Company Analysis

May & Baker Nigeria: Soaring Profit On The Wings Of Favourable Policy

Rating: Buy
Current Market Price: N3.90

Latest Dividend: N0.30
Year High: N5.18
Year Low: N3.21
Fair Value: N4.90
Equity Analyst: Tunde Segun Jeariogbe

Key Investment Ratios

  • This report observed the full-year financials of May & Baker Plc for the year ended 31st December, 2020, and compared them with those of the previous year to establish growth trajectory.
  • Meanwhile, numbers for the year ended 31st December, 2019, along with those of recent years were highly instrumental to arriving at the current valuation and the company’s outlook for future returns.
  • Generally, the result for the year under consideration showed some appreciable improvement over those of the previous financial year, a situat6ion that is linkable to favourable policy supports during the year as part of measure to mitigate the impact of to Coronavirus pandemic, in addition to the Central Bank of Nigeria (CBN) fund targeted specifically at players in the Nigerian health sector.
  • The impact of the CBN’s monetary policy efforts primarily offered huge funds at single-digit rates, laced with a 12-month moratorium targeted at the industry during the year, in addition to an opportunity to reprice outstanding obligations.
  • This accounted for the increase in debt utilized by the company through the year, as seen in the higher Finance Cost used through the period, just as the growth rate of income was not commensurate to the rate of increase in interest yielding liabilities used through the year.
  • We are of the opinion that, better returns will be seen in its numbers for this and subsequent years, thereby testing the management’s efficient use of assets to build wealth for shareholders, especially given the opportunities available in the sector.
  • See the table below for comparison between numbers for current and past financial years.
Source: Company data, NSE, Investdata Research

Dividend Information

  • At the end of the 2020 financial year, directors of May & Baker recommended N0.30 per unit dividend to shareholders, representing a 20% increase on the N0.25 paid in the prior year.
  • According to the data released through Nigerian Stock Exchange, the closure date for the dividend is May 19th to 21st, 2021, meaning that the qualification date is May 18th, 2021, while the payment is scheduled for 4th June 2021.
  • The said dividend is the same as 53.66% of the total Earnings Per Share through the 2020 financial year, which in our opinion is a reflection of the company’s shareholding structure, which makes it attractive for dividend investors.
  • Nonetheless, the N0.55 dividend is a mere 7.69% of the share price on the exchange as of when the result was released to investors.
  • The sustainable growth rate for the company’s dividend stood at 6.63%, the same as a 44.53% improvement over the 4.59% of the previous year.
Source: Company data, NSE, Investdata Research

Company Figures

  • Turnover reported during the year stood at N9.39 billion, 16.21% better than the N8.08 billion posted in the previous year.
  • Direct Business Cost was estimated at N5.60 billion, slightly above the N5.17 billion reported at the end 2019.
  • Operating Profit stood at N1.40 billion, versus N1.03 billion in the corresponding year.
  • Operating Cost was estimated at N2.42 billion, 22.11% above the N1.98 billion of the immediate comparable year.
  • Finance Cost used through the year was N135.04 million, higher than the N1.19 million in 2019 financial year.
  • A total of N1.24 billion was reported at Profit before Tax at the end of the year, higher than the N900.59 million posted in the corresponding year.
  • Having made allowance for Tax Expenses, a total of N964.56 million was posted as Profit for the year, as against the N716.12 million in the corresponding year.
  • In 2019 the company reported Asset revaluation gain (net of tax) to the tune of N408.14 million, which built Total Comprehensive Income to N1.12 billion. In the 2020 financial year, however, such line item was absent, this kept the current year’s Total Comprehensive Income at same value to Profit for the period.
  • Thus, academically, the company reported higher profit in 2019, compared to the current year.
Source: Company data, NSE, Investdata Research
  • Current Assets in now valued at N9.18 billion compared to N4.06 billion in the corresponding year.
  • Non-Current Assets stood at N5.17 billion, higher than the N5.43 billion achieved at the end of 2019.
  • Thus, Total Assets at the end of the year was valued at N14.35 billion, same as 51.18% improvement over the N9.49 billion in the previous year.
  • Current Liabilities is estimated at N3.81 billion, same as 68.88% growth over the N2.26 billion in 2019.
  • Non-Current Liabilities is valued at N3.79 billion, as against N1.02 billion in the comparable year.
  •  Thus, Total Liabilities for the year stood at N7.61 billion, higher than the N3.28 billion posted in 2019 business session.
  • Net Assets of May & Baker is estimated at N6.74 billion, versus N6.20 billion in the preceding year.
  • Retained Earnings improved by 27.69% to N2.45 billion, up from N1.92 billion in 2019.

Financial Strength/Solvency Ratios

  • The debt ratio is currently estimated at 53.02%, the same as 53.25% above the 34.60% estimated in 2019, implying that Total Liabilities used through the period halved the value of the company’s assets.
  • Total Debt to Equity is estimated at 112.88%, as against 52.91% estimated in the comparable year, implying that more debt was used to service Assets through the year.
  • It was established that Equity is the same as 46.98% of May & Baker’s Assets Value, estimate from 2019 performance indices yielded 65.40%.
  • Nevertheless, we can conclude that May & Baker’s shares are fairly liquid, although the estimated Beta value stood slightly above the market beta, and below the industry average.
Source: Company data, NSE, Investdata Research

Profitability Ratios

  • EBITDA margin estimate for the year stood at 14.99%, better than the 12.78% estimated from 2019 earnings numbers.
  • Pre-Tax Margin also revealed improved profitability at 13.29%, the same as 19.28% above the 11.15% margin estimated from 2019 numbers.
  • Cost of Sales is 59.73% of Turnover; or 6.74% below the 64.04% estimated in 2019, confirming management’s effort at controlling direct costs.
  • Return on Equity is currently estimated at 14.31%, higher than 11.53% in 2019.
  • See below for other profitability ratios and comparisons.
Source: Company data, NSE, Investdata Research

Efficiency Ratios

  • Operating Expenses to Turnover value is currently estimated at 25.77%, representing a 5.07% improvement in efficiency during the year.
  • Turnover to Total Assets Ratios stood at 65.43%, compared to 85.12%, representing a 23.13% drop in management’s efficiency when compared to estimates from the 2019 performance indices.
  • Working Capital Ratio, a ratio that indicates a company’s effectiveness in utilising working capital was estimated at 1.75x, a 60.98% drop from the 4.49x estimated in 2019
  • See the table below for other efficiency ratios tested:
Source: Company data, NSE, Investdata Research

Investment/Valuation Ratios

  • When put side-by-side the comparable year’s earnings, the management of May & Baker grew the amount earned per unit to N0.56 from the N0.42 achieved in 2019.
  • P/E-ratio stood at 6.98x, as against the 6.46x estimated in 2019.
  • The said earnings per share represents a 14.34% yield of May & Baker’s price on the exchange when the result was released, a lower yield when compared to the 15.49% in the prior year. It is important to understand that the company’s share price grew by 45.52% within the comparable released dates.
  • The value of May & Baker’s shares in its book is currently estimated at N3.91 per share an 8.59% improvement over the previous value.
  • Thus, Price to Book Value indicates that the share price is correctly valued by investors on the exchange.
  • See the table below for details:
Source: Company data, NSE, Investdata Research


Having considered the financials of May & Baker, along with various policies that currently favour its line of business, while maintaining our conservative valuation approach, we project with the assumption that the management will work to reduce interest yielding liabilities and marginally build dividend over the coming years. This is a benefit of the doubt we give the management, which is strictly attached to our analyst’s view, following which we have valued each unit of May & Baker at N4.90, and have rated it a Buy.

Source: Company data, NSE, Investdata Research

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