Company Overview
VITAFOAM produces flexible polyurethane foams for beddings and rigid foams for insulation in industries such as oil and gas, construction, agriculture, automotive, food processing and pharmaceuticals.
Management has been growing the business by branching out into the production of allied products through its domestic and foreign subsidiaries. This has helped the company to broaden its product portfolio and achieve operational efficiency and profitability.
Investment Thesis
Management has been growing the business by branching out into the production of allied products through its domestic and foreign subsidiaries. This has helped the company to broaden its product portfolio and achieve operational efficiency and profitability.
Revenue has grown annually at a Compound Annual Growth Rate (CAGR) of 1.9% over the past three years. Nigeria produced a revenue increase of 2% (on a three-year CAGR basis) while operations outside Nigeria lost turnover of 37.9% on a three-year CAGR basis. Revenue from foam products, its flagship products, was NGN15.4 billion up from NGN11.7 billion, gaining 31.7%.
Debts are mounting and the interest payment has had a negative impact on net earnings and profit margin. Profit Before Tax (PBT) margin, which has been on the decline, was less than 1 percentage point. Profit After Tax (PAT) margin was -0.7%. Moreover, VITAFOAM obtained a NGN2 billion loan in September, 2017 to shore up its working capital.
VITAFOAM's shares should offer investors an expected return of 30.1% consisting of capital appreciation of 23.7% and a dividend yield of 6.4%.
Read More.
