After an impressive full-year results, investors have continued to take position in the shares of foam-maker, Vita-Foam forcing the share price to hit N5, the highest in five years.
Since the beginning of trading this year, the share price of Vitafoam has gained 13.64percent as at Friday.
In its full-year result for the period ended 30th September, profit more-than-quadrupled and crossed a record billion naira-mark after company sales jumped 14 percent. Vitafoam posted an annual profit of N2.46bn for the business year ended 30 September 2019. This is 309 percent more than it made in the previous year and the fastest bottom-line growth in at least five years.
The manufacturer grew revenue by 14 percent to N22.28bn with sales from foams and other products up by 10 percent year-on-year while Freight income which was dormant in 2018 contributed N779.328m in 2019. The Key drivers behind the results were higher revenue and lower finance costs. Finance costs reduced from N1.3 billion in 2018 to N1 billion in 2019, down 23percent year on year.
While it has hit a 5-year high, there may be room for further upside, as the stock is trading at a price-earnings ratio far lower than the average on the Nigerian Stock Exchange (NSE). Vitafoam is trading at a PE ratio of 2.7 times earnings. The average PE on the NSE is 7.8 times earnings.
After a disappointing 2019 the equities market has regained its mojo since the beginning of the year as investors take positions ahead of the earnings season.
Buoyed by the recent move of the central bank to ban individuals and local corporates from the Open Market Operations (OMO) window means that current maturities cannot be rolled over, this has led to increasing liquidity in the system.
With the current abysmal rates on sovereign bonds and government short-term debt instruments often called treasury bills, investors are left with no other option than to seek alternative assets classes to invest their funds, and it appears the equities market is now the logical destination of any discerning investor.
Vitafoam’s Q1 2019/2020 results would be out in a few weeks from now and will be a pointer as to the company’s ability to sustain last year’s performance. The results are for the three months ended December 2019, which witnessed increased consumer spending.
