Rating: Buy
Current Price: N5.10

Latest Dividend: N0.25

Full Year EPS: N0.58

Q1-EPS: N0.28
Year-High: N6.30
Year-Low: N4.28
Fair Value: N7.09
Equity Analyst:  Tunde Segun Jeariogbe

Key Investment Ratios

• This report observes the three-month financials of Fidson Healthcare for the period ended 31st March 2021, compares the same with released numbers for the corresponding period of 2020, to establish growth accordingly.
• Meanwhile, the financials for full-year ended 31st December 2020, along with a few others were explored in the valuation and projection for future returns expected from Fidson Healthcare.
• The company in its first quarter achieved 28 kobo, the same as 48.27% of its full-year earnings. It is important to understand that this was slightly below the trend in 2020 when it recorded 20 kobo full-year Earnings Per Share in 1999, and 10 kobo in the first quarter of 2020, although the difference in share outstanding during these periods also contributed to the difference.
• We note the impact of factors that have enhanced the company’s fundamentals, particularly favourable government policies, as well as Fidson Healthcare’s aggressive growth in its bouquet of products.

Company figures

• At N6.32 billion, first quarter Turnover improved by 78.67% over the corresponding quarter’s N3.53 billion.
• Cost of Sales grew along same line, as seen in the 71.70% improvement from N3.47 billion to N2.02 billion posted in the 2020Q1 earnings report.
• Operating Profit is estimated at N1.17 billion, an equally outstanding growth when compared to the N554.67 million posted in the prior Q1.
• Operating expenses growth was seemingly constrained at 45.36% over the comparable period, rising to N1.77 billion, from N1.22 billion in the corresponding period of last year.
• Nevertheless, as the company continues to take advantage of various opportunities in its field and research further on customer oriented products, it maintained its interest yielding liabilities, servicing its bank loans with N323.88 million, representing a marginal 2.36% drop from the N331.72 million used at the end of the 2020Q1 business cycle.
• Considering all expenses and incomes, Profit before Tax for the period was valued at N852.28 million as against N223.46 million in similar quarter of 2020.
• Thus, having considered Tax expenses for the period, the management of Fidson Healthcare posted a first quarter Profit of N579.55 as against N151.95 million in the corresponding period of last year.

• Current Assets is valued at N17.14 billion, same as 12.71% below the N19.63 billion estimated at the end of the first three months of 2020.
• Non-Current Assets held by the firm is valued at N14.26 billion, up from N12.92 billion posted at the end of 2020 first quarter business session.
• Current-Liabilities stood at N11.85 billion same as 127.08% above the N5.22 billion stated in its 2020 first quarter result.
• Non-Current Liabilities grew by 81.88% to stand at N8.41 billion as against N4.26 billion in 2020.
• Net Assets posted for the period therefore is valued at N11.11 billion, up from N9.79 billion in 2020.
• Retained Earnings on the other hand improved by 34.74% to stand at N5.14 billion versus N3.81 billion in 2020.

Financial Strength/Solvency Ratios

• Debt Ratio is currently estimated at 64.58%, same as 113.53% above the 30.24% estimated in the similar period of 2020. This implies that, Total Liabilities is same as 64.58% of Total Assets.
• Total Debt to Equity was equally estimated at 182.31% as against 100.57% estimated in the comparable quarter. This implies that more debt was employed in servicing the company’s assets through the period.
• It was also established that Equity is same as 35.42% of Fidson Healthcare’s Assets Value, estimate from 2020 first quarter performance indices yielded 30.07%.
• Nevertheless, we can conclude that Fidson Healthcare shares is liquid and well patronised, although the estimated Beta stood slightly below our estimated industry average, and below market beta.

Profitability Ratios

• EBITDA margin estimated for the period stood at 18.56%, above the 15.68% estimated from 2020 first quarter earnings.
• Pre-Tax Margin equally grew by 113.46% to 13.48%, from the 6.32% estimated at the end of 2020 first quarter.
• Effective Tax Rate was stable through the period as shown in the table below.
• Cost of Sales is 55.03% of the Turnover for the period, which is only 3.97% below the 57.26% estimated in 2020, a confirmation of the management’s efforts at controlling direct cost of staying in business.
• Return on Equity stood at 5.21% against 1.55% of 2020

Efficiency Ratios

• Operating Expenses to Turnover value is same as 28.51%, this is 18.64% improvement in efficiency during the quarter under review.
• Turnover to Total Assets Ratios stood at 20.13%, as against 10.86%, which is an 85.34% improvement in management efficiency, when compared to estimates from 2020Q1 performance indices
• See below for details

Investment/Valuation Ratios

• When compared with the figures for the first three months of 2020 earnings performance, EPS improved outstandingly to N0.28 from the previous estimate of N0.10 each.
• Our first quarter adjusted P/E-Ratio dropped by 40.86%, having moved to 17.28x from 29.22x. Note that the high P/E-Ratio is also an indication of positive investor sentiments in the shares of Fidson Healthcare.
• The said Earnings per Share is a yield of 5.79% of the current market price of its shares on the exchange as of the time the result was presented to the investors.
• The Book Value of Fidson is currently estimated at N5.33, slightly above the market value on the NGX, and below our Intrinsic Value for the stock.
• Confirming and under-priced status of Fidson shares on the floor of the exchange is the Price to Book Value which stood below unity (0.90x).

Valuation

Having considered the financials of Fidson Healthcare, aggressive product growth and government policies in its favour, especially in the wake of the COVID-19 pandemic, while maintaining our conservative valuation approach, we have made our projection with the assumption that the management will work to reduce its interest yielding loans. In doing this, it must build both performance and dividend over the coming years, following which we, therefore, value each unit of Fidson Healthcare at N7.09 and have rate it a Buy.