Rating: BUY
Current Market Price: N3.03

Latest Dividend: N0.25
Year High: N3.39
Year Low: N1.79
Fair Value: N3.65
Equity Analyst:  Tunde Segun Jeariogbe

Key Investment Ratios

• This report observes the half-year performance of May & Baker for the period ended 30^th June, 2020, compares same with numbers released in the similar period of 2019, to establish the growth. Trend.
• Meanwhile, the full-year financials for the year ended 31^st December, 2019 along with few other years was very instrumental in the valuation and projection of future returns expected from the company.
• Key among the company’s fundamentals is the news of its being licenced to manufcture vaccines, in addition to the government policy favouring its operations under the current dispensation.

MAY & BAKER
Bourse	Nigerian Stock Exchange
Code Name	MAYBAKER
Sector	HEALTHCARE
Market Classification	MAIN BOARD
Nature of Business	Manufacturing and Distribution of Pharmaceutical and Consumer goods
Date of Incorporation	April 9th 1944
Date Listed	November 10th 1994
End of Accounting Year	31ST DECEMBER
Website	www.may-baker.com
Registrar	Veritas Registrars Limited
Auditor	PKF Professional Services
Share Price@Relsd (N)	3.00
Earnings per Share	0.25
Intrinsic Value(N)	3.37
Share Outstanding	1,725,234,886
Market Capitalisation	5,175,704,658

Company figures

• Turnover reported for the period stood at N4.07 billion, a marginal 0.41% above the N4.05 billion posted in the corresponding period of last year.
• Direct Cost is estimated at N2.48 billion, slightly below the N2.73 billion reported at the end of similar period in 2019.
• Operating Profit is estimated at N687.74 million, versus N504.74 million in the prior half-year.
• Operating Cost is valued at N884.48 million, almost same as N875.74 million in the comparable quarter.
• Finance Cost used through the six months is estimated at N41.34 million, far below the N109.92 million posted in the same quarter of 2019.
• A total of N645.42 million was reported at Profit before Tax at the end of the quarter, higher than the N427.68 million posted in the corresponding quarter.
• Having made allowance for Tax Expenses, a total of N438.88 million was posted as Profit for the year, as against the N292.82 in the corresponding quarter.

MAY & BAKER
Statement of Comprehensive Income
	2020	2019	%CHG
Turnover	4,072,366,000	4,055,680,000	0.41
Cost of Sales	2,480,285,000	2,733,957,000	-9.28
Operating Profit	687,745,000	504,740,000	36.26
OPEX	884,481,000	875,741,000	1.00
DEPRECIATION	279,559,000	284,649,000	-1.79
AMORTISATION	–	–	#DIV/0!
FINANCE COST	41,342,000	109,926,000	-62.39
NET FINANCE INCOME	(413,420,000)	(81,155,000)	409.42
PBT	645,421,000	427,687,000	50.91
TAX	206,535,000	136,860,000	50.91
PAT	438,886,000	290,827,000	50.91
TOTAL COMP INCOME	438,886,000	290,827,000	50.91
Statement of Financial Position
Current Assets	6,074,982,000	5,759,245,000	5.48
Non Current Assets	5,321,407,000	4,788,121,000	11.14
Total Assets	11,396,389,000	10,547,366,000	8.05
Current Liabilities	3,745,501,000	4,215,061,000	-11.14
Non Current Liabilities	1,770,453,000	957,063,000	84.99
Total Liabilities	5,515,954,000	5,172,124,000	6.65
Net Assets	5,880,435,000	5,375,243,000	9.40
Retained Earnings	1,933,752,000	1,500,560,000	28.87
Shares Outstanding	1,725,234,886	1,725,234,886

• Current Assets in now valued at N6.07 billion compared to N5.75 billion in the corresponding quarter
• Non-Current Assets stood at N5.32 billion, higher that the N4.78 billion achieved at the end of 2019 half year business session
• Thus, Total Assets at the end of the period is valued at N11.39 billion, a mild improvement over the N10.54 billion in the similar period of 2019
• Current Liabilities is estimated at N3.74 billion, same as N4.21 billion in the same quarter of 2019
• Non-Current Liabilities is valued at N1.77 billion against N957.06 million in the comparable quarter of 2019
• Thus, Total Liabilities for the period stood at N5.51 billion, higher than the N5.17 billion posted in the comparable quarter
• The Net Assets of May & Baker stood at N5.88 billion versus N5.37 billion in the corresponding quarter.
• Retained Earnings improved by 28.87% to the current estimate of N1.93 billion, as against N1.500 billion in 2019.

Financial Strength/Solvency Ratios

• Debt Ratio is estimated at 48.40%, same as 1.30% below the 49.04% estimated in the similar period of 2019. This implies that, Total Liabilities is same as 48.40% of Total Assets.
• Total Debt to Equity was equally estimated at 93.80% as against 96.22% estimated in the comparable quarter. This implies that more debt was deployed to service the company’s assets through the period.
• It was established that Equity is same as 51.60% of May & Baker’sAssets Value, estimate from 2019 half year performance indices yielded 50.96%.
• Nevertheless, we can conclude that May & Baker’s shares are liquid and well patronised, although the estimated Beta stood slightly below the industrial average.

Financial Strength/Solvency Ratio
TICKERS	2020	2019	%CHG
Debt Ratio	48.40%	49.04%	-1.30
Total Debt to Equity Ratio (MRQ)	93.80%	96.22%	-2.51
Equity Ratio	51.60%	50.96%	1.25
TICKERS	2020	Industrial Average	%CHG
Beta Value	1.20	1.50	-20.00

Profitability Ratios

• EBITDA margin estimated for the period stood at 16.89%, well above the 12.45% estimated from 2019 half-year earnings numbers.
• Pre-Tax Margin revealed improved profitability at 15.85% same as 50.29% above the 10.55% margin estimated from 2019 half year numbers.
• Effective Tax Rate was stable through the period as shown in the table below.
• Cost of Sales is 60.91% of the Turnover Figure; this is only 9.65% below the 67.41% estimated in 2019, a confirmation of the management’s effort at controlling direct cost.
• Return on Equity is currently estimated at 7.46% higher than the 5.41% in 2019

PROFITABILITY RATIOS
TICKERS	2020	2019	%CHG
EBITDA MARGIN	16.89%	12.45%	35.70
PRE-TAX MARGIN	15.85%	10.55%	50.29
EFFECTIVE TAX RATE	47.06%	47.06%	0.00
CS toTO	60.91%	67.41%	-9.65
ROE	7.46%	5.41%	37.94
ROA	3.85%	2.76%	39.67

Efficiency Ratios

• Operating Expenses to Turnover value is currently measured at 21.72%, this is 0.58% improvement in efficiency during the quarter.
• Turnover to Total Assets Ratios stood at 35.73% against 38.45%, this is 7.07% drop in management efficiency when compared to estimate from the 2019 half-year performance indices.
• Working Capital Ratio, which indicates a company’s effectiveness in using working capital was estimated at 1.75x, a 33.44% drop from the 1.37x estimated in 2019.
• See below for other efficiency ratios tested.

EFFICIENCY RATIOS
	2020	2019	%Chg
OPEX TO TO	21.72%	21.59%	0.58
TO to TA	35.73%	38.45%	-7.07
Working Capital Turnover	1.75	2.63	-33.44
Working Capital Ratio	1.62	1.37	18.71

Investment/Valuation Ratios

• When put side-by-side the comparable quarter’s earnings, the management of May & Baker grew earnings per unit to N0.25, from the N0.17 achieved in the similar period of 2019.
• Our half-year Adjusted P/E ratio stood at 11.19x, slightly below the 12.46x of 2019.
• The said earnings per share is a yield of 8.48% of the price of May & Baker on the floor of the exchange on the day the result was released, this is a better yield when compared to the 8.03% in comparable period
• The value of May & Baker’s shares in its book is currently estimated at N3.41 this is 9.40% improvement over the previous value.
• Thus, Price to Book Value showed an undervalued state of May & Baker’s shares on the exchange.
• See the below table for details.

Investment/Valuation Ratios
Tickers	2020	2019	%Chg
Price at Released	3.00	2.10	42.86
EPS	0.25	0.17	50.91
TCIP/SHARE	0.25	0.17	50.91
P/E-Ratio	11.79	12.46	-5.34
Earnings Yield	8.48%	8.03%	5.64
BV/Share	3.41	3.12	9.40
PBV	0.88	0.67	30.58

Valuation

Having considered the financial stand of May & Baker, while maintaining our conservative valuation approach, we projected with the assumption that the management will work on reduced interest yielding liabilities and marginally build dividend over the years, we valued each unit of May & Baker at N3.65and have rated it a Hold.