Rating: Buy
Current Market Price: N5.10

Latest Dividend: N0.55
Year High: N8.60
Year Low: N5.10
Fair Value: N8.42
Equity Analyst: Tunde Segun Jeariogbe

Key Investment Ratios

• In this report we observed the half-year numbers released by GlaxoSmithkline Consumers for the period ended, 30^thJune, 2020, compared same with those for the corresponding period of 2019 to establish growth, make projections and valuation analysis.
• We observed that the management of GlaxoSmithkline rounded up the quarter with zero finance cost. In other words, the management reported zero Non-Current Liabilities for the year, as against the N107.085 million reported in the preceding half-year.
• In clearer language, the company had no interest-yielding liabilities through the period, a situation that commenced from the 2019 full-year.
• Please see below for detailed analysis.

GLAXO SMITHKLINE
Bourse	Nigerian Stock Exchange
Code Name	GLAXOSMITH
Sector	HEALTHCARE
Market Classification	Main Board
Nature of Business	Manufacturing, Marketing and Distribution of Pharmaceutical, Oral Care and Nutritional Products
Date of Incorporation	June 23rd 1971
Date Listed	1977
End of Accounting Year	31ST DECEMBER
Website	www.ng.gsk.com
Registrar	UNION REGISTRARS LIMITED
Auditor	PRICEWATERHOUSECOOPERS
Share Price@Relsd (N)	4.90
Earnings per Share	0.25
Intrinsic Value(N)	8.42
Share Outstanding	1,195,876,488
Market Capitalisation	5,859,794,791

Company figures

• Turnover reported at the end of the period under review was N10.43 billion, 4.69% above the N9.96 billion reported in the prior half-year.
• Cost of Sales grew by 9.43% to N7.66 billion from N7.00 billion used through 2019 period.
• Since the company reported zero Finance Cost through the period, Operating Profit was same as Profit before Tax for the period.
• Operating Expenses reported for the period was N2.42 billion, as against N2.46 billion in the prior half-year.
• Profit before Tax at the end of the quarter was estimated at N447.89 billion, same as 15.74% below the N531.50 billion achieved in the comparable quarter.
• Tax Expenses allowance for the quarter was estimated at N143.311 million, versus N159.452 million in the similar quarter.
• Thus, Profit for the period was estimated at N304.53 million, this is 18.15% below the N372.05 million reported in the corresponding quarter.

GLAXO SMITHKLINE
Statement of Comprehensive Income
	2020(000)	2019(000)	%CHG
Turnover	10,431,524	9,964,484	4.69
Cost of Sales	7,662,727	7,002,552	9.43
Operating Profit	447,849	531,506	-15.74
OPEX	2,425,569	2,467,526	-1.70
DEPRECIATION	43,746	60,767	-28.01
PBT	447,849	531,506	-15.74
TAX	143,311	159,452	-10.12
PAT	304,538	372,054	-18.15
TOTAL COMP INCOME	304,538	372,054	-18.15
Statement of Financial Position
Current Assets	18,430,658	13,784,289	33.71
Non Current Assets	2,201,641	2,279,508	-3.42
Total Assets	20,632,299	16,063,797	28.44
Current Liabilities	11,173,271	7,349,814	52.02
Non Current Liabilities	–	107,085	-100.00
Total Liabilities	11,173,271	7,456,899	49.84
Net Assets	9,459,029	8,606,898	9.90
Retained Earnings	8,809,695	7,957,564	10.71
Shares Outstanding	1,195,876,488	1,195,876,488

• Current Assets of GlaxoSmithkline, at the end of the quarter, was valued at N18.43 billion, same as 33.71% above the N13.78 billion in the corresponding quarter of 2019.
• Non-Current Assets was estimated at N2.20 billion, a marginal 3.42% drop below the N2.27 billion in the comparable quarter.
• Current Liabilities grew by 52.02% to N7.34 billion, compared to N11.17 billion stated in its 2019 half year report.
• As noted above, the company has no Non-Current Liabilities at the end of 2020 half-year business session, as against the N107.08 million stated in the 2019 half-year numbers.
• Net Assets is valued at N9.45 billion, versus N8.60 billion in the corresponding quarter.
• Retained Earnings grew by 10.71% to stand at N8.80 billion from N7.95 billion in 2019.

Financial Strength/Solvency Ratios

• The amount reported as Total Liabilities is same as 54.15% of the Total Assets Value at the end of the quarter; which is higher than the estimated 46.42% in the corresponding year. It is important to understand that liabilities here are mainly short-term.
• Short-term liabilities mentioned above, was same as 118.12% of the company’s shareholders’ fund value reported at the period, as against the estimated 86.64% at the end of 2019 half year.
• GlaxoSmithkline shareholders’ funds valuation at the end of the quarter is same as 45.85% of the Total Assets Value, which is a drop when compared to 53.58% achieved at the end of 2019 half year.
• Nevertheless, going by the estimated beta value of 0.67x, we can safely conclude that shares of GlaxoSmithkline are less liquid, compared to industry peers.

Financial Strength/Solvency Ratio
TICKERS	2020	2019	%CHG
Debt Ratio	54.15%	46.42%	16.66
Total Debt to Equity Ratio (MRQ)	118.12%	86.64%	36.34
Equity Ratio	45.85%	53.58%	-14.43
TICKERS	2020	Industrial Average	%CHG
Beta Value	0.67	1.00	-33.00

Profitability Ratios

• EBITDA margin estimated for the quarter is same as Pre-Tax Margin as noted above. It stood at 4.29%, 19.51% below the 5.33% estimated from 2019 half-year numbers.
• Cost of Sales is 73.46% of the Turnover figure, which is a mere 4.53% above the 70.28% estimated in 2019. This confirms management’s effort at controlling direct cost.
• Return on Equity stood at 3.22%, as against 4.32% achieved in 2019.
• See below for details.

PROFITABILITY RATIOS
TICKERS	2020	2019	%CHG
EBITDA MARGIN	4.29%	5.33%	-19.51
PRE-TAX MARGIN	4.29%	5.33%	-19.51
EFFECTIVE TAX RATE	47.06%	42.86%	9.80
CS TO TO	73.46%	70.28%	4.53
ROE	3.22%	4.32%	-25.52
ROA	1.48%	2.32%	-36.27

Efficiency Ratios

• Operating Expenses to Turnover ratio is same as 23.25%, which is a 6.10% improvement in management efficiency from the 24.76% estimated in the 2019 half-year financial indices.
• Turnover to Total Assets Ratios stood at 50.56%, compared to the previous 62.03%, a drop in management efficiency within the two compared periods.
• Working Capital Ratio, which indicates a company’s effectiveness in using working capital stood at 1.44x, 7.18% down from the 1.55x estimated in 2019.
• See below for details.

EFFICIENCY RATIOS
	2020	2019	%Chg
OPEX TO TO	23.25%	24.76%	-6.10
TO TO TA	50.56%	62.03%	-18.49
Working Capital Turnover	1.44	1.55	-7.18
Working Capital Ratio	1.65	1.88	-12.05

Investment/Valuation Ratios

• At the end of the 2020 half-year, the management of GlaxoSmithkline earned N0.25 on every share, lower than the N0.31 recorded in the same period of 2019.
• PE/Ratio Stood at 19.24x versus 25.71x in 2019 half-year.
• The said earnings per share yielded 5.20% of the price of GlaxoSmithkline on the Nigerian Stock Exchange (NSE), as of when the result was made available to investors.
• Each unit of GlaxoSmithkline is estimated at N7.91 in its books as of the 2020 half-year, representing a 9.90% growth over the N7.20 estimated in the corresponding period of the 2019 half-year, and well above the price on the floor of the exchange.
• Confirming a marginal underpriced status is the Price to Book Value ratio at below unity.
• See below for detailed investment ratios.

Investment/Valuation Ratios
Tickers	2020	2019	%Chg
Price at Released	4.90	8.00	-38.75
EPS	0.25	0.31	-18.15
TCIP/SHARE	0.25	0.31	-18.15
P/E-Ratio	19.24	25.71	-25.17
Earnings Yield	5.20%	3.89%	33.64
BV/Share	7.91	7.20	9.90
PBV	0.62	1.11	-44.27

Valuation

Impacted by dividend growth between the two years observed in this report, and low rate from 91-day T-Bill Rate; we have conservatively valued each unit of GlaxoSmithKline at N8.42 and Rated it a Hold.