Julius Berger 2019FY: Robust Intrinsic Value, Good For Medium, Long-Term Positioning

Rating: Buy
Current Market Price: N23.70
Latest Cash Dividend:
Latest Scrip: 1 for 5
Year High: N24.00
Year Low: N19.90
Fair Value: N44.40
Equity Analyst: Tunde Segun Jeariogbe

Introduction
• Complementing the previously released un-audited result for the year ended 31st December 2019, the management of Julius Berger has released its audited numbers, with mild changes from those previously released.
• Thus, this report observed the same result and compares the same with the audited financials from the previous year to establish the growth pattern. The valuation was established by relying on estimates from the numbers and previous projections.
• Generally, the result revealed improved performances and conservative business strategies by the management. We believe that various road constructions going on across the country immensely contributed to the growth.
• In the said result the management of Julius Berger proposed a final cash dividend of N2.75 and a scrip of one new ordinary share for every five previously held.
• The closure date is set for between June 1 and 3, 2020; while the qualification date is May 29, 2020. The said dividend will be credited to investors’ accounts on 19th June 2020.

Statement of Comprehensive Income
• Turnover during the period, at N266.43 billion, improved by 36.90% over that of the prior year, versus N194.61 billion in the corresponding period of 2018.
• The cost of sales grew by 44.67% from the previously reported N142.60 billion to N206.31 billion in the just-concluded year.
• Operating Profit is estimated at N19.98 billion, up from N12.08 billion in the corresponding year.
• Operating Expenses was almost stable with a mild growth of 0.54%. The Operating Expenses is currently valued at N40.13 billion, compared to N39.92 billion in 2018.
• Profit before Tax is estimated at N13.91 billion from N10.19 billion achieved at the end of the 2018 financial year.
• After taking the Tax Expenses for the year into account, the management of Julius Berger reported a profit of N8.75 billion through the year, versus N6.10 billion in the corresponding year.
• Nevertheless, due to the negative differences recorded while translating the foreign operations, the Total Comprehensive Income for the period dropped to N7.55 billion against N7.00 billion in 2018.

Statement of Financial Position
• Current Assets at the end of the 2019 financial year is valued at N160.95 billion, a 5.74% improvement over the N152.21 billion estimated in 2018.
• Non-Current Assets, on the other hand, is estimated at N152.70 billion, versus N136.21 billion in 2018. Thus, Total Assets stood at N313.66 billion as against N288.43 billion in the corresponding period of 2018.
• Conversely, Current Liabilities at the end of the year is estimated at N60.69 billion, down from the previously estimated N76.15 billion.
• Non-Current Liabilities equally stood at N212.63 billion, same as 20.23% above the N176.85 billion in the similar year. Thus, Total Liabilities is valued at N273.33 billion against N253.01 billion.
• Net Assets is estimated at N40.32 billion, the same as 13.86% above the previously estimated N35.41 billion.
• Retained Earnings at the end of the year was worth N29.88 billion, which is 24.46% above the N24.00 billion stated in its 2018 financials.

Financial Strength
• The amount reported as Total Liabilities is the same as 87% of the Total Assets for the year. In other words, the Debt Ratio is 0.87x. or 0.66% below the 0.88x reported in the corresponding period of 2018.
• Total Debt to Equity Ratio is currently estimated at 6.78x, as against 7.14x in the corresponding year, this implies that the Total Debt Value for the year can replicate Equity 6.78 times, which1 is a lower position than the 7.14 times replicate1d for the previous year.
• Equity Ratio is also valued at 0.13x versus 0.12x. That is Equity is the same as 13% of the Total Assets Value for the year.
• Going by the current estimated beta value, the shares of Julius Berger can be described as less liquid given that its beta value is currently far below the market beta.

Profitability Ratio
• EBITDA Margin is Currently estimated at 7.50%, versus 6.21% estimate at the end of 2018 financial year.
• Pre-Tax Margin stood at 5.22% as against 5.24% in 2018.
• Cost of Sales is estimated at 77.44% of the Turnover Figure, which is 5.68% higher than the 73.28% in the corresponding year.

Efficiency Ratio
• Operating Expenses is estimated at 15.06% of the Turnover Value, an appreciable improvement in the management’s efficiency when compared to the 20.51% estimated in 2018.
• Turnover Value is 84.94% of the Total Assets Value, the ratio is 25.89% above the 67.47% estimated from 2018 figures.
• At 2.66x, Working Capital Turnover grew by 3.85% from the previously estimated 2.56x.
• Working Capital Ratio, within the two compared years, stood above unity and confirms the firm’s ability to settle its current liabilities with current assets as and when due, through the season.

Investment Ratios
• Within the two periods compared, traders were seen largely revaluing the share price of Julius Berger on the floor of the exchange with the price at N20.15 (at the release of result) from N27.50 in the corresponding year.
• The estimated earnings per share of Julius Berger is N6.64 this is far above the N4.62 earned at the end of the comparable year.
• PE-Ratio is currently estimated at 3.04x compared to the previous 5.95x.
• At the price of Julius Berger when the result was released, investors had a positive yield of 32.93% as against 16.81% in the previous year-end
• The Book Value of Julius Berger is currently estimated at N30.55, higher than the N26.83 estimated from the corresponding results
• Confirming an undervalued price on the floor of the exchange, the Price to Book Value ratio stood below unity as shown in the below table.

Valuation
• Julius Berger’s performance is outstanding, we are of the opinion that its business is seasonal and now competitive within Nigeria, nevertheless, it continues to command the lion share in its sector. Our valuation models were also based on careful projections by our analyst, using the current results earnings along with previous year’s for projection, we have valued each unit of Julius Berger Shares at N44.40and have Rated it a Buy.

Sign In

Register

Reset Password

Please enter your username or email address, you will receive a link to create a new password via email.