Rating: Hold
Current Market Price: N7.70

Latest Interim Dividend: N
Year High: N15.12
Year Low: N7.70
Fair Value: N8.43
Equity Analyst: Tunde Segun Jeariogbe

Introduction

• In this report, we observed the financial report of BOC Gases for the half-year ended 30^th June 2021, compared same with figures released in the similar period of 2020 to establish growth and make comparison accordingly.
• The report adopts a conservative valuation approach since it is focused on enhancing our readers’ investment skills. Thus, we explored the full-year numbers, factoring necessary economic indicators while placing an intrinsic value on the share price.
• Despite the tough business environment, BOC Gases built its financial indices appreciably over those of the comparable quarter.
• See below for other financial indices and comparisons:

Company figures

• At the end of the six-month period, the management of BOC Gases reported revenue of N1.77 billion, the same as 19.96% above the N1.47 billion reported at the end of the corresponding period in 2020.
• Cost of Sales equally grew by 18.95% to N864.53 million, versus N726.79 million in the corresponding period.
• Operating Profit was estimated at N297.58 million as against N180.74 million in the similar quarter of 2020.
• Operating Expenses inched north by a marginal 2.26% to N613.66 million, versus N600.13 million in the corresponding period.
• Finance Cost used through the first six months of 2021 was valued at N70.00 million, which is 275.66% higher than the N18.63 million used in 2020.
• Profit before Tax posted for the period was N244.14 million, same as 26.11% growth over the N193.59 million reported at the end of the 2020 half-year business session.
• Tax Expense for the half-year is N75.71 million, a 13.83% increase over the N66.51 million of 2020 half-year.
• Thus, the total Profit for the period is valued at N168.43 million, as against N127.07 million in the comparable period.

• BOC Gases’Current Assets is valued at N5.79 billion, the same as 18.32% above the N4.89 billion stated in its 2020 half-year result.
• Non-Current Asset is N2.42 billion, a marginal drop from the stated N2.54 billion in the 2020 numbers.
• Total Current Liabilities on the other hand stood at N2.32 billion against N1.47 billion in the corresponding quarter.
• Total Non-Current Liabilities is currently valued at N499.31 million versus N632.51 million in the corresponding quarter.
• Net Assets is estimated at N2.96 billion, same as 6.30% above the N2.78 billion in the corresponding quarter.
• General Reserve is valued at N2.75 billion compared to the N2.58 billion announced in its 2020 earnings report.

Financial Strength/Solvency Ratios

• BOC Gases Debt Ratios is estimated at 48.79% at the end of the quarter. In other words, Total Liabilities for the period is as high as 48.79% of the Total Assets number. This is against the 43.00% estimated at the end of the 2020 business session.
• Total Debt to Equity is 95.29%, compared to 75.45% in the corresponding quarter. That is, Debt at the end of the period can replicate Equity 0.95 times, up from 0.75 times in the corresponding period, which is quite low.
• Equity Ratios stood at 51.21% as against the previously estimated 57.00%. in other words, Equity Valuation at the end of the period is 0.51x of the Total Assets valuation.
• Going by the estimated beta value of BOC Gases, one can safely conclude that the equity does not enjoy frequent patronage, at below unity.

Profitability Ratios

• EBITDA Margin is currently estimated at 16.80%,from 12.24% in 2020.
• Pre-Tax Margin stood at 13.79%, up from the previous 13.11% estimated at the end of the 2020 half-year.
• We also established that the Cost of Sales reported through the period is the same as 48.81% of the Turnover Value posted at the end of the period. This is only a marginal difference of 0.84% over the 49.23% in 2020.
• Return on Equity stood at 5.68%, the same as 24.69% growth when compared to the 4.56% in the corresponding period of 2020.
• Similarly, Return on Assets improved by 12.02% to 2.91%, as against 2.60% in the corresponding quarter.
• See the table below for detailed profitability ratios and comparison:

Efficiency Ratios

• Operating Expenses is estimated at 34.65% of the Gross Earnings Value estimate for the quarter, an improvement of 14.65% in management efficiency when compared to the 40.65% estimated from 2020half year financial statistics.
• Total Revenue through the period is the same as 30.59% of BOC Gases’ Total Assets Valuation, a marginal 1.38% improvement in management efficiency during the observed period.
• See below for other efficiency ratios:

Investment/Valuation Ratios

• At the end of 2021 first half, the management of BOC Gases earned N0.40 on each unit of its listed shares, better than the N0.31 achieved at the end of 2020 half-year by 32.55%.
• Our half-year adjusted Price Earnings Ratio increased to 19.03x from 14.77x, an improvement that is mainly due to investors’ revaluation of the share price on the exchange during the periods compared.
• The said earnings produced a yield of 5.26% over the price of BOC Gases on the exchange when the result was released. Although this is a drop from that of the corresponding period, we maintain that the yield is quite attractive, since price changes within the period were much.
• The Book Value of BOC Gases is estimated at N7.12 at the end of the quarter, an improvement in valuation when compared to N6.70 valued at the end of the 2020 half-year.
• Confirming an academic over-valued status of BOC Gases shares on the exchange is the estimated Price to Book Value ratio that stood above unity.

Valuation

While valuing BOC Gases, we chose a highly conservative method, seeking to present a very secure price to our readers. Thus, we have valued each unit of BOC Gases shares for N8.43, which is fairly above both the Book Value and the current market price of BOC Gases on the exchange. Hence, we Rated it a Hold.