Dangote Flour plc. A good investment or not?
September 22nd, 2007 Ogbuotobo Chuks || chuks@stockmarketnigeria.com
By Ogbuotobo Chuks
Undoubtedly, Allhaji Dangote and every other thing affiliated to him, in respect to his companies is regarded by all as viable and profitable. Come September 27, 2007, the initial public offer of the Dangote flour company would come to an end. The question then is “is this investment a good one and does the company have what it takes to perform in such a manner that would affect share price positively?”
Nigeria is a country with a population of over 140 million people and still counting. In spite of this, our daily flour consumption rate is the lowest amongst the top 12 in the world. Even countries like Egypt, South Africa, and Pakistan amongst others that are not up to us in population size consume more than we do. This is due to the fact that we have the market to drive up this consumption rate, but ironically, lack sufficient production of flour.
Flour can be converted into a wide range of products from bread, noodles, pasta, cake, spaghetti and the list goes on. Bread in this country is a staple food that cuts across all levels. Dangote flour has recognized this growing need and has therefore decided to expand its operations to capture more market.
Presently, the main competitor it has is Flour Mills of Nigeria plc, and both companies jointly control about 65% of the market which is still growing. Dangote Flour is into flour milling, processing and marketing of bread flour, pasta and wheat offals. With strategic mills in Apapa, Kano, Calabar and Ilorin, the company has a total installed capacity of 4000 MT per day.
The company also has two subsidiaries namely Dangote Pasta and Dangote Allied Sacks. The current size of the pasta market in Nigeria is pegged at between 22-25 million cartons per year with Dangote pasta producing about 10 million cartons per year. It controls about 45 percent of this market. The agro sacks division caters for the packaging needs of all the operations of the Dangote companies, as well as external customers. By so doing, the company saves cost on packaging as well as earning income from outside.
As expected, with so much on offer and with a good market share, the financial prospects of the company stands out with proposed dividend payout increasing from N0.40 in 2007 to N2.50 by 2011, turnover from N57.27 billion in 2007 to N172.14 billion by 2011 and profit before tax from N4.63 billion in 2007 to N22.09 billion by 2011.
Before you close this page, don’t you think that the low amount of the shares on offer would cause serious demand once it’s listed and a relative sharp rise in share price? Hmm…
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Well quoting the first line of this article “Undoubtedly, Allhaji Dangote and every other thing affiliated to him, in respect to his companies is regarded by all as viable and profitable.”, i galantly agree that there will be great demand and sharp rise inthe price of the share price. To a reasonable degree, i want to believe that there is still a measure of monopoly hold of the flour market by Dangote as regards the competition between Flour mills of Nigeria and Dangote Flour mills respectively
i don’t know how my share growing
i want you to send your rate at which my share growing send to denkays@yahoo.com or p.o.box 2825 dugbe ibadan
P.o.box 2820 Onitsha Anambra