Dangote Sugar is listed under the Food and Beverages Sector of the NSE and they are the biggest sugar refinery in sub-Sahara Africa and one of the biggest in the world. They presently control over 70% of the sugar market share in Nigeria. This company is not likely to be seriously affected by the vagaries of the economy positively or negatively since they are into the production of a necessity. People will always use sugar no matter the situation.
They released their first quarter results for the period ended March 2008 recently on the floor of the NSE, which showed an increase in turnover from N20.036 billion to N20.94 billion indicating a 4.53% increase. This is despite the drop in the global prices of raw sugar, which ultimately led to a drop in average selling price of refined sugar which the company produces. They were able to work on their cost of sales which reduced as evidenced by the rise in profit before tax, which increased by 24.76% from N7.158 billion to N8.93 billion and after tax profits also improved by 24.63% from N5.368 billion to N6.69 billion within the same corresponding period.
They recently released their full year results for the period ended December 2007 where they gave a bonus of 1 for 5 with payout date of April 11, 2008. Therefore, the outstanding number of shares for the first quarter ended March 2008 will be used in the computation of analysis; this stood at 12 billion shares. The earning per share comes to 56K, while the projected earning per share for the full year will come to 223k. This means that at the current price of N33.51 the forward price earning multiple is 15.03x. This will put the fair value at around N49.04.
This analysis is based on the previous number of outstanding shares and I believe that a better computation will be made when they release their half year results when it will be safe to dilute with the bonus issues. But in the whole Dangote Sugar is a good buy at the current value.