Investors staking their funds on Dangote Cement shares are in for a good time as the stock performance on the floor of the Nigerian Stock Exchange (NSE) has continued to be on the upbeat.
The NSE All-Share Index, at the weekend hit an all time high of 33,895.07 points since 2008 following price gains recorded by shares of Dangote Cement Plc on the floor of Exchange.
According to the report of the trading on Friday, February 22, which was posted on the website of the NSE, shares of the cement company rose by N13.01 to N160 per share from N146.99 opening price.
The price gains by the biggest listed firm which accounts for one- third of market capitalisation on the bourse boosted the all share index.
Besides capital appreciation which the investors are sure to benefit from, the management of Dangote Cement also recently assured its shareholders of good returns on their investments this year despite the downturn experienced by traders on the NSE.
Recall that analysts at FutureView Financial Services Limited, one of the leading investment banks in Nigeria, have projected that the share price of Dangote Cement Plc will hit a high of N237.
They recommended the shares to investors for purchase, saying it has significant upside potential considering its current market value.
The shares of the cement manufacturing giant closed at N140.20 per share at the time of the forecast and now stood N160 per share. And given the price projection of Future View analysts, investors buying now stand the chance of reaping capital gain of over 69 per cent at the end of the year.
According to the analysts, they arrived at the N237 price using Dividend Discount Model (DDM) valuation metric. Making an investment case for Dangote Cement shares, they said, "With the high level of expansion and increasing capacity, Dangote Cement is poised to be the largest cement producer in Africa.
"Moreover, the use of gas to power most of its plants will yield economies of scale in terms of reduced operating costs and increased profitability."
Analysing the operations of the company, they said Dangote Cement shipped about 2.4 metric tonnes(mt) of cement in Q3'12, which is an increase of7.7 per cent compared with 2.3mt shipped in Q3'11.
"The production level represents utilisation rate of 51 per cent based on the current capacity of 19mtpa. Obajana Cement factory is Dangote's largest cement plant with production capacity of 10.25mt. It was affected by flooding mid-year though the effect of the disaster is now abated," they said.
The company had recorded a turnover of N208.2 billion in Q3 of 2012, up by 19.8 per cent from N173.8 billion recorded in the corresponding period of 2011.