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Total Energies Plc has consistently paid dividend since 2006, with a payout of 79 percent in the past seventeen years validating improved earnings and cash flow generation.
The largest downstream oil and gas firm has a dividend yield of 6.97 percent and a price to earnings multiples of 7.41 times making the stock attractive.
This year, earnings are expected to get a boost from a possible removal of subsidy on petroleum products as sector players are reeling from inflationary pressures, foreign exchange liquidity constraints, and inadequate infrastructure.
Downstream oil and gas sector players have been losing money as the state oil corporation Nigerian National Corporation Limited (NNPLC) has been the sole importer of the premium motor spirit otherwise known as petrol.
But the industry dynamics is about with the coming on board of the 650,000 per barrel Dangote Refinery in the second quarter of this year; the refinery is expected to significantly shrink fuel scarcity and fix the dislocation in the downstream oil and gas sector that has been hamstrung by lack of investment.
Analysts at Cordros Securities remain optimistic about TotalEnergies ability to deliver impressive earnings despite the plethora of challenges in the operating landscape.
This optimism is predicated on market leadership status; robust storage and distribution network, and strong balance sheet management.
“Nonetheless, we highlight that the price cap on PMS, the surge in crude oil prices and higher net finance costs will continue to inhibit profitability growth,’’ said analysts at Cordros Securities.
“On our estimates, TOTAL trades at a 2023E P/E and EV/EBITDA of 4.5x and 0.9x, a discount to the MEA peer average of 18.7x and 11.0x, respectively,” said the analysts.
They, however, noted that the downside risk to growth remains rising net finance costs and rising crude oil price on the back of the Russia and Ukraine war.
For the first three months through March 2023, TotalEnergies’ sales spiked by 38.85 percent to N135.27 billion from N97.60 billion the previous year.
Operating profit was up 9.80 percent to N7.29 billion in March 2023 from N6.63 billion as at March 2022.