Share Price (25/07/2023): GH¢6.70
Target Price: GH¢8.37 (Potential Upside: 25%)
Recommendation: Short Term BUY
Industry: Distribution
Ticker: GSE.TOTAL
About the Company
TotalEnergies Marketing Ghana Plc stands as the esteemed Ghanaian subsidiary of the globally recognized TotalEnergies Group, an industry leader within the integrated international Oil & Gas sector. As the fourth largest publicly-traded entity of its kind across the globe, the TotalEnergies Group boasts an extensive presence that spans over 130 countries, solidifying its position as a formidable force in the industry.
TotalEnergies, which embarked on its operations in Ghana as Total Oil Products, has journeyed through various transformative phases. These significant milestones include the strategic takeover of British Petroleum through Elf Oil and the integration with the esteemed French entity TotalfinaElf. Building on these accomplishments, the subsequent global merger of Total and Elf marked a pivotal juncture that led to the establishment of Total Petroleum Ghana Limited. This transformative phase was realized when Total Outre-Mer acquired Mobil Ghana, cementing the incorporation of Total Petroleum Ghana Limited.
TotalEnergies demonstrates its profound commitment to providing essential energy solutions by boasting an expansive network of over 234 service stations throughout Ghana. This remarkable network extends across all 10 regions of the country, underlining the company’s dedication to accessibility and excellence.
On the Ghana Stock Exchange (GSE), TotalEnergies Marketing Ghana is a listed entity since July 19th, 1991. The company’s trading activity occurs under the ticker symbol “TOTAL” with the International Securities Identification Number (ISIN) of GSE:TOTAL identified as GH0000000144. Notably, TotalEnergies Marketing Ghana holds the distinction of being the ninth most valuable stock on the GSE, boasting a market capitalization of GHS 1.01 billion. This valuation represents approximately 1.38% of the total equity market on the Ghana Stock Exchange, showcasing its significance within the financial landscape.
Performance History
GROWTH ANALYSIS
| HISTORICAL | |||
| GH₡(‘OOO) | Y-2020 | Y-2021 | Y-2022 |
| Revenue | 2,394 | 3,227 | 5,686 |
| % Growth | 35% | 76% | |
| 3-year CAGR | 33% | ||
| COGS | (2,045) | (2,901) | (5,195) |
| Gross margins | 349 | 326 | 491 |
| Admin Expen. | (189) | (207) | (281) |
| EBITDA | 218 | 177 | 278 |
| Adj EPS | 1.08 | 0.66 | 1.33 |
PROFITABILITY
| GH₡( ‘000) | FY2020 | FY2021 | FY2022 | 2023+F |
| Revenue | 2,394 | 3,227 | 5,686 | 5,787 |
| % Growth | 35% | 76% | 2% | |
| Gross margins | 349 | 326 | 491 | 500 |
| Gross margins Growth | 15% | 10% | 9% | 9% |
| EBITDA | 218 | 177 | 278 | 317 |
| Adjusted EPS | 1.08 | 0.66 | 1.33 | 1.36 |
| KEY RATIOS | 2020 | 2021 | 2022 |
| Return on Equity | 33% | 25% | 36% |
| Long Term Debts to Equity | 0.21x | 0.23x | 0.33x |
| Interest bearing debt to retained earning | 0.29x | 0.27x | 0.65x |
| Current Ratio | 0.92x | 1.04x | 0.98x |
| Asset turnover | 2.67x | 3.15x | 3.90x |
| Equity turnover | 8.03x | 8.46x | 13.21x |
Industry Comparison
Total consistently outperforms its counterpart Goil on the Ghana Stock Exchange, showcasing its superior performance and market competitiveness.
| Company | Ticker | 5-year Revenue Growth |
Operating Margin |
P/E | EV/Revenue | EV/EBITDA | |||
| 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | ||||
| GOIL | GOIL | 15% | 1% | 10.83x | 6.23x | 0.06x | 0.02x | 2.42x | 1.96x |
| AVERAGE | 17% | 3% | 9.01 | 5.48 | 0.16 | 0.08 | 3.15 | 2.44 | |
| TOTAL | TOTAL | 19% | 4% | 7.18x | 4.73x | 0.25x | 0.14x | 3.88x | 2.92x |
VALUATION HIGHLIGHTS: TotalEnergies has consistently demonstrated prudent financial management by retaining a substantial portion of its profits to fortify its equity position. This strategic approach has facilitated effective control and reduction of both long-term and interest-bearing debts incurred for operational purposes, while ensuring that a considerable share of the business’s gains accrues to its equity stakeholders.
Furthermore, TotalEnergies represents a defensive stock, possessing qualities that make it resilient in the face of market fluctuations and economic uncertainties. This defensive nature is indicative of the company’s ability to maintain stable performance even during challenging market conditions.
- Valuation (Discounted Cashflow)
| 12/31/2024 | 12/31/2025 | 12/31/2026 | 12/31/2027 | |
| Revenues | 6,718,683 | 7,397,020 | 8,143,845 | 8,966,071 |
| NOPAT | 176,190 | 220,608 | 247,867 | 305,170 |
| UNLEVERED FREE CASHFLOW | 116,229 | 132,950 | 141,738 | 176,966 |
| EPS | 1.57 | 1.97 | 2.22 | 2.73 |
Based on our comprehensive analysis and considering the robust financial performance of TotalEnergies, we have calculated the intrinsic value of each share over its entire lifespan using a Weighted Average Cost of Capital (WACC) of 18.05% and a Growth Rate of 1.6%. The estimated intrinsic value per share is GH₵8.37, which notably surpasses its current trading price of GH₵6.70.
This analysis suggests that TotalEnergies shares have significant growth potential, indicating that the stock is potentially undervalued in the market. Investors may find this information valuable when making informed investment decisions.
OTHER TAKEAWAYS
- P/E AND EV/REVENUE MULTIPLE.
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | ||
| EV/Revenue | 0.44x | 0.34x | 0.31x | 0.34x | 0.25x | 0.14x | |
| Actual P/E Multiple | 22.97x | 17.32x | 10.90x | 6.67x | 7.18x | 4.73x | |
Due to the substantial increase in earnings, TotalEnergies Marketing Ghana Plc has experienced a notable reduction in its Price-to-Earnings (P/E) multiple. This decline in the P/E multiple signifies that the company’s stock price is now more in line with its earnings, reflecting a positive shift in investor sentiment towards the company’s performance.
Additionally, the Enterprise Value-to-Revenue (EV/Revenue) multiple has also decreased. This suggests that the valuation of TotalEnergies in relation to its revenue has become more favorable, indicating that the market perceives the company’s revenue generation as more efficient and potentially undervalued.
These changes in valuation metrics could indicate increased confidence among investors in TotalEnergies’ earnings prospects and overall financial health.
Industry & Economic Analysis
INDUSTRY ANALYSIS
Using the S.W.O.T ANALYSIS
- STRENGTH- HIGH
Total has a dominant force in the energy sector with a robust brand known for reliability. It is highly committed to research and development fostered towards innovation. With an expensive geographic presence, it fuels not just vehicles but the nation’s progress, exemplifying excellence in energy distribution.
- WEAKNESS- MODERATES
Total faces a weakness in environmental impact and product differentiation. However, its positive trajectory stems from commitment to sustainability and potential innovation.
- OPPORTUNITY- HIGH
Total holds promise in strategic acquisitions, capitalizing on a rapidly expanding industry. Growth potential is amplified by its adaptability and resources.
- THREAT- AVERAGE
Climate changes and competition poses a moderate threat to Total. Yet, its resilience, commitment to green initiative, and innovation positions it for long-term success.
ECONOMIC ANALYSIS
GDP Growth: The rate of GDP growth witnessed a decline, falling from 5.4% in 2021 to 3.2% in 2022. Notably, the oil and gas sector constituted an average of 4.5% of Ghana’s Gross Domestic Product (GDP) from 2013 to 2021. In terms of revenue contribution, the government of Ghana derived approximately 1% of its GDP from oil sales as of the second quarter of 2022.
Inflation: Inflationary pressures have been on the rise throughout the year. Currently standing at 42.5%, the Bank of Ghana (BOG) responded to these inflationary trends by elevating the monetary policy rate from 29.5% to 30% in the current year.
Implications: The cedi has shown signs of appreciation against the dollar, particularly leading up to the IMF deal. Additionally, the recent debt restructuring has led to instances of imminent bond defaults. As a consequence, numerous investors seeking to diversify their portfolios are likely to shift their focus toward equity investments. This adjustment is a notable trend in response to the evolving economic landscape.
Recommendation:
Based on our analysis, we have a conviction that Total presents a highly favorable investment opportunity. With a projected value of GH₵ 8.37 per share, we recommend Total as an Strong BUY for both SHORT-TERM and LONG-TERM investment strategies. This recommendation is driven by the company’s robust potential for both dividend distribution and capital appreciation, making it a compelling choice for investors seeking solid returns.