Rating: Hold
Current Market Price: N0.58
Year High: N0.82
Year Low: N0.39
Fair Value: N0.64
Equity Analyst: Tunde Segun Jeariogbe
Key Investment Ratios
- This report reviews the financials of Jaiz Bank for the half-year ended 30thJune, 2020, comparing same with numbers released in the corresponding quarter of 2019 to establish growth or otherwise.
- Unlike its industry peers and true of ethical banks, rather than charge interest on loans, it run a profit sharing policy. This is why it does not report any figure as Loan, a situation that makes it a highly risky business approach. The operational mode, nonetheless and “all things being equal,” guarantees higher profits, while reducing incidents of non-performance with the help of a strong risk management team.
- Operating Expenses account for over 50% of the Gross Earnings in the quarter under review. Generally, it is an improved performance over that of the comparable quarter.
- See the tables below for details.
| 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) | 0.55 |
| Earnings per Share | 0.04 |
| Intrinsic Value(N) | 0.64 |
| Share Outstanding | 29,464,249,300 |
| Market Capitalisation | 16,205,337,115 |
Company Figures
- Gross Earnings achieved for the period is estimated at N8.00 billion, 39.37% above the N5.74 billion reported in its corresponding quarter of 2019.
- Income from its various Contract Financing endeavours during the quarter is estimated at N4.55 billion, better than the N3.33 billion done in the 2019 second quarter by 33.36%.
- Meanwhile, a total of N3.45 billion was realised from Investment Activities through the first six months of 2020, 43.53% higher than the N2.40 billion made in the 2019 half-year.
- After considering losses made on its Return-on-Equities of Investment Account Holders and Net Impairment Charges, in addition to other income items, Jaiz Bank recorded Total Income of N6.23 billion for the quarter, up by 29.33% from the N4.82 billion reported in the preceding half-year.
- Operating Expenses (Staff Cost & Other Operating Expenses added) stood at N4.52 billion, as against the N3.57 billion used through the comparable period of 2019.
- Profit before Tax, same as Operating Profit, in the absence of finance charges/incomes stood at N1.34 billion, versus N905.57 million in the first half of 2019.
- Tax Expenses gulped a total of N175.05 million, as against N91.27million in the corresponding quarter.
- Profit reported for the period, therefore, stood at N1.17 billion, same as 43.87% above the N814.30 million reported in the corresponding quarter of 2019.
| JAIZ BANK | |||
| Statement of Comprehensive Income | |||
| 2020 | 2019 | %CHG | |
| GROSS EARNINGS | 8,008,367,000 | 5,746,213,000 | 39.37 |
| INCOME FROM FINANCE CONTRACT | 4,550,363,000 | 3,336,932,000 | 36.36 |
| INCOME FROM INVESTMENT ACTIVITIES | 3,458,004,000 | 2,409,281,000 | 43.53 |
| TOTAL INCOME | 6,234,247,000 | 4,820,274,000 | 29.33 |
| OPEX | 4,527,034,000 | 3,574,124,000 | 26.66 |
| DEPRECIATION & AMORTISATION | 360,660,000 | 340,577,000 | 5.90 |
| PBT | 1,346,552,000 | 905,574,000 | 48.70 |
| TAX | 175,052,000 | 91,274,000 | 91.79 |
| PAT | 1,171,501,000 | 814,300,000 | 43.87 |
| TOTAL COMP INCOME | 1,184,786,000 | 815,651,000 | 45.26 |
| Statement of Financial Position | |||
| TOTAL ASSETS | 186,625,432,000 | 144,002,215,000 | 29.60 |
| TOTAL LIABILITIES | 100,913,318,000 | 80,771,626,000 | 24.94 |
| CASH & CASH EQU. | 45,714,877,000 | 29,357,008,000 | 55.72 |
| PROP PLANT & EQUIPMENTS | 2,313,833,000 | 2,690,968,000 | 14.01 |
| NET ASSETS | 15,565,232,000 | 13,109,162,000 | 18.74 |
| RETAINED EARNINGS | -4,081,114,000 | -4,574,108,000 | 10.78 |
| CUSTOMERS DEPOSITS | 67,676,983,000 | 56,368,384,000 | 20.06 |
| OTHER FINANCING | 15,719,964,000 | 12,935,032,000 | 21.53 |
| OTHER LIABILITIES | 17,315,534,000 | 11,373,736,000 | 52.24 |
| SHARE OUTSTANDING | 29,464,249,300 | 29,464,249,300 | 0.00 |
- At the end the first six months of 2020, Jaiz Bank had Total Assets valued at N186.62 billion, a 29.60% improvements over the N144.00 billion at the end of 2019 second quarter.
- Meanwhile, Total Liabilities, a chunk of which is accounted for by Customer Deposits, was valued at N100.91 billion, higher than the N80.77 billion stated in its 2019 second quarter numbers.
- Properties Plant and Equipment investments through the quarter were valued at N2.31 billion, a 14.01% drop from the N2.69 billion investment done in 2019.
- Shareholders’ Funds grew by 18.74% to N15.56 billion as against N12.93 billion in the corresponding period
- Meanwhile, Retained Earnings remained negative at N4.08 billion, as against the Accumulated Loss of N4.57 billion earlier.
- Customer Deposits received through 2020 half-year amounted to N67.67 billion, as against N56.36 billion deposits achieved in the first six months of 2019.
Financial Strength/Solvency Ratios
- Total Liabilities reported for the quarter is same as 50.07% of the Total Assets value, 3.60% lower than the 56.09% ratio estimated in the corresponding period of last year. 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 currently established that Total Debt for the year can replicate the Equity value almost seven times.
- Due to the large Liabilities carried by the bank, it is established that Equity Value at the end of the 2020 second quarter only accounted for 8.34% of the Total Assets Valuation. This is a drop when compared to the 9.10% contribution estimated from the numbers for the 2019 second quarter.
| Financial Strength/Solvency Ratio | |||
| TICKERS | 2020 | 2019 | %CHG |
| Debt Ratio | 54.07% | 56.09% | -3.60 |
| Total Debt to Equity Ratio (MRQ) | 648.33% | 616.15% | 5.22 |
| Equity Ratio | 8.34% | 9.10% | -8.38 |
| TICKERS | 2020 | 2019 | %CHG |
| Beta Value | 1.00 | 1.30 | -23.08 |
Profitability Ratios
- EBITDA/Pre-Tax Margin is estimated at 16.81%, which is a 6.69% improvement on the estimated 15.76% in the corresponding quarter.
- Return on Average Equity through the year was estimated to be 7.53%, same as 21.17% above 6.21% in 2019.
- Return on Assets was equally estimated at 0.63%, higher than the estimated 0.57% in 2019 by 11.01%.
| PROFITABILITY RATIOS | |||
| TICKERS | 2020 | 2019 | %CHG |
| EBITDA MARGIN | 16.81% | 15.76% | 6.69 |
| PRE-TAX MARGIN | 16.81% | 15.76% | 6.69 |
| ROE | 7.53% | 6.21% | 21.17 |
| ROA | 0.63% | 0.57% | 11.01 |
Efficiency Ratios
- Operating Expenses through the period stood below the corresponding quarter by 9.12%, after dropping from 62.29% to 56.53%. This is an improvement in management efficiency within the period observed.
- Gross Earnings is same as 4.29% of the Total Assets valuation at the end of the quarter, which is same as a 7.54% drop 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 6.48 times, as against the previous 6.16 times.
| EFFICIENCY RATIOS | |||
| 2020 | 2019 | %Chg | |
| OPEX TO TO | 56.53% | 62.20% | -9.12 |
| TO TO TA | 4.29% | 3.99% | 7.54 |
| CAPEX/SHARE | (0.00) | 0.03 | -102.05 |
| FINANCIAL LEVERAGE | 6.48 | 6.16 | 5.22 |
Investment/Valuation Ratios
- At the end of the first six months of 2020, the bank earned N0.04 on each unit, higher than the N0.03 per share at the end of 2019 second quarter.
- The price of Jaiz Bank at the time this report was made available to the investing public can replicate the earnings per share 13.83 times (P/E-Ratio=13.83x), lower than the 15.20x estimated in 2019.
- The said earnings per share translated to a 7.23% yield of the price of Jaiz Bank on the exchange when the result was released to investors, this is a better yield when compared to 6.58% estimated in 2019.
- Estimated Book Value per share of Jaiz Bank is currently N0.53, same as 18.74% above the N0.44 estimated in 2019,
- Thus, Price to Book Value stood at 1.04x, up from 0.94x. This simply implies that the stock is currently selling below its book value on the stock exchange.
| Investment/Valuation Ratios | |||
| Tickers | 2020 | 2019 | %Chg |
| Price at Released | 0.55 | 0.42 | 30.95 |
| EPS | 0.04 | 0.03 | 43.63 |
| TCIP/SHARE | 0.04 | 0.03 | 45.26 |
| P/E-Ratio | 13.83 | 15.20 | -8.98 |
| Earnings Yield | 7.23% | 6.58% | 9.86 |
| BV/Share | 0.53 | 0.44 | 18.74 |
| PBV | 1.04 | 0.94 | 10.29 |
Valuation
While trying to place a fair value on each unit of Jaiz Bank shares, we considered the average of two valuation models- the 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 N0.64. Thus, considering the closeness of our valuation to the current market price of Jaiz Bank, we have rated it a Hold.
