Company Analysis

AFRIPRUD 2020Q3: Pressured By Declining Numbers, Economic Realities

Rating: HOLD

Latest Dividend: N0.75
Current Market Price: N5.45
Year High: N6.05
Year Low: N3.15
Fair ValueN5.88
Equity AnalystTunde Segun Jeariogbe

Introduction

  • This report observed the recently released financials for the nine-month ended 30th September 2020, compared the same with figures released in the corresponding period of 2019, established growth and necessary ratios.
  • We arrived at our valuations making use of full-year statistics, projections, and comparison.
  • This report primarily seeks to probe the numbers, to enable investors take informed decisions as to positioning or not in the shares of the company. We have therefore adopted a conservative valuation approach in our analysis.
  • The result is a lower performance when compared to numbers for the corresponding period of 2019.
  • Income from its registrars business dropped significantly against the comparable quarter, due to the zero retainership fee in the current quarter, as against the N715.21m realised last year.
  • See the table below for released numbers comparison/analysis and ratio estimations.
AFRICAN PRUDENTIAL REGISTRARS
BourseNigerian Stock Exchange
Code NameAFRIPRUD
SectorFinancial Services
Market ClassificationMAIN BOARD
Nature of BusinessShare Registration
Date of IncorporationMarch 23rd 2006
Date ListedNovember 1st 2013
End of Accounting Year31st December
Websitewww.african prudential.com
RegistrarAfrican Prudential Registrars
AuditorAKINTOLA WILLIAMS DELOITTE, Ernst & Young
Share Price@Relsd (N)                                                         5.45
Earnings per Share                                                         0.71
Intrinsic Value(N)5.88
Share Outstanding2,000,000,000
Market Capitalisation                                       10,900,000,000

Company figures

  • At the end of the 2020 business session, the management of African Prudential reported N860.78 million as fees from its share Registration business, down from N1.22bn achieved in the corresponding quarter of 2019. As noted above, the difference is due to a zero Retainership Fees reported in the current quarter
  • Net Interest Income was valued at N1.76 billion, same as 5.76% growth over the N1.67 billion reported in the similar period
  • Thus, Gross Earnings for the nine months business session is valued at N2.63 billion versus N2.89 billion of 2019.
  • Other Income stood at N29.12 million, slightly lower than the N30.86 million posted at the end of 2019.
  • Personnel Expenses inched north by 3.37% to stand at N464.97 million as against N449.81 million in the comparable quarter,
  • Other Operating Expenses through the nine months is estimated at N551.22 million, a marginal 1.85% drop from the N561.63 million achieved in the corresponding quarter.
  • In other words, Total Operating Expenses is valued at N1.016 billion, a marginal 0.47% growth, above the N1.101 in the similar quarter.
  • Finance Cost used through the period was only N1.31 million, as against N101.03 million in the corresponding quarter of 2019.
  • Profit before Tax was N1.57 billion, after dropping from N1.75 billion in the corresponding period, difference between the two values is 10.72% down the line.
  • Tax Expenses used through the nine months is valued at N259.27 million versus N257.16 million in the corresponding period.
  • Thus, the amount reported as Profit for the period is N1.41 billion, slightly below the N1.50 billion posted at the end of the first nine months of 2019
  • Total Comprehensive Income was estimated at N1.38 billion against N1.42 billion achieved in the corresponding period
AFRICAN PRUDENTIAL REGISTRARS
Statement of Comprehensive Income
 20202019%CHG
REGISTRAR FEE860,787,0001,222,866,00029.61
NET INTEREST INCOME1,769,214,0001,672,795,0005.76
GROSS EARNINGS2,630,001,0002,895,661,0009.17
OTHER INCOME29,192,00030,863,0005.41
PERSONNEL EXPENSES464,975,000449,810,0003.37
OTHER OPERATING EXPENSES551,227,000561,631,0001.85
TOTAL OPERATING EXPENSES1,016,202,0001,011,441,0000.47
DEPRECIATION & AMORTISATION62,556,00054,763,00014.23
FINANCE COST1,310,000101,030,00098.70
PROFIT BEFORE TAX1,570,712,0001,759,290,00010.72
INCOME TAX159,273,000257,164,00038.07
PROFIT AFTER TAX1,410,129,0001,502,126,0006.12
TOTAL COMPREHENSIVE INCOME1,384,866,0001,452,715,0004.67
Statement of Financial Position
TOTAL ASSETS19,378,978,00020,833,034,0006.98
TOTAL LIABILITIES11,109,828,00011,783,730,0005.72
CASH & CASH EQU.535,014,0002,498,453,00078.59
PROP PLANT & EQUIPMENTS292,044,000229,669,00027.16
NET ASSETS8,269,150,0009,049,304,0008.62
CUSTOMERS DEPOSITS10,155,371,00010,992,457,0007.62
RETAINED EARNINGS6,620,099,0006,431,067,0002.94
SHARE OUTSTANDING2,000,000,0002,000,000,0000.00
  • At the end of the 2020 nine-month, the Total Assets of African Prudential is valued at N19.37 billion, 6.98% drop from the N20.83 billion valued in the corresponding period.
  • Total Liabilities is currently estimated at N11.10 billion, same as 5.72% drop from the N11.78 billion reported in the corresponding quarter.
  • Cash & Cash Equivalent dropped by 78.59% to N535.01 million versus N2.49 billion in the comparable period.
  • Net Assets at the end of the period was valued at N8.26 billion versus N9.04 billion in the similar quarter
  • Customers Deposits through the nine months is N10.15 billion, same as marginal 7.62% drop from the N10.99 billion in the corresponding period
  • Retained Earnings posted in the current quarter is N6.62 billion, almost same as the N6.43 billion estimate of the corresponding quarter

Financial Strength/Solvency Ratios

  • Debt Ratio is estimated at 57.33% a marginal increase of 1.36% over the 56.56% estimate in the corresponding quarter. In other words, Total Debt of African Prudential is same as 57.33% of the Total Assets Valuation for the period.
  • Total Debt to Equity is 1.34x against 1.30x in the corresponding quarter. That is, Debt at the end of the period can replicate Equity in 1.34 times. This is a better position for the equity holders
  • Equity Ratio stood at 0.43x same as in the previous quarter’s estimate. in other words, Equity Valuation at the end of the period is 42.67% of the Total Assets valuation
  • Going by the estimated beta value of African Prudential, one can easily conclude that the stock is not very liquid at below market beta.
AFRICAN PRUDENTIAL REGISTRARS
Financial Strength/Solvency Ratio
TICKERS20202019%CHG
Debt Ratio57.33%56.56%1.36
Total Debt to Equity Ratio (MRQ)                                       1.34                                   1.303.18
Equity Ratio                                       0.43                                   0.431.76
Beta Value                                       0.72                                   0.720.00

Profitability Ratios

  • Pre-Tax Margin stood at 59.72% down from the last estimate of 60.76% at the end of 2019 nine-month period, a marginal drop in profitability rate between the two period observed.
  • Return of Equity stood at 17.05%, same as 2.73% growth when compared to the 16.60% in the corresponding period of 2019
  • Return of Assets on the other hand inched up to 7.28%, as against 7.21% in the corresponding quarter.
  • See the table below for detailed profitability ratios and comparisons.
AFRICAN PRUDENTIAL REGISTRARS
PROFITABILITY RATIOS
TICKERS20202019%CHG
PRE-TAX MARGIN59.72%60.76%1.70
EFFECTIVE TAX RATE11.29%17.12%34.02
ROAE17.05%16.60%2.73
ROAA7.28%7.21%0.92

Efficiency Ratios

  • Operating Expenses is estimated at 38.64% of the Gross Earnings Value estimate for the quarter, an improvement of 10.62% in efficiency when compared to the 34.93% estimated from 2019 third quarter financial statistics.
  • Gross Earnings through the period is same as 13.57% of African Prudential’s Total Assets Valuation, this is a 2.36% drop in management’s efficiency during the observed period
  • See below for other efficiency ratios:
AFRICAN PRUDENTIAL REGISTRARS
EFFICIENCY RATIOS
 20202019 
OPEX to GROSS EARNINGS38.64%34.93%10.62
GROSS EARNINGS to TOTAL ASSETS13.57%13.90%2.36
Capex/Share                                       0.06                                   0.03105.68

Investment/Valuation Ratios

  • At the end of 2020 third quarter, the management of African Prudential earned N0.71 on each units of its listed share capital, this is a 6.12% drop from the N0.75 earnings recorded in the corresponding period of 2019.
  • Total Comprehensive Income per share equally dipped by 4.67% from the corresponding period’s estimate. The ratio stood at N0.69 from N0.73.
  • The Price Earnings Ratio increased to 7.73x from 5.33x.
  • The said earnings per share produced an appreciable yield of 12.94% over the price of African Prudential on the floor of the exchange when the result was released. In our opinion, the yield is impressive
  • The Book Value is estimated at N4.13 at the end of the quarter, a lower valuation when compared to the N24.52 estimated  at the end of the 2019 nine months.
  • Confirming an academic over-valued status of African Prudential shares on the floor of the exchange is the estimated Price to Book Value ratio that stood above unity.
AFRICAN PRUDENTIAL REGISTRARS
Investment/Valuation Ratios
Tickers20202019%Chg
PRICE AT RELEASED5.454.0036.25
EPS0.710.756.12
TCIP/SHARE0.690.734.67
P/E-Ratio7.735.3345.14
Earnings Yield12.94%18.78%31.10
BV/Share4.134.528.62
PBV1.320.8849.10

Valuation

While valuing African Prudential, we opted for a more conservative method, putting into consideration the ongoing economic challenges which may reduce the registrars income, should its clients fail to pay dividend for some times. Nevertheless, our valuation is within same range with the current market price of African Prudential, but below its year high. In other words, we have valued each unit at N5.88. Thus, considering the range between our valuation and the current market price of the company’s shares as of the time this result was compiled, we have rated it aHold.

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