Implications of Dangote Cement Share Buyback Programme Tranche II

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Event: Dangote Cement (DangCem) begins share buyback programme Tranche II

Implications: Buyback of tranche II – 1.0% (170,003,074) of all outstanding shares – will have negligible impact on our ’22E EPS forecast. We assume management will complete this transaction on or before proposed completion date.
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This morning, DangCem announced the resumption of its share buyback scheme. According to the firm, tranche II will commence on January 19th and close a day later or when the tranche size is complete, whichever is earlier.

The market had anticipated an announcement through much of last year.

We do not expect excitement from long-term investors given the strong mid-to-long term prospect for the business.

However, we believe a potential trading opportunity does exist for investors with a relatively shorter time horizon. We have a price target for DangCem shares of N299.7 which represents a potential upside of 15.6% from current levels.

According to our estimates, the tranche II buyback programme will have a negligible impact on our ’22E EPS forecast. See below.

On a relative basis, DangCem’s shares are trading on a ’22f EV/EBITDA multiple of 7.7x for 2.5% EPS growth in ’23f. We have an Outperform rating on the stock.