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Aradel FY 2025: Accumulate or stay neutral till Q1 2026 ? · Green Ticker Tales

• 0:00
  good evening so let's look at aradale afs 2025 numbers afs means audited financial statements and so what you have is you had year-on-year revenues up uh fy 2025 revenue came in at about 700 billion and then fy 2024 revenue came in at 581 billion so if you if you do the math uh it means that um year on year
• 0:28
  uh revenue is up by about 19.6 percent plus roughly 20 profit after tax flow is down um it's down uh it's down sharply so it's it's um also i've taken the liberty to strip away the gains so if you don't analyzing numbers don't just go by what you see in the financial statements because it includes one-time gains if you want to do proper analysis strip away those one-time gains
• 0:58
  and so if you do that it means that you would have year-on-year profit is down now if you include the one-time gains your profit is sharply up right it's all by over over 100 so just that distinction is clear and the video will explain well but what i have is after you drill down you come in with an earnings per share of about 41 20 copper now i'm not an accountant i've used
• 1:23
  a 20 tax rate if you use a lower tax rate maybe you'd have a higher industry share and higher profit if you use a higher tax rate you have probably a much lower a profit of the tax and any special so you can assume okay that the annual special came in at maybe 37 38 39 40 whatever the mass you're doing but this is a way bigger firm and in if i were to do a tdl or summary of
• 1:49
  this podcast some ways you can either decide to accumulate at current levels or you can just wait for q1 2026 numbers to come in and that should give you more clarity but um let's break things into a granular level i've done a five-year earnings uh review for the firm and i've taken the normalized fy 2025 normalized fy 2025 means i'm taking fy 2025 numbers stripped of those gains
• 2:18
  and if you work it with it that way it means that between 2021 to the normalized fy 2025 period our revenue grew at an average growth rate of 91.8 percent profit after tax grew at a average growth rate of about 57.2 percent your equity grew at an average growth rate of 64.8 percent so
• 2:44
  that's the figure you have now for fy205 normalized your return on assets for the full year came in at 1.82 percent return on equity came in at about 8.37 percent um so it was 2025 where weak set of numbers compared to 2024 i mean 2024 return on asset was 14.81 return on equity 18.45 percent it doesn't make my cutoff of 24 25 26 percent um
• 3:13
  but clearly 20 25 numbers were weak now why were they weak and that brings me to the cost segment split you can break our other numbers into three three um segments you have refined products you have gas so you can break out into three segments uh refined products gas and then crude oil now crude oil that's that's the biggest by the biggest by revenue the biggest segment by revenue
• 3:42
  and his biggest segment by profit after tax. Revenue grew, that's fine. Profit after tax fell by 45.1%, so FY2025 crude oil revenue came in at 190.8 billion, FY2024 was 347 billion, so that number was a bit soft. And that then leads me, or that is the fulcrum on which I'm balancing my own theory, or my own view, or thesis.
• 4:10
  as to why i think this talk is a bit simple i believe that q1 2026 numbers will show recovery in that space and if it then shows recovery in that space you can kind of work out what the earnings per share will be based on that recovery and then you should have a materially higher number compared to q1 2025 so that's one way to look at it a simplistic way to look at it is to say look now i've taken two forecasts right let's assume that
• 4:40
  2026 we have maybe 50 naira in any special at this current price that means the stock will be trading at 35 times earnings 35 times earnings is lower than its historical earnings growth rate which is about 50 something times and even though in my view buying at 35 times earnings
• 5:03
  it doesn't really give you much margin of safety because you are buying on the assumption and i think this company can continue to grow its earnings by 50 percent on average next couple of years which is a very high order stable but it doesn't give you room for for any downturns um so there are two options you can either say look feeling that p ratio of 35.3 times earnings that's what i think is going to be um when you have maybe 15 iron earnings for fy 2026
• 5:33
  you take the current price so 1750 divided by 50 that gives you forward earnings of about 35 times multiple that's a bit expensive ideally you want to say maybe 25 times multiple 20 times multiple so you're looking at somewhere between 1000 1000 to 50 but i think that that's low because the assumptions for those numbers are baseline equity growth of five percent and then um
• 6:02
  which which which is a bit low now on the flip side of things uh forecast uh two or forecast scenario two uh assumption of what thirty percent retention ratio fifteen percent return on equity so you have a higher payout uh ratio but you have higher equity the baseline equity growth is about 4.5 percent or so if you work with that and it means that year one
• 6:30
  2026 this firm should easily do about 74 naira and earnings per share and so at its current price it would mean it's trading at the forward earnings of 23.5 times um and all that which which isn't expensive and i think that the the the figure the real figure kind of lies in between scenario one and scenario two so even if you say look i think this company could easily do maybe
• 6:59
  60 Naira in earnings for FY2026. And if you take that 60 Naira in earnings, and if you go by its current price, it will mean that the stock will be trading about 30 times multiple fold earnings, which isn't that expensive really. I don't think it's that expensive for this firm. So, somewhere in between both, and that's where your answer lies.
• 7:27
  now to be simplistic you might say look i'm going to get in at this price uh possibly i may be getting in about slightly higher than its fair value but if endings or when onions accelerate over the next couple of years plus the comfort you get from a dividend you'll be good option two is to say look i'm going to wait for q1 numbers and i guess q1 numbers should probably be out sometime next week
• 7:55
  If I'm going to wait for Q1 numbers, based on Q1 numbers, I can try and analyze how things would shape out and then come back to model. But in my view, you could wait and this stock could run a bit higher. Market reaction to the results is unpredictable. We are in a rather down market at the moment. So it's possible that markets could look at the results shrug.
• 8:22
  and then nothing happens, prices will stick around at $1,750, maybe $1,600, $1,650. It's possible that happened. It's also possible markets could look at the numbers, put the numbers together and say, hey, market gets excited, this stock hits maybe $1,800, $1,900, $2,000. So the middle ground for me is accept you're a trader, and most people are traders anyway. If you're not a trader, I would say start building a position.
• 8:50
  then you see how the market moves if the market the stock price runs meaning goes up and well at least your entry price is kind of low if the stock price goes down then if it's not too severely down you can decide um to average however you look at it i don't think this stock is overly expensive even if you say which i disagree but even if you were to assume that maybe you put a fair value for this stock and maybe
• 9:19
  one five one six finding that one thousand seven fifty i don't think that's that's a big deal really you know because you could you could wait weeks to get your ideal price so rather than having to wait weeks you're not a trader you can just get in and see how it goes or you can just decide to wait to queue on 2026 but i don't believe in waiting well for my own personal portfolio i'm not waiting um i've been in arado for a while and in any case i've worked out my own tcs
• 9:49
  i'm going with my teeth you know so you walk out your numbers or watch the video and if the video makes sense to you can then you know take a punch but as always i still invest my advice these are my views views are subject to changes and points in time have yourselves a lovely rest of the day