FBN Holdings 2021Q3: Time For Competitive Earnings, Profit, Pay Out
Rating: HOLD
Current Market Price: N11.70
LDR (Q3-2021): 56.21%
Year High: N12.90
Year Low: N6.25
Fair Value: N10.51
Equity Analyst: Tunde Segun Jeariogbe
Introduction
- We have carefully observed the recently released nine-month financial numbers of FBN Holdings Plc for the period ended 30th September, 2021, compared same with figures released in the similar period of 2020 to establish growth and make recommendations accordingly.
- The holding company posted a lower performance, compared to its corresponding result in 2020.
- Worst of all, the group posted far lower numbers in its Total Comprehensive Income for the period. A further review of the numbers shows that the Total Comprehensive Income dipped due to losses arising from Debt and equity instruments.
- See below for detailed analysis:
Company figures
- Gross Earnings for the nine-month is estimated at N427.03 billion slightly below the N439.33 billion estimated in the corresponding period of 2020.
- Interest Income also stood at N260.11 billion, 12.63% below the comparable period, from N297.71 billion in the comparable period.
- Meanwhile, Interest Expense stood at 7.45% below the comparable period, at N97.15 billion, against N104.97 in the previous year.
- As a result of the marginal difference in both Interest elements, the Net Interest Income dipped by 1,545% to N162.96 billion, down from N192.73 billion in the corresponding quarter.
- Operating Expenses is estimated at N208.88 billion, same as 9.25% above the N191.20 billion stated in its 2020 third quarter earnings numbers.
- Profit before Tax stood at N52.93 billion, down from the N63.28 billion achieved in 2020 nine-month financials.
- After making provisions for Tax Expenses, Profit reported for the period is N40.79 billion, representing 40.15% below the N68.15 billion reported in similar period of 2020.
- Impacted negatively by the Net Fair Value losses on Debt Instruments and Equity Instruments, the Total Comprehensive Income dipped by 93.78% to N4.52 billion, from the N72.80 billion stated in its 2020 third quarter report.
- Total Assets is currently valued at N8.50 trillion, an improvement over the previous estimate of N7.24 trillion.
- Total Liabilities, on the other hand, grew by 18.69% to N7.75 trillion, compared to the N6.53 trillion estimated in 2020 financial report.
- Thus, Net Assets improved by 5.83% at the current value of N753.45 billion against N712.05 billion in 2020 third quarter.
- Retained Earnings grew by 60.92% to N205.74 billion, as against N127.85 billion in the previous quarter.
- Total Deposit also improved over the comparable period to N6.65 trillion, against N5.74 trillion of 2020.
- Total Loans and Advances appreciated by 30.29% to the current N3.73 trillion, compared to the previous N2.86 trillion.
Financial Strength/Solvency Ratios
- We have estimated the Debt Ratio at 91.14%, against 90.17% in the corresponding quarter, implying an improved asset valuation over last year. Note that Total Deposits was added to the Liabilities figure used in the estimate.
- We also ascertained that the Total Debt for the period can replicate Equity 10.29 times, an improved position from the 9.17 times replicate estimated from 2020 third quarter statistics.
- Total Equity was estimated at 8.86% of the Asset Value at the end of the period, a lower position of 9.88% over the 9.83% estimated in the corresponding period.
- We have currently estimated a Beta value above the market Beta for FBNH. Note that at 1.01 beta value, it’s still below the industrial average of 1.11.
Profitability Ratios
- EBITDA is currently estimated at 48.81%, same as 8.63% drop from the previously estimate of 50.13% in 2020.
- Pre-Tax Margin stood at 12.40% down from the last estimate of 14.40% at the end of 2020 nine-month.
- Interest Expense posted for the period is same as 22.75% of the Estimated Gross Earnings figure; this is same as 4.78% drop from the previous quarter estimate.
- Return Achieved on Average Equity used through the period was estimated at 5.41%, far below the 9.75% return achieved in 2020.
- See below table for detailed profitability ratios and comparisons.
Efficiency Ratios
- Operating Expenses is estimated at 48.92% of the Gross Earnings Value estimated for the period. This is an improved from the 43.52% estimated from 2020 financials.
- Similarly, Gross Earnings was estimated to be 5.02% of Total Assets, this is 17.22% drop in efficiency when compared to estimates from the corresponding period of last year.
- Total Loan to Deposit Ratio achieved at the end of the quarter stood at 56.21%, up from the 49.95% achieved in 2020.
Investment/Valuation Ratios
- Profit on each unit of FBN Holdings Plc shares at the end of the quarter is estimated at N1.14, up from the previously estimated N1.90.
- Total Comprehensive Income per unit is estimated for N0.13 versus N2.03 in the corresponding period of 2020.
- Price to Earnings Ratio adjusted per quarter stood at 3.43x as against 1.34x in 2020
- The said earnings per share is same as 9.71% of the current market price of FBN Holdings Plc on the exchange when the result was released, and represents a far lower yield when compared to the previous quarter estimate.
- The current Book Value of FBN Holdings Plc is N20.99, same as 5.83% improvement from the N19.84 estimated at the end of the corresponding quarter.
- Confirming a seemingly under-priced position is the Price to Book Value ratio that was clearly below unity.
Valuation
Exploring our blend of valuation tools, we conservatively valued each units of FBNH shares at N10.51, thus, we rated it a Hold.
