Negative sentiment has driven the share price of Oando down by 69 percent between 2013 and 2017, even as Average annual earnings growth analysis of companies listed in the oil and gas index of the Nigerian Stock Exchange market (NSE) reveals Oando plc as the best performing company in the index.
The NSE oil and gas sectoral index comprise of the top most capitalized and liquid companies in the oil and gas sector. BusinessDay analysis using compound annual growth rate shows that Oando earnings grew by 69.89 percent from about N1.4 billion in 2013 to N19.7 billion in 2017 hence, leading the chart.
Abdulrauf Bello, Investment research Analyst, WSTC Financial, asserted that Oando’s growth in earnings during the period under review may be due to the fact that the organisation is involved in several line of business which seems to be different from peers in the index.
In contrast to the earnings performance of Oando between 2013 and 2017, analysis revealed that its share price plunged compared to most stocks in the index. During the period, Oando share price declined by 69 percent from N19.43 in December 2013 to N5.99 in December 2017. This saw Oando as the worst performing stock in the index during period under investigation.
Paul Uzum, a stock broker on the NSE, explains that the declining performance of Oando is majorly a function of its acquisition of Conocophillips Nigeria oil and gas business in 2014 and internal management crises within the organisations. In his words, “the acquisition of Conocophillips had a significant negative effect on the organisation which almost led to their collapse and currently the effect of this acquisition still abounds”.
He also added that “the fight to remove current management led by Wale Tinubu by two major shareholders of the organisation due to perceived inefficiencies in the running of the firm also affected their performance”.
In agreement to Uzum position, Bello noted that issues around Oando explain the inverse relationship between its earnings and share prices. He added “in 2014, Oando made a strategic mismatch trying to concentrate more on the upstream which led them to acquisition of Conocaphillips.
This was bad for them as the same period crude oil price plunged; petrol price was increased from N97 to N145 which they couldn’t take advantage of. Corporate governance issues also affected the organisation”.
Abdulrauf further explained, “Fundamentally, as an investment professional, I wouldn’t advice investor to invest in Oando currently. As long as Oando is still mixed with all of these issues, public sentiment against them, high indebtedness, I expect to see their poor performance reflect in their share price movement”.
In 2015, Oando recorded a loss of N49.7 billion, this was better off than a huge loss of N145.7 billion recorded in 2014 representing a 66 percent improvement in its loss amount. 2016 looked good for the company after its earnings grew to N3.9 billion signifying a 108 percent increase from previous year.
Of 8 companies in the oil and gas index of the NSE, only 6 had their earnings grow annually on an average over the last five years. This included companies like Eterna plc (23.28%), MRS Nigeria plc (16.90%), 11 plc (16.65%), Total Nigeria (8.50%) and Seplat plc (2.45%).
Forte Oil plc and Conoil plc stood as the worst performing companies based on earnings growth during the period under consideration. Forte oil plc had an average annual growth rate of -5.52 percent while Conoil recorded -12.46 percent.
YTD analysis reveals that Oando shares are currently down by 5 percent from N5.99 in January to N5.85 today.