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Why Caverton Offshore Is a Penny Stock to Watch Closely

NigerianStocksToBuy Forum / Why Caverton Offshore Is a Penny Stock to Watch Closely / Category / Company Analysis / Why Caverton Offshore Is a Penny Stock to Watch Closely

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Why Caverton Offshore Is a Penny Stock to Watch Closely by : 8:54 am On October 31, 2018

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As of this writing, Caverton had just released its Q3 2018 earnings report with key metrics indicating that the company is on track to beat its previous year record.

The stock is selling for ₦1.91 with a YTD performance of 48.06%.

Recent Result

Results for the 9-month ended September 2018 show that revenue increased from ₦14.8 billion in 2017 to ₦23,1 billion in 2018 while operating expenses also increased to ₦14.7billion (from ₦9.7billion).

The revenue was driven by 61% growth in contracts from Aeroplane and Helicopter services.

Profit before tax jumped from ₦1.8billion in 2017 to ₦2.8 billion in 2018. Profit after tax followed suit; from ₦1.1billion in 2017 to ₦1.6 billion in 2018.

Return on Equity grew from 6.9% to 10% while Debt to Equity expanded from 1.9% to 2.3%. Although interest coverage above 2 means that the company still pay its interest obligations from operating profits, the gradual accumulation of debt should be closely watched.

Cash generated from the operation on the Q3 report is ₦10.9b (compared to ₦2.3b)

Technical Analysis

Caverton, as of this writing, is trading for ₦1.91, above its 50-day average of ₦1.90, but below 20-day moving the average price of ₦1.92. Technically, the stock may have turned bullish as indicated by the moving average crosses, backed by the company’s impressive fundamentals.

The long term sentiment is clearly bearish, except the price surges past its 200-day moving average of ₦2.24

Valuation

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Caverton reported a 9-month EPS of 48k, which is 33% more than the EPS of 36k in the comparable period (2017).

Using an adjusted discount rate of 15%, an assumed zero growth on TTM EPS of 89k we assign a fair value of ₦5.93 to the stock, which is 337% above the current share price.

Market update

No update on Caverton.

Recommendation

We assign a BUY rating on Caverton’s stock.

About Caverton Offshore Support

Caverton Offshore Support Group Plc operates in the marine and aviation logistics sectors of the Nigerian oil and gas industry.

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At What Price Will CCNN Stock Turnaround? / Is The New Access Bank Destined for Greatness? / Is It Worth Buying Stanbic IBTC Despite Higher Prices? / Why Shares of Oando is Rising Amidst Huge Debt. / This is Why Zenith Bank Made More Profit in 2018 /  

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