Rating: Buy
Current Market Price: N0.66
Year High: N0.88
Year Low: N0.39
Fair Value: N0.88
Equity Analyst: Tunde Segun Jeariogbe
Key Investment Ratios
- In this report, the financials of Jaiz Bank for the period ended 30th September, 2020 are analysed and compared with numbers released in the corresponding period of 2019 to establish growth, projections and valuations accordingly.
- Unlike its industry peers, rather than charging interest on loans, operates a profit-sharing policy, which is why it does not report any figure as Loan. Although this is a highly risky business approach, it guarantees higher profits and reduces non-performance with a strong risk management team.
- We must however commend the outstanding growth achieved by the management of Jaiz Bank despite the poor business environment that poses serious challenges to loans. Though we have maintained conservative valuation approach for Jaiz, we are of the opinion that, should the profit growth be sustained through the year, it will attract a better valuation.
- Kindly see below for detailed analysis:
| JAIZ BANK | |
| Bourse | Nigerian Stock Exchange |
| Code Name | JAIZBANK |
| Sector | FINANCIAL SERVICES |
| Market Classification | MAIN BOARD |
| Nature of Business | BANKING |
| Date of Incorporation | April 1st 2003 |
| Date Listed | February 9th 2017 |
| End of Accounting Year | 31st December |
| Website | www.jaizbankplc.com |
| Registrar | Africa Prudential Plc |
| Auditor | Ahmed Zakari &co |
| Share Price@Relsd (N) | 0.58 |
| Earnings per Share | 0.06 |
| Intrinsic Value(N) | 0.88 |
| Share Outstanding | 29,464,249,300 |
| Market Capitalisation | 17,089,264,594 |
Company figures
- Gross Earnings for the period is estimated at N13.65 billion, 45.71% above the N9.36 billion stated in its corresponding quarter.
- Income from its various Finance Contracts through the quarter is estimated at N7.90 billion, higher than the N5.13 billion reported in 2019 third quarter by 53.82%.
- Meanwhile, a total of N5.75 billion was realised from its Investment Activities through the nine six months of 2020, which is 35.87% better than the N4.23 billion made at the end of 2019 third quarter.
- After considering losses made on Return on Equities of Investment Account Holders and Net Impairment Charges, and adding other income items, It reported a Total Income of N9.79 billion for the quarter, which is 26.47% above the N7.67 billion reported in its corresponding period report.
- Operating Expenses (Staff Cost & Other Operating Expenses added) stood at N7.03 billion, as against the N5.68 billion used through the comparable quarter.
- Profit before Tax which is also Operating Profits in the absence of finance charges/incomes is valued at N2.12 billion, versus N1.47 billion in the similar quarter of 2019.
- A total of N276.39 million accounted for Tax Expenses, as against N220.62 million in the corresponding quarter.
- Profit for the period stood at N1.84 billion, same as 49.01% above the N1.25 billion reported in the corresponding quarter of 2019.
| JAIZ BANK | |||
| Statement of Comprehensive Income | |||
| 2020 | 2019 | %CHG | |
| GROSS EARNINGS | 13,652,868,000 | 9,369,942,000 | 45.71 |
| INCOME FROM FINANCE CONTRACT | 7,902,868,000 | 5,137,824,000 | 53.82 |
| INCOME FROM INVESTMENT ACTIVITIES | 5,750,000,000 | 4,232,118,000 | 35.87 |
| TOTAL INCOME | 9,703,278,000 | 7,672,440,000 | 26.47 |
| OPEX | 7,031,639,000 | 5,683,711,000 | 23.72 |
| DEPRECIATION & AMORTISATION | 545,529,000 | 515,926,000 | 5.74 |
| PBT | 2,126,110,000 | 1,472,802,000 | 44.36 |
| TAX | 276,394,000 | 220,626,000 | 25.28 |
| PAT | 1,849,716,000 | 1,252,176,000 | 47.72 |
| TOTAL COMP INCOME | 1,862,948,000 | 1,250,214,000 | 49.01 |
| Statement of Financial Position | |||
| TOTAL ASSETS | 210,214,383,000 | 151,945,196,000 | 38.35 |
| TOTAL LIABILITIES | 110,427,626,000 | 81,715,598,000 | 35.14 |
| CASH & CASH EQU. | 48,000,781,000 | 31,869,926,000 | 50.61 |
| PROP PLANT & EQUIPMENTS | 2,435,503,000 | 2,499,178,000 | 2.55 |
| NET ASSETS | 14,681,250,000 | 13,109,162,000 | 11.99 |
| RETAINED EARNINGS | -4,965,043,000 | -4,574,108,000 | 8.55 |
| CUSTOMERS DEPOSITS | 71,411,672,000 | 57,095,433,000 | 25.07 |
| OTHER FINANCING | 16,339,663,000 | 11,613,328,000 | 40.70 |
| OTHER LIABILITIES | 22,374,112,000 | 12,783,010,000 | 75.03 |
| SHARE OUTSTANDING | 29,464,249,300 | 29,464,249,300 | 0.00 |
- At the end the first nine months of 2020, Jaiz Bank’s Total Assets is valued at N210.21 billion, 38.85% improvements over the N151.94 billion valued at the end of 2019 third quarter.
- Meanwhile, Total Liabilities, the bulk of which accounted for by Customer Deposits, is valued at N110.42 billion, an improvement over the N81.71 billion stated in its 2019 third quarter.
- Properties Plant and Equipment investments through the quarter was valued at N2.43 billion, a marginal 2.55% drop from the N2.49 billion investment done in 2019 third-quarter.
- Shareholders’ Funds grew by 11.99% to N14.68 billion, as against N13.01 billion in the corresponding period.
- Meanwhile, Retained Earnings remained negative at N4.96 billion as against the Accumulated Loss of N4.57 billion in the corresponding quarter.
- Customer Deposits received through 2020 third quarter was N71.41 billion, up from N57.09 billion in 2019.
Financial Strength/Solvency Ratios
- Total Liabilities reported for the quarter is same as 52.53% of the Total Assets and 2.32% lower than the 53.78% ratio estimated in the corresponding quarter. In our opinion, this is a good ratio, especially considering the fact that Deposits accounted for the large portion of its reported Liabilities.
- Meanwhile, typical of financial institutions, Total Debt to Equity Ratio is on the high side. We have established that Total Debt for the year can replicate the Equity value in 7.52 times.
- Due to the large Liabilities carried by the bank, Equity Value at the end of the 2020 third quarter only accounted for 6.98% of the Total Assets Valuation. This is a drop when compared to the 8.63% contribution estimated from the 2019 third-quarter.
| Financial Strength/Solvency Ratio | |||
| TICKERS | 2020 | 2019 | %CHG |
| Debt Ratio | 52.53% | 53.78% | -2.32 |
| Total Debt to Equity Ratio (MRQ) | 752.17% | 623.35% | 20.67 |
| Equity Ratio | 6.98% | 8.63% | -19.05 |
| TICKERS | 2020 | 2019 | %CHG |
| Beta Value | 0.60 | 1.30 | -53.85 |
Profitability Ratios
- EBITDA/Pre-Tax Margin is estimated at 15.57%, this is 0.93% adjustment from the corresponding quarter estimate.
- Return on Average Equity through the quarter was estimated to be 12.60%, same as 31.90% above 9.55% in 2019.
- Return on Assets was equally estimated at 0.88%, higher than the estimated 0.82% in 2019 by 6.77%.
| PROFITABILITY RATIOS | |||
| TICKERS | 2020 | 2019 | %CHG |
| EBITDA MARGIN | 15.57% | 15.72% | -0.93 |
| PRE-TAX MARGIN | 15.57% | 15.72% | -0.93 |
| ROE | 12.60% | 9.55% | 31.90 |
| ROA | 0.88% | 0.82% | 6.77 |
Efficiency Ratios
- Operating Expenses through the period was below that of the corresponding quarter by 15.09%, having moved from 60.66% to 51.50%. This is an improvement in the management efficiency within the period observed.
- Gross Earnings is same as 6.49% of the Total Assets valuation at the end of the quarter, same as 5.32% improvement in management efficiency within the compared quarters.
- Financial Leverage, a ratio that compares Total Liabilities with Net Assets, showed that Total Liabilities can replicate Net Assets in 7.52 times as against 6.23 times replicate in the corresponding quarter.
| EFFICIENCY RATIOS | |||
| 2020 | 2019 | %Chg | |
| OPEX TO TO | 51.50% | 60.66% | -15.09 |
| TO TO TA | 6.49% | 6.17% | 5.32 |
| CAPEX/SHARE | 0.02 | 0.03 | -38.56 |
| FINANCIAL LEVERAGE | 7.52 | 6.23 | 20.67 |
Investment/Valuation Ratios
- At the end of the first nine months of year 2020, Jaiz Bank earned N0.06 on each unit listed on the Nigerian Stock Exchange (NSE), higher than the N0.04 reported at the end of 2019 third quarter.
- The price of Jaiz Bank at the time of this report can replicate the earnings per share 9.24 times (P/E-Ratio=9.24x) this is lower than the 10.59x estimated in 2019.
- The said earnings per share is a 10.82% yield of the price of Jaiz Bank on the exchange as of when the result was released to the investing public, representing a better yield than the 9.44% yield estimated in 2019.
- Estimated Book Value per shares of Jaiz Bank is currently N0.50, same as 11.99% above the N0.44 estimated in 2019
- Thus Price to Book Value stood at 1.16x as against 1.01x, which simply implies that the stock is currently selling above its book value on the bourse.
| Investment/Valuation Ratios | |||
| Tickers | 2020 | 2019 | %Chg |
| Price at Released | 0.58 | 0.45 | 28.89 |
| EPS | 0.06 | 0.04 | 47.95 |
| TCIP/SHARE | 0.06 | 0.04 | 49.01 |
| P/E-Ratio | 9.24 | 10.59 | -12.75 |
| Earnings Yield | 10.82% | 9.44% | 14.61 |
| BV/Share | 0.50 | 0.44 | 11.99 |
| PBV | 1.16 | 1.01 | 15.09 |
Valuation
While trying to place a fair value on each unit of Jaiz Bank shares, we considered the average of two valuation models. FCFE Stable Growth Model and H-Model where we projected appropriately for expected returns-two years to come. Thus, each unit of Jaiz Bank is valued at N0.88, thus, considering the gap between our valuation and the current market price of Jaiz Bank, we have rated it a Buy.
