Rating: Buy
Current Market Price: N3.20

Latest Dividend: N0.15
Year High: N3.25
Year Low: N2.21
Fair Value: N3.90
Equity Analyst: Tunde Segun Jeariogbe

Key Investment Ratios

• This report observes the full-year financial statistics of Fidson Healthcare Plc for the period ended 31^st December 2019, compares the same with released numbers for the corresponding year, so as to establish growth.
• The company exited the loss position posted in the 2018 financial year recorded a profit, although the top-line numbers stood below those of the comparable year.
• It is necessary to mention the high Finance Cost incurred by the healthcare companies throughout the year. Recall that this item hit its 2018 full-year numbers hard, and the trend remained through the just-concluded year.
• Before we look further into the company’s numbers for the year under review, there is a need to mention that the difference in Share Outstanding between the two periods is due to its last rights issue.
• Nevertheless, we expect that the company’s board and management would leverage on the Federal Government’s policy on import duty waiver on raw materials for players in the health sector to boost its profit line while reducing interest yielding loans through the remaining quarters of 2020.

Company figures

• A total of N14.06 billion was reported as turnover for the period, lower than the N16.22 billion posted at the end of the comparable year.
• The cost of Sales equally stemmed below that of the comparable year by 17.30% at N8.19 billion, down from N9.91 billion.
• Operating Profit is estimated at N2.11 billion, a marginal increase over the N2.04 billion in the corresponding year.
• Finance Cost dropped by 10.81% to N1.71 billion, versus the N1.92 billion in the similar year.
• Profit before Tax is estimated at N458.85 million, far above the N160.86 million in the corresponding year.
• Tax Expenses made was N146.83 million, lower than the N160.86 million in the similar year.
• Thus, a total of N312.02 million was reported as profit for the period, as against the loss of N97.44 million posted at the end of 2018.

• Current Assets was valued at N7.13 billion, the same as 5.77% below the N7.57 billion estimated for the 2018 financial year.
• Non-Current Assets held by the leading indigenous healthcare firm is currently valued at N13.11 billion, as against the N12.90 billion in 2018 full-year report.
• Current-Liabilities stood at N4.22 billion, same as 59.87% below the N10.53 billion stated in its 2018 full-year result.
• Non-Current Liabilities grew by 132.47% to N6.49 billion as against N2.79 billion in 2018.
• Net Assets for the year was valued at N9.52 billion, up from the N7.15 billion in 2018.
• Retained Earnings on the other hand inched north by 3.52% to stand at N3.55 billion versus N3.43 billion in 2018.

Financial Strength/Solvency Ratios

• Debt Ratio is currently estimated at 0.53x, the same as 18.63% below the 0.65x estimated in 2018. This implies that Total Liabilities is the same as 53% of Total Assets.
• Debt to Equity ratio was equally estimated at 1.13x, as against 1.86x estimated in the comparable year, which simply implies that debt used in servicing assets through the quarter was higher than equity.
• It was established that Equity is the same as 47% of Fidson Assets Value, up from 35% estimated in the 2018 full-year period.
• Nevertheless, we can conclude that Fidson’s shares are fairly liquid, although the estimated Beta value stood slightly below market beta.

Profitability Ratios

• EBITDA margin estimated for the period stood at 15.06%, same as 19.40% above the 12.62% estimated in the 2018 full-year earnings numbers.
• Pre-Tax Margin soared by 229.21% to 3.26% from the 0.99% estimated at the end of 2018 full-year performance indices.
• Cost of Sales is 58.28% of the Turnover figure, and only 4.55% above the 61.06% estimated in 2018, thereby confirming the management’s effort to control its direct cost
• See below for other profitability ratios.

Efficiency Ratios

• Operating Expenses is estimated at 28.64% of the Turnover value reported at the end of the 2019 financial year, this is a marginal drop in management efficiency of about 2.83% when compared to 2018 estimate.
• Similarly efficiency drop by 12.36% was observed when Turnover to Total Asset was tested. It was established that Turnover is 69.44% of the Asset in the just concluded year versus 79.23% in 2018.
• Working Capital Ratio, which measures management’s effectiveness in utilising working capital was estimated at 4.83x, an improvement over the negative ratio of the corresponding period.
• Further testing the management efficiency, we observed the Working Capital Ratio, which confirmed that Current Asset was higher than current liabilities at the end of the period.

Investment/Valuation Ratios

• When compared with the 2018 full-year earnings performance, the amount earned per share of Fidson Healthcare improved outstandingly due to the negative earnings in the comparable year to N0.15against negative earnings of N0.06 in 2018.
• P/E-Ratio is now estimated at 17.05x as against -76.20x in the corresponding year
• The said earnings was a yield of N5.86% of the price of Fidson Healthcare on the Nigerian Stock Exchange (NSE) as of the day this result was made available to the investing public.
• The Book Value of Fidson shares is currently estimated at N4.57, far above the market value on the floor of the exchange.
• Confirming the under-priced status of Fidson shares on the bourse is the company’s Price to Book Value at below unity (0.56x).

Valuation

As noted above, the previous full-year negative performance recorded by Fidson Healthcare is a major dent on its valuation. Nevertheless, the high probability of consistent investors’ reward is another factor worthy of consideration. Having measured all visible risks including the harsh operating environment and the favourable policies it stands to enjoy for at least two quarters of 2020 and even more, including the N100 billion funds set aside by the Central Bank of Nigeria (CBN) for players in the healthcare industry at 5% interest rate and a moratorium of one year, we have fairly priced each unit of Fidson Healthcare shares at N3.90and Rated it a Buy.