Rating Summary:
We issue an ACCUMULATE rating on Ghana Oil Company PLC (GOIL) with a fair value of GHS 4.47. This represents a 6.4% upgrade to our previous provisional fair value of GHS 4.2, despite the stock’s 33.8% year-to-date rally, as we perceive further upside driven by our anticipated volume recovery and ancillary revenue streams. We expect Ghana’s “Big Push” road construction programme to materially lift petroleum demand through higher utilisation of diesel and petrol-powered trucks, construction vehicles and heavy machinery, while intensified equipment use should also support consumption of maintenance fuels and lubricants across project corridors. These dynamics underpin our expectation of a revenue recovery in 2026, with topline projected to rise 26.5% y/y to GHS 21.6bn in FY2026, reversing the 11.6% y/y contraction in FY2025 and supporting a five-year revenue CAGR of 13.6%. While this trails the historical five-year CAGR of 28.7%, the divergence reflects a distortion in FY2022, when revenue surged 175.2% y/y on the back of a 20.4% y/y increase in sales volume alongside upward price adjustments. Excluding FY2022, historical average growth moderates to 9.9%, below our projected 13.6%. Beyond core fuel sales, we expect the road construction drive to unlock substantial demand for bitumen, with GoBitumen Ltd, GOIL’s wholly-owned subsidiary, well positioned to capture part of this demand and generate incremental revenue alongside the core distribution business. Taken together, these factors justify our ACCUMULATE stance, as we believe GOIL remains positioned for sales volume recovery in 2026 amid management’s ongoing cost control measures. We obtained our fair value estimate using a blended valuation approach comprising Discounted Cash Flow (40% weight), Enterprise Value to Earnings Before Interest and Taxes – EV/EBIT (40% weight), and Dividend Discount Model (20% weight). The intrinsic value estimate is based on a 15.01% risk-free rate, a weighted average cost of capital (WACC) of 13.5%, and a terminal growth rate of 5.0%.