Today, I’ve decided to feature my good friend
Boakye Ogyem as he expresses
his thoughts and findings on GOIL. I
personally hold GOIL shares. Not much though. Do you? What are your views on GOIL and would you advise someone to
buy GOIL? Do you agree with Boakye? Let me read your views on this stock.
WHY YOU SHOULD BUY GOIL
SHARES BEFORE FIRST QUARTER 2015 by Boakye Ogyem
For quite a time now I have taken the stress upon myself to
extensively scrutinize all shares listed on the stock exchange, all in the name
of seeking alpha for my portfolio. My relentless effort in search of
undervalued companies with strong earning fundamentals engendered the stock
named GOIL, listed on the GSE. The rational for choosing this great company is
listed below.
STRONG GROWTH
PROSPECTS:
The current macro-economic variables bodes well for
petroleum distribution companies in general, with the incessant power shortages
undauntedly looming , it’s obvious that many productive economics activities
will increase their consumption for oil to compensate for inadequate
electricity. In fact gasoline percentage share of the national energy demand
will surge in the upcoming years due to inefficient power supply. Secondly the
expansion of GOIL market share in lucrative and unregulated industries such as
aviation and fuel bunkering indicates that the company’s future prospects are
great, after all apart from VIP BUS what other means can the high income
earners travel to Kumasi /Takoradi in order to broker their deals safely and
timely? Aviation, Currently GOIL has a 3year compounded Sales growth rate of
33.3% which shadows the revenue performance of all listed non-financial stocks
on the GSE.
RETURN TO INCREASING
PROFITABILITY:
Do you know that GOIL was experiencing a decline in
profitability? Yes for almost three good years beginning 2009-2012 GOIL’s
profitability measured with net profit margins kept tumbling from a high of
1.4% t0 1.18%. Currently, this company boasts of a profitability margin of
1.78% (evidenced in their third quarter 2014financial report), this indeed
manifest that the company is not only increasing growth but rather churning
more profit out of every single sales they make. Furthermore EPS growth for the
past three years has shown an astronomical surge, displaying a compounded
growth rate of 35%. This indeed is a great news, we have a company growing
earning faster than sales which postulates that its really increasing its
operational efficiency.
ATTRACTIVE
VALUATIONS:
I’m personally of the view that this stock is currently
undervalued and should experience a price surge coming early part first
quarter, firstly the P/E ratio is unjustifiable relative to the industry’s P/E
ratio which hovers around 16. Secondly the third quarter results of GOIL shows
an increase in sales of GHC 1.1billion with an EPS of 0.079 for third quarter
only. From the historical total leverage of 0.45 its clear that GOIL’s end of
year sales will hit the region of GHC 1.6 billion , this will push end of
period earning per share to 0.1145 which is almost 8% above the consensus end
of year estimate of 0.105.Therefore applying a P/E ratio of 12 ,which is a
fraction of what its peer rival TOTAL company is trading for, will results in a
price of 0.1145*12= GHC 1.38 , this is a 31.4% surge in price if bought at
today’s price of GHC 1.05.
DISCLAIMER: THOUGH THE EARNING PER SHARE ESTIMATE IS
THOROUGHLY RESEARCHED BASED ON HISTORICAL THIRD TO FINAL YEAR REPORT ANALYSIS,
IT SOMETIMES DO CHANGE EXPECIALLY WHEN MANAGEMENT DECIDED TO ISSUE ADDITIONAL
SHARES. IF MANAGEMENT DOESN’T ISSUE EXTRA SHARES THEN EXPECT A PRICE SURGE
EARLY PART NEXT YEAR THANK YOU.
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