Meristem Recommends Buy for Forte Oil, Projects N77.41 Price

Goddy Egene

Investors in Forte Oil Plc stand to witness more capital gain asleading investment banking firm, Meristem Securities Limited (MSL) raise its target price for the oil stock from N64.09 to N77.41. The investment advisory firm also upgraded its recommendation on stock to buy from hold.

MSL raised the target price to N77.41 from N64.09 and with a closing price of N57.96 per share last Friday, the new target price implies a 34 per cent upside potential.

According report, MSL had before now advised investors in the equities market to hold shares of Forte Oil and investors who followed MSL’s recommendation would have received a 58 per cent return in the past year before last Friday, compared with the negative 78 per cent return on the shares.

In the past three years and four months, MSL has rated Forte Oil hold once, buy once and sell once. The shares fell 23 per cent in the period rated hold, fell 11 per cent in the period rated buy and rose 146 per cent in the period rated sell.

Analysts raised their consensus one-year target price for the stock by 4.8 percent in the past three months. Forecasts range from N61.44 to N202.87.

Foremost ratings and research agencies, Agusto & Co. and Global Credit Rating Co. (GCR), had recently affirmed Forte Oil Plc investment grade rating.

Both agencies stated that the long term outlook for the oil and gas company remained stable.

The credit ratings were given to Forte Oil Plc based on the company’s top-tier position in the Nigerian downstream sector, underpinned by a strong and visible brand, significant assets across the energy value chain, and strong relationships with suppliers, strong corporate governance framework, and an experienced and stable management team.
The company is currently making efforts to inject more equity capital in its operations.

Shareholders of the company early this month authorised the board of directors to raise, by way of public offering, right issue or any other method they deem fit, additional N20 billion, whether locally or internationally or a combination of both through the issuance of shares, convertible securities, and/or any other instrument(s) at such dates and time on such terms and conditions, including through a book building process or other process(s) all of which shall be determined by the directors subject to the approval of relevant regulatory authorities.

The Group Executive Director, Finance and Risk, Forte Oil, Mr. Julius Omodayo-Owotuga, had said the proceeds realised from the fund raising exercise would be used for business expansion, enhancement of working capital and downstream businesses, among others.