Aradel Holdings Plc, formerly known as Niger Delta Exploration & Production Company (NDEP), has made a significant leap from dominating the NASD OTC platform to becoming a noteworthy player on the Nigerian Exchange (NGX).
Starting with a share price of N350 in 2013 on the NASD OTC platform, Aradel achieved an impressive growth trajectory. Over 11 years, its share price soared by 2,719%, representing a compound annual growth rate (CAGR) of 35.47%. The stock peaked at N9,867.38 in 2024 before undergoing a re-denomination, which adjusted the share price to N469.95.
On October 14, 2024, Aradel was listed on the NGX at N702.69 per share, translating to a market capitalization of N3.05 trillion. Despite an initial surge, its stock declined by 33.83% year-to-date, closing at N465 as of December 10, 2024.
Financial Performance and Revenue Growth
In the first nine months of 2024, Aradel recorded a remarkable 477% year-on-year growth in earnings per share, amounting to N25.45. This led to an interim dividend payout of N8 per share. The company’s revenue has been on a steady rise, growing from N39.05 billion in 2018 to N221.14 billion in 2023, with a CAGR of 41.45%.
By the third quarter of 2024, Aradel’s revenue had surged 207% year-on-year to N377.6 billion, surpassing its total revenue for 2023 by 70%. This growth was driven by higher global crude oil prices, averaging USD 82.49 per barrel, and increased production across its key business segments. Crude oil output rose by 146.82% year-on-year to 9,737 barrels per day, while gas and refined product volumes grew by 48.6% and 74.62%, respectively.
However, rising costs have posed challenges. The cost of sales increased by 207.56% in 2023 to N73.21 billion and further surged by 211% in 2024 to N166.8 billion. Addressing these escalating costs is critical to maintaining profitability and financial sustainability.
Profitability and Asset Utilization
Aradel has demonstrated strong profitability, with pre-tax profits in 2023 growing by 237% to N112.164 billion. This momentum continued in 2024, as pre-tax profits for the first nine months surged 412% year-on-year to N191.457 billion, surpassing 2023’s total by 71%.
Despite robust profitability, the company’s asset utilization remains a concern. With an asset turnover ratio of 0.22x, Aradel generates only 22 kobo in revenue per naira invested in assets. This inefficiency has weighed on its return on equity (ROE), which stands at 8.16%. Improving asset utilization could enhance profitability and boost shareholder returns.
Growth Potential and Market Outlook
Aradel’s low debt-to-equity ratio of 5.76% and strong operating cash flows, which grew 130.5% year-on-year to N228.887 billion in 2024, indicate ample room for leveraging and future expansion. Analysts project a positive outlook for the company, with target prices ranging from N637.39 to N1,258.77, highlighting significant upside potential.
While the stock currently trades at N465, well below these target prices, this may present an opportunity for investors focused on long-term growth. Despite challenges with asset utilization and rising costs, Aradel’s strong financial fundamentals and growth trajectory suggest a promising future.
Investors may consider Aradel a worthwhile addition to their portfolios, driven by its robust earnings potential, dividend payout capacity, and strategic positioning in the oil and gas sector.
