Iimprovement in Unilever fundamentals could trigger a price rally

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Unilever Ghana Limited [UNIL] endured a harsh and highly competitive operating environment for the first half of the year.

Revenue generated by UNIL dipped by 1.1% to GHS248,945,000 in HY2016. The fall in revenue is largely due to high fuel and utility costs incurred by the company.

Operating Profit of UNIL dipped by 10.4% to GHS28,966,000 over the 52-weeks period.

Inflationary pressures and the depreciation of the local currency from HY2015 negatively impacted the operations and distribution channels of UNIL.

This eventually affected the market size of UNIL products. The company also had to endure stiff product competition from the likes of PZ Cussons, Nestle Ghana Limited and other foreign-based manufacturers of consumer staples.

Operating profit margin [OPM] consequentially fell to 11.6% in HY2016 from a level of 12.8% same period last year.

Owing to high costs of production and shrinking market size for products, UNIL’s bottom-line profit was gravely affected.   Profit after Tax fell by 5.1% to GHS 21,594,000 in HY2016. Earnings per share attributable to shareholders also dipped from GHS0.7279 to GHS 0.6910 over the 52-weeks period.

Cash generated from operations went down by 44.6% to GHS27,393,000 in HY2016. The period saw UNIL invest very little in capital expenditure. Money invested as capital expenditure fell by 58.2% to GHS5,022,000 in HY2016. The company’s branding and marketing investment expenses increased by 21.5% to GHS15,416,000 in HY2016; the increment in branding investment was necessary to recapture consumer market size.

Total Asset recorded by the company increased by 19.6% to GHS 347,182,000 in HY2016. A 29.7% increment in related party payables led to Total Liabilities shooting up by 21.4% to GHS 286,640,000 in HY2016.

Fundamental analysis conducted on UNIL show that the equity is currently undervalued by 5.71%. The share still possesses a huge potential for above-average capital gains on the bourse. GN Analysts estimate that a marginal improvement in the fundamentals of UNIL could possibly trigger a share price rally. The equity remains a good buy for valued-stocks portfolio holders.

Trading activity on the bourse ended with 1 gainer [HFC] and 2 losers [ETI & UTB] yesterday. UTB topped trading chart as 53,300 shares worth GHS 2,165.00 changed hands. Returns on the Composite and Financial Stock Index pegged at -9.64% and -11.51% respectively.

Activity on the Ghana Alternative Market (GAX) saw 21,000 shares of ILL worth GHS 1,890.00 change hands yesterday.

HORDS currently lead record capital gains on the GAX, appreciating by 25% from year open.

The Cedi GAINED marginally to the Euro but lost to the Pound and stabilized against the Dollar yesterday.

The local currency exchanged at a mid-rate of GHS 3.9464 to the USD, GHS 5.2534 to the GBP and GHS 4.3991 to the EURO yesterday.

The GCFM Cedi index, a measure of the holistic performance of the Cedi on the interbank market now records a year-to-date depreciation of 2.82%.

 

Source: Ghana/todaygh.com/GN Research

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