The value of Ignite Investments and Commodities Limited investment in Forte Oil has increased to N15.83 billion, after acquiring an additional 500,000 more ordinary shares in the downstream oil and gas firm for a price of N66.25.
That jerks up Ignite and Commodities’ stake by 0.04 percent, as total holdings now stands at 74.06 percent, leaving the minority shareholders of Forte Oil with stakes valued at N5.59 billion out of a total market capitalization of N20.42 billion (as at last Friday August 30).
We arrived at the total holdings by multiplying 74.06 percent by total number of ordinary shares of Forte Oil of (1.30 billion as the balance sheet date), then multiplying the final figure with market price of the downstream oil and gas firm.
This means Ignite Commodities has 962.78 million ordinary shares in the company.
Forte Oil disclosed on December 24, 2018 the divestment by its majority shareholder, Femi Otedola, who said he had reached
an agreement with the Prudent Energy team, investing through Ignite Investments and Commodities Limited, to divest of his full 74.02 per cent direct and indirect shareholding in the company’s downstream business.
While other players in the industry are reeling from lack of cost reflective cost on premium motor spirits that has undermined earnings, Forte Oil is thriving as a double-digit growth in revenue from fuel added impetus to profit.
The company converts sales into cash in an efficient and expeditious manner, as its operating cash margins surged to 15.42 percent in June 2019 from 1 percent the previous year. It has an operating cash flow of N12.79 billion in the period under review, as against N488 million the previous year. A robust cash position shows the company has the financial strength to settle its debt, pay dividend to shareholders and fund future expansion plans.
A robust cash level means the company can settle its debt, pay dividend to owners of the business, and fund future expansion such as the acquisition of more trunks or building new gas stations.
Forte Oil has an attractive valuation compared to peers, which means its shares should be cheap for investors.
It has a price to earnings ratio of 2.58, this compares to Total Oil, 12.95 times price to earnings; Mobil Oil, 7.07 times; Conoil, 5.12 times; Eterna Oil, 24.66 times earnings.