Shares of power and petrol marketer Forte Oil (FO) which traded at 116.24 per share as of last ticker on Friday is 127.21 percent above the 52 week closing low of 53.7 set two weeks ago on Nov 30, 2016.
Forte Oil Plc recently raised N9 billion from the capital market to support its operation and drive its expansion strategy. The bond is a 5 year fixed rate issue and the first series of its proposed N50 billion bond issuance programme.
According to the company, the funds raised would be deployed to refinance existing short term commercial bank loan obligations and to finance its retail outlet expansion.
Forte Oil stock has been cut in half in the past year as it deals with surging finance costs and cost of sales which led to a 35 percent slide in net income as at Q3, 2016.
Should you buy FO here?
Looking at technical analysis Forte Oil has just blown past the 50 day moving avergage which had served as resistance for most of the year (see chart).
The stock is however at overbought levels on the Relative Strength Index (RSI) indicator, which signals a pull-back, is imminent.
Fundamentally if the company can refinance its short term debts with bond proceeds it should bode well for the bottom line going forward.
The company paid N3.5 billion to creditors as interest expense on bank loans and overdrafts as at the third quarter of 2016.
We believe Forte Oil will consolidate at these levels for a while before it attempts to move higher again.
Investors should wait for the pullback.
PATRICK ATUANYA
