Market Reduces Aradel Holdings Valuation by 37% to N1.94T
Aradel Holdings Plc has seen a significant decline in its market value on the Nigerian Exchange (NGX) barely a month after it listed shares in the equities market Why is a company with huge earnings potential falling?
It is pure sentiment, a slew of stockbrokers told MarketForces Africa that earnings results are not enough to set price direction for a company. How the company is perceived is a strong factor in the equation. Due to weak sentiment, Ticker: ARADEL share price has been nosediving in successive rounds despite 477% year-on-year growth in earnings per share.
Aradel Holdings financials showed earnings per share came in at N25.45 at the end of 9M-2024, while its board of directors declared N8 as interim dividend per share, translating to a 31% pay-out ratio.
The dividend pay-out sent signals to the market about what investors should expect for a high priced energy stock. Some analysts think the market has refused to buy into this, causing price to dip. Data from the Nigerian Exchange showed that the company lost more than 25.74% of its post listing market value in the just concluded week.
The company’s share price tracked lower to N445.60 in the stock market from N600.1 at the beginning of the week due to negative investors’ sentiment. Aradel Holdings came to the stock market with 4,344,844,360 shares outstanding, priced at N702.69.
The listing by introduction of Aradel Holdings Plc on the Exchange on Oct 15 increased the market capitalisation to N3.4 trillion as its stock price closed for trading at N772.90 per share. As of Friday’s close, the oil and gas company was priced down to N1.936 trillion, having lost N1.5 trillion from its first day valuation in the equities market.
Buying sentiment remained weak as some analysts said the company failed to adequately prepare the mind of the investing public and give significant reasons to encourage investing in the oil and gas company’s future earnings streams.
Chapel Hill Denham acted as the official adviser to Aradel on the Nigerian Exchange coming to the equities market on October 14, 2024.
Aradel Holdings Plc grew profit after tax by more than 169% to $88.825 million, according to details from the company’s unaudited financial statement released on the Nigerian Exchange (NGX).
The significant increase in the company’s bottom line was supported by higher revenue performance due to oil and gas income registered in the period. Its revenue came in at about 30% higher to $274.4 million at the end of 9 months of the financial year 2024, from $211.802 million in the comparable period.
The increase in revenue was a reflection of higher crude oil and gas sales, which masked the decline in refined product sales, CardinalStone Limited said in a note.
In the period, crude oil sales, which came at $177.8 million, accounted for 64.8% of total revenue; refined products sales of $81.6 million accounted for 29.7% of total revenue; and gas sales totaling $15.1 million contributed 5.6% to total revenue, analysts said. Aradel Holdings export revenue grew by 77.2% year on year to $198.2 million, accounting for 72.2% of total revenue generated in the period.
Its unaudited financials further revealed that costs of sales climbed by 24.2% year on year to $114.743 million from $92.417 million at the end of 9M-2023 results. Analysts said the company’s increase in sales costs was driven by a 62.0% rise in crude oil handling charges to $42.1 million from $26.0 million in 9M-2023.
There were also additional pressures that emanated from the 60.1% increase in royalties & other statutory expenses associated with FGN and NESS fees, according to CardinalStone. In addition, analysts noted that the company reported stock adjustments—relating to the net movement in the value of inventory in the tank during the period—of $19.0 million, which helped to mitigate overall cost pressures during the period.
Aradel Holdings gross profit surged by 33.7% year on year to $159.664 million at the end of the period from $119.385 million in the comparable period. This translated to improved gross profit margin, which settled at 58.2% from 56.4% 12 months ago.
Other losses moderated by more than 61% in the current period, from $29.927 million in 9M-2023 to $11.607 million at the end of 9m-2024. General and administrative expenses also fell by 9.3% year on year to $18.385 million from $20.272 million 12 months earlier.
This resulted in strong operating income for Aradel Holdings at $129.672 million at the end of 9M-2024 period, which is 87.4% above $69.186 million posted in the comparable period in 2023.
Net finance costs also declined by 92.8%, supported by the 52.0% reduction in finance costs due to lower bank borrowings along with improved finance income. Aradel Holdings reported a 125.9% year on year increase in pretax profit in the current period, settling at $145.336 million from $64.328 million in the equivalent period in 2023.
The feat lifted pretax margin to 53.0% from 30.4% in the space of 12 months. The result showed that tax expense grew by 80.2% year on year to $56.5 million. Hence, the company profit after tax came in at $88.8 million, +169.4% above $32.976 billion 12 months ago.
The company has also announced an interim dividend of N8.00 per share to be paid to shareholders. Aradel traded flat at N550.1 on the Nigerian Exchange after the earnings release after losing streaks.#Market Reduces Aradel Holdings Valuation by 37% to N1.94T#
