Dangote Cement Plc.’s share price has gained 14.33% from the beginning of the year to date. However, some equity analysts said it is deserving for a listed company with a healthy fundamental and strong financial scorecard to see better share price growth.
In another clime, there is a feeling that the stock market is not rewarding industry leaders well enough such that share buyback has been the latest development by bellwethers to reduce retail investors holdings, thus stemming volatility.
The stock had weakened its market position, dragged valuation lower but Dangote Cement Plc share price started an uptrend after the company announced a decision to buy back shares last year.
Also, Airtel Africa has share buyback agenda while MTN Nigeria trying to find value for the company share through book building ahead of public offer to retail investors.
In the first half of 2020, Dangote cement share price was below N230 but share jumped ahead after it announced share buy back in July.
Despite strong profit margin and heavy sales growth year on year, the cement company stock is not the best performer in the local bourse. And it is a bit volatile – some analysts’ think that its volatility is moderate.
However, at 14% capital gain, Ticker:DANGCEM is among the stock that has covered exposure to Nigeria’s double-digit headline inflation rate based on a 12-months average. After all, the fixed income market is offering a negative real rate.
Effectively, every N1 million investment in the cement company’s 17 billion outstanding shares would have added more than N144,000 as capital gain today.
Valued by investors at N4.76 trillion, the company share price hit N280 and it has been trading at this level for 7-days despite seesaw prices movement in the local bourse.
Dangote Cement is the largest quoted company on the Nigerian Exchange, accounting for 22% of the entire market size on Friday. Also, the leader in the cement oligarch controls some 60% market share.
On January 4, 2021, Dangote was priced at N244.9 on the floor of the Nigerian Stock market and closed at N280 – its highest in the last 52 trading weeks. The share price has stabilised since when the cement company announced a plan to return money to shareholders in a share buy back deal.
After the announcement became public, the share has made a series of uptrends, breaking out when compare with pre-July 2020 when the company hinted about the plan.
There are so much to like about Dangote Cement: a market leader with more than N1 trillion total sales and largest quoted company, meaning it combines volatility with liquidity.
Industry’s data shows that Nigeria has a total cement production capacity of 47.8 million tonnes and annual demand of around 20.7 million tonnes.
In July 2020, Dangote cement announced a plan to buy back up to 10% of its 17.04 billion issued shares in tranches and subsequently cancel those shares, according to its regulatory filing on NGX.
It had considered an open tender for the buyback. The shares, which hit bottom in April, rose to an almost two-year high on news of the share buyback.
Credit: dmarketforces
