Dangote Cement is a more attractive takeover…

Dangote Cement is an eye- catching takeover candidate compared to peer rivals, which means the largest producer of the building material in Africa’s largest economy is better managed and with a solid growth prospect.

The largest producer of the building material has an enterprise value to earnings before interest taxation, depreciation, and amortization (EBITDA) of 6.80 times, this compares to Lafarge Africa’s and Cement Company of Northern Nigeria (CCNN)’S EV/EBITDA ratios of 11.0 times, and 20.0 times, respectively.

The enterprise multiple ratio is considered a more accurate barometer of the firm’s value than the price-to-earnings (P/E) ratio since the enterprise value, which comprise of the market capitalization, debt and, working capital of the company, gives an investor an insight into the value of a company before an acquisition.

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EBIDTA is a measure of efficient, and it a more realistic gauge of printability because takes into consideration exceptional items and out of pocket expenses.

In a nut shell, a lower EV value is more attractive while a ratio below 10 is favoured by investors, implying that Dangote Cement is a stock worth holding.

The cement sector are not spared from the carnage of a flagging economy, the industry was laggard as seen

in the last GDP report released by the National Bureau of Statistics (NBS).

Nigeria’s economy has been growing sluggishly since it existed a recession in 2016.

Gross domestic product in Africa’s largest oil producer expanded by 1.94 percent in the second quarter of year, this compares with a 2.10 percent expansion in the first quarter.

The manufacturing sector contracted by 0.13 percent from the 0.81 percent expansion in the first quarter (Q1) 2019.

Experts say Federal Government has to implement structural reforms that will propel the economy and accelerate construction activities, they suggested more fiscal stimulus.

However, prognosticators see a bright future for the industry, as the country’s huge infrastructure deficits and rising population could be major driver of volumes.

Nigeria requires $100bn over the medium term to plug huge infrastructure deficit, according to ICRC.

The Central Bank of Nigeria (CBN)’S lending drive especially for consumer, retail and mortgage financing is positive for cement manufacturers.

Also, rapid implementation of capital expenditure component of 2019 budgets and exports could be supportive, major reconstruction of Northern Nigeria, post the peak of insurgency and Second Niger Bridge will impetus to construction activities.