CEO, Honeywell Flour Mills, Mr. Babatunde Odunayo
Impressed with the 2012 and first quarter of 2013 financial performance of Honeywell Flour Mills Plc, analysts at Meristem Securities Limited (MSL), an investment banking firm, have said the shares of the flour milling firm are undervalued.
After posting a profit after tax (PAT) of N2.7 billion for the year ended March 31, 2012 and Honeywell Flour Mills last week reported a PAT of N475 million for the first quarter (Q1)-ended June 30, 2012.
In their analysis of the result, made available to THISDAY, analysts at MSL, said that going by their 2013 full-year PAT forecast of N3.197 billion, the company as at Q1 had achieved 14.86 per cent.
Basing their valuation on the dividend discount model(DDM) and assuming a pay-out of 50 per cent, which is in line with the company’s 53.18 per cent 3-year average pay-out ratio, the analysts arrived at a full year target price of N5.39.
“Honeywell Flour is set for price appreciation in the near term especially as our valuation gives a 130 per cent premium on the current market price by year end,” they said. The stock closed at N2.10 per share yesterday.
Speaking in an interview with THISDAY, the Executive Vice Chairman/Chief Executive Officer of Honeywell Flour Mills, Mr. Babatunde Odunayo, said the current price did not reflect the true value of the company, saying investors should take advantage of the low price and buy into the company for bountiful harvest in the future.
According to him, the expansion project of the company, which would be inaugurated next month, would lead to 62 per cent capacity increase in whole wheat meal, 55 per cent in flour output and almost 100 per cent in Semolina .
Meanwhile, trading at the stock market Monday opened the week on negative note as investors embarked on profit-taking. The Nigerian Stock Exchange (NSE) All-Share Index declined 0.13 per cent to close at 25,839.00.