pre-pandemic levels by the end of 2022.

“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” the Paris-based energy watchdog said.

It said that rising demand and countries’ short-term policies were at odds with the IEA’s call to end new oil, gas and coal funding.

“In 2022 there is scope for the 24-member OPEC+ group, led by Saudi Arabia and Russia, to ramp up crude supply by 1.4 million barrels per day (bpd) above its July 2021-March 2022 target,” the IEA said.

Data showing road traffic returning to pre-COVID-19 levels in North America and most of Europe was encouraging, ANZ Research analysts said in a note.

“Even the jet fuel market is showing signs of improvement, with flights in Europe rising 17% over the past two weeks, according to Eurocontrol,” ANZ analysts said.

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Africa Oil Week Remains Force of Good for Africa



Crude oil - Investors King

Hyve Group Plc, organisers of Africa Oil Week have confirmed that business opportunities and discussions at the 2021 edition will remain focused on driving investment into Africa for its sustainable socio-economic development, as it has done for the past 27 years.

The event which will temporarily move to Dubai for 2021 due to COVID-19 restrictions in South Africa will take place on 8-11 November 2021 and has support from key African stakeholders.

Atty. Saifuah-Mai Gray, CEO of National Oil Company of Liberia said “As an oil and gas hub, Dubai represents a huge opportunity for Governments to meet a high concentration of investors with the financial and technical capability to partner in our national upstream”

Africa Oil Week is known for driving deals and transaction across the African oil and gas sector, and after being forced to host the 2020 edition virtually, confirmation that a live event will take place in 2021 has delighted clients.

Miriam Seleoane, Assistant Director at the Department of Trade and Industry and Competition said

“The DTIC has supported the Africa Oil Week for many years. For 2021 we will be taking a delegation of 20+ companies to the Oil Week to advance partnership and investment dialogue between our South African businesses and international partners. Africa Oil Week remains a huge platform for the DTIC and our South African private sector”.

The event will run under the theme “succeeding in a changed market”, and it will be the only large-scale oil and gas event focused solely on Africa to run in person in 2021.

In a previous statement, the organiser cited Dubai as the “next best location” after Cape Town due to the exceptional progress made in the UAE’s vaccination programme. Dubai is also the leading financial centre in the Middle East, Africa and South Asia and presents an opportunity for attendees to meet with new capital holders, further driving investment into Africa.

The 2022 event will return to Cape Town, where organises have said it is the event’s “natural home” and to which they are strongly committed for the long-term.

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Crude Oil

Crude Oil Rebounds on Thursday After Slipping on U.S Weak Demand



Crude Oil - Investors King

Oil prices rose on Thursday a day after slipping on data indicating weak U.S. driving season fuel demand as investors eyed upcoming U.S. economic data.

Brent crude oil futures were up 18 cents, or 0.25%, at $72.40 a barrel, holding just shy of a high not seen since May 2019.

U.S. West Texas Intermediate oil futures rose 11 cents, or 0.16%, to $70.07 a barrel, staying near its highest since Oct. 2018.

“The market is recovering impressively from yesterday’s dismal weekly EIA report, the drop in weekly gasoline demand was particularly disappointing,” said Tamas Varga, analyst at PVM Oil Associates.

“It will interesting to see whether the monthly OPEC report due out later will confirm last month’s upbeat demand assessment for the second half the year. If it does, as expected, it should support oil prices.”

Varga added that U.S. inflation data and jobless claims would provide more direction on the health of world’s biggest economy and clues as to whether the Federal Reserve might start tapering stimulus.

U.S. crude oil stockpiles that include the Strategic Petroleum Reserve (SPR) fell for the 11th straight week as refiners ramped up output, but fuel inventories grew sharply due to weak consumer demand, the Energy Information Administration (EIA) said on Wednesday.

Crude inventories that exclude the SPR fell by 5.2 million barrels in the week to June 4 to 474 million barrels, the third consecutive weekly drop. But fuel stocks were up sharply, with product supplied falling to 17.7 million barrels per day (bpd) versus 19.1 million the week before.

Implied gasoline demand fell to 8.48 million bpd in the week to June 4, down from 9.15 million bpd from the week before, but up from 7.9 million bpd a year ago, EIA data showed.

Weighing on prices, India’s fuel demand slumped in May to its lowest since August last year, with a second COVID-19 wave stalling mobility and muting economic activity in the world’s third largest oil consumer.

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