Company: JULIUS BERGER NIGERIA PLC
Rating: BUY
Current Market Price: N18.55
Latest Dividend: N2.00
Year High: N28.80
Year Low: N18.00
Fair Value: N29.73
Equity Analyst: Tunde Segun Jeariogbe

Key Investment Ratios
• This report observed the half-year financial indices of Julius Berger for the period ended 30th June 2019, compare the same with the figures released in the similar period of 2018 to establish performance trend.
• Undoubtedly, the company did more business in the first six months of 2019, compared to that of 2018. This is further established in the large difference in the Turnover figure and other performance indices.
• Unlike the previous half-year, the construction giant made less profit on Foreign Exchange, compared to the similar period in 2018. For example, in the current half-year, it recorded FX loss of N351.59 million, as against the N4.44 billion in the comparable period.
• Please understand that other gains and losses which reflected these indices on the main account were boosted by the N450.43 million earned on Properties, Plant and Equipment.
• Interest on Over Draft contributed largely to the increased Finance Cost, just as Interest on Loan complementing the figure.
• Also, note that a total of N2.68 billion (2018-N1.99 billion) was expended on Interest on Over Draft, while N1.11 billion (2018- N669.77 million) was reported as interest on Loan. Other items on the Finance Cost are Bank Commission (N35.57 million), Guaranty and Financing Cost (N4.24 million) and Other Finance Charges (N75.67 million).

Company figures
• Turnover reported for the period stood at N131.78 billion, same as 80.33% above the N73.07 billion reported for a similar period in 2018.
• Cost of Sales also grew by 89.12% to N101.93 billion, as against the N53.89 billion reported in the corresponding period.
• Operating Profit was estimated at N7.55 billion, compared to N6.63 billion in 2018 half-year numbers.
• Operating Expenses was N22.52 billion, or 34.88% below the N34.59 billion reported at the end of the first six months of 2018.
• Finance Cost dipped by N3.91 billion from the N4.56 billion reported in the similar period of 2018.
• Profit before Tax on the other hand improved by 16.07% to N4.56 billion, as against the N3.92 billion in 2018 half year.
• Profit reported for the period is N2.83 billion, same as 9.28% over the N2.594 billion achieved in 2018 half-year business session.

• In the period under review, Current Assets grew by 78.34% over that of the comparable period. Julius Berger Current Assets was valued at N172.57 billion against N96.76 billion.
• Non-Current Assets improved by 10.85%, to N157.19 billion versus N141.81 billion.
• Current Liability is valued at N104.52 billion, which equally built 60.76% up to stand at N104.52 billion, as against N65.02 billion in 2018 half-year numbers.
• Non-Current Liabilities stood at N36.38 billion, after rising over a comparable period by 20.52% from N30.18 billion.
• Due to the large difference between the Total Assets and Liabilities, Nets Assets grew over comparable period by 20.51% to N36.380 billion.
• Retained Earnings appreciated by 39.39% to N24.28 billion, compared to the preceding half-year’s N17.41 billion.

Financial Strength/Solvency Ratios
• Debt Ratio (which compares Total Liabilities to Total Assets) of Julius Berger was estimated at 0.43x, 7.07% above the 0.40x estimate in the corresponding quarter of 2018.
• To confirm that the company’s Total Debt is far higher than equity, we checked the Debt to Equity which shows that Total Liabilities is 3.87x higher than the reported Equity for the period.
• Also checked was the Equity Ratio, which compared the reported Equity to Total Assets of Julius Berger, following which we arrived at 0.11x (2018-0.13x), implying that Equity is same as 11% of the company’s Assets Valuation.
• We have estimated the Beta value of Julius Berger at 0.48, which implies that the stock is not liquid, a fact that is further backed up by the company’s low share outstanding.

Profitability Ratios
• EBITDA margin estimated for the period stood at 5.82%, below the 9.08% estimated from 2018 half-year earnings numbers.
• Pre-Tax Margin showed reduced profitability at 3.46%, same as 35.64% above the 5.38% margin estimated from 2018 half-year numbers.
• Effective Tax Rate was stable through the period as shown in the table below.
• Cost of Sales is 77.35% of the Turnover figure; this is only 4.87% above the 73.76% estimated in 2018. This confirms current efforts by the management to control its direct cost.
• Return on Equity is currently estimated at 7.79% lower than the8.59% in 2018.

Efficiency Ratios
• Operating Expenses to Turnover value is currently measured at 17.09%, which is 63.89% improvement in efficiency between the two quarters compared.
• Turnover to Total Assets Ratios stood at 39.96%, as against 30.63%, same is 30.47% improvement in management efficiency when compared to the estimate from 2018 half-year performance indices.
• Working Capital Turnover Ratio was established to ascertain the company’s effectiveness in using its working capital. We arrived at 1.94x, which is lower than the 2.30x estimate in the corresponding quarter. Theoretically, this is an ideal working capital turnover ratio.
• Also tested is the Working Capital Ratio which stood far above unity in the two quarters compared. This is indicative of the company’s solid financial ground in terms of liquidity.

Investment/Valuation Ratios
• At the end of the first six-month financial session, Julius Berger’s management earned an estimated N2.15 per unit of the company’s shares listed on the floor of the Nigerian Stock Exchange (NSE), this is 9.28% above the N1.97 achieved in similar quarter of 2018.
• Meanwhile, Total Comprehensive Income shows that the amount earned per unit dipped by 23.47% at the current N2.73, as against N3.57 in the previous quarter.
• P/E ratio was also corrected by 32.22% to the currently estimated 8.38x, from 12.37x.
• The said earnings per share represent 11.93% yield of the price of Julius Berger on the NSE as at the time this result was made available to the investing public.
• Presently, each unit of Julius Berger shares is estimated at N27.56 in its Book, higher than that current value of N18.55 as at the time this report was compiled.
• Confirming the under-priced status is the Price to Book Value Ratio which stood far below unity.
• See the below table for details.

Valuation
Being conservative enough in our valuation approach, considering the business style of the giant construction company, we have projected accordingly, thus, we fairly priced each unit of Julius Berger’s share price at N29.73 and have rated the equity a Buy.