Here is FSDH Securities‘ Analysis of the Cement Company of Northern Nigeria’s Q2 2009 Results:

In arriving at a fair value for CCNN, we estimated TO, Earning Before Interest Tax Depreciation and Amortization (EBITDA) and PAT for December 2009. We estimated a TO of N13.83bn, based on a growth of 40%, over the previous year. We project EBITDA of N2.966bn based on EBITDA margin of 17.45% and a PAT of N2.42bn based on a PAT margin of 17.50%. We used 1.256bn Ordinary Shares in issue. The estimate Earning Per Share (FEPS) generates N1.93k. We estimated a Total Dividend Per Share (DPS) of N1.25k (having paid an interim of 80k we expect a final of 45k) based on a dividend payout of 65%. Applying Enterprise Value EV/EBITDA multiple of 9.25x, a P/E multiple of 10.5x, we arrived at N20.46k per share using EV/EBITDA multiple and N20.22k per share using price earnings multiple. Applying a weight of 50% each to the valuation results we arrived at 20.34k which is our fair value. The estimate earnings yield and dividend yield based on our fair value generate 9.47% and 5.78% respectively while the estimate P/E ratio generates 10.56x. We therefore place a BUY on Cement Company of Northern Nigeria (CCNN) stock at the current market price for both capital appreciation and dividend payment.

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