M&B Nigeria: Riding On The Wings Of Favourable Policies, Momentum

Rating: Hold
Current Market Price: N3.05

Latest Dividend: N0.25
Year High: N3.93
Year Low: N1.79
Fair Value: N4.21
Equity Analyst: Tunde Segun Jeariogbe

Key Investment Ratios

  • This report observe the nine-month financial performance of May & Baker Nigeria, for the nine-month ended 30th September, 2020, compared same with numbers released in the similar period of 2019 to establish growth.
  • Meanwhile, financials for the full-year ended 31st December, 2019 among other was very instrumental in the valuation and projection of future returns expected.
BourseNigerian Stock Exchange
Market ClassificationMAIN BOARD
Nature of BusinessManufacturing and Distribution of Pharmaceutical and Consumer goods
Date of IncorporationApril 9th 1944
Date ListedNovember 10th 1994
End of Accounting YearDecember 31st
RegistrarVeritas Registrars Limited
AuditorPKF Professional Services
Share Price@Relsd (N)                                                         3.05
Earnings per Share                                                         0.40
Intrinsic Value(N)                                                         4.21
Share Outstanding1,725,234,886
Market Capitalisation                                         5,261,966,402

Company figures

  • Turnover for the period stood at N6.43 billion, a marginal 8.85% above the N5.19 billion posted in the corresponding period of last year.
  • Direct Cost is estimated at N3.74 billion, slightly below the N3.75 billion reported at the end of similar period in 2019.
  • Operating Profit is estimated at N1.13 billion, versus N845.65 million in the first nine months of last year.
  • Operating Cost is valued at N1.56 billion, same as 12.96% above the N1.38 billion in the comparable quarter.
  • Finance Cost used through the nine months is estimated at N131.15 million, this is 25% lower than the N175.90 million posted in the same quarter of 2019
  • A total of N1.00 billion was reported at Profit before Tax at the end of the quarter, this is higher than the N696.43 million posted in the corresponding quarter
  • After making allowances for Tax Expenses, a total of N681.73 million was posted as Profit for the year, as against the N473.56 in the corresponding quarter.
Statement of Comprehensive Income
Turnover                    6,438,066,000                5,914,541,0008.85
Cost of Sales                    3,741,854,000                3,752,756,000-0.29
Operating Profit                    1,136,071,000                    845,650,00034.34
OPEX                    1,561,772,000                1,382,637,00012.96
DEPRECIATION                    3,842,793,000                3,813,405,0000.77
FINANCE COST                       131,155,000                    175,904,000-25.44
NET FINANCE INCOME                     (121,155,000)                 (142,473,000)-14.96
PBT                    1,002,546,000                    696,436,00043.95
TAX                       320,815,000                    222,860,00043.95
PAT                       681,731,000                    473,576,00043.95
TOTAL COMP INCOME                       681,731,000                    473,576,00043.95
Statement of Financial Position
Current Assets                    8,646,428,000                4,692,927,00084.24
Non Current Assets                    5,234,246,000                4,885,703,0007.13
Total Assets                 13,880,674,000                9,578,630,00044.91
Current Liabilities                    3,907,792,000                3,104,417,00025.88
Non Current Liabilities                    3,849,602,000                    916,221,000320.16
Total Liabilities                    7,757,394,000                4,020,638,00092.94
Net Assets                    6,123,280,000                5,557,993,00010.17
Retained Earnings                    2,176,597,000                1,683,310,00029.30
Shares Outstanding                    1,725,234,886                1,725,234,886 
  • Current Assets in now valued at N8.64 billion, compared to N4.69 billion in the corresponding quarter.
  • Non-Current Assets stood at N5.23 billion, higher that the N4.88 billion achieved at the end of 2019 third quarter business session.
  • Thus, Total Assets at the end of the period is valued at N13.88 billion, same as 44.91% improvement over the N9.57 billion in the similar period of 2019
  • Current Liabilities is estimated at N3.90 billion, same as 25.88% growth over the N3.10 billion in the same quarter of 2019
  • Non-Current Liabilities is valued at N3.84 billion against N961.22 million in the comparable quarter of 2019
  •  Total Liabilities for the period, therefore, stood at N7.75 billion, higher than the N4.02 billion posted in the comparable quarter.
  • Net Assets of May&Baker is estimated at N6.12 billion versus N5.55 billion in the corresponding quarter
  • Retained Earnings improved by 29.30% to N2.17 billion, compared to N1.68 billion in 2019.

Financial Strength/Solvency Ratios

  • Debt Ratio is currently estimated at 55.89%, same as 33.14% above the 41.98% in the similar period of 2019, implying that Total Liabilities is same as 55.89% of Total Assets.
  • Total Debt to Equity was equally estimated at 126.69% as against 72.34% estimated in the comparable quarter. This implies that more debt were used in service the company’s assets through the period.
  • It was established that Equity is same as 44.11% of May & Baker’s Assets Value, estimate from 2019 nine months performance indices yielded 58.02%.
  • Nevertheless, we can conclude that May & Baker’s shares are fairly liquid, although the estimated Beta stood slightly above the industrial average, and below market beta.
Financial Strength/Solvency Ratio
Debt Ratio55.89%41.98%33.14
Total Debt to Equity Ratio (MRQ)126.69%72.34%75.13
Equity Ratio44.11%58.02%-23.97
TICKERS2020Industrial Average%CHG
Beta Value                                       0.70                                   0.75-6.67

Profitability Ratios

  • EBITDA margin estimated for the period stood at 17.65%, well above the 14.30% estimated from the previous numbers.
  • Pre-Tax Margin revealed improved profitability, at 15.57% same as 32.25% above the 11.77% margin estimated from the 2019 nine-month data.
  • Effective Tax Rate was stable through the period as shown in the table below.
  • Cost of Sales is 58.12% of the Turnover Figure; which is just 8.40% below the 63.45% estimated in 2019. This is a confirmation of the management effort to control its direct cost.
  • Return on Equity is currently estimated at 11.13% higher than the 8.52% in 2019.
EBITDA MARGIN17.65%14.30%23.42
PRE-TAX MARGIN15.57%11.77%32.25
EFFECTIVE TAX RATE47.06%47.06%-0.00
CS to TO58.12%63.45%-8.40

Efficiency Ratios

  • Operating Expenses to Turnover value is currently measured at 24.26%, representing a 3.77% improvement in efficiency during the quarter.
  • Turnover to Total Assets Ratios stood at 46.38% against 61.75%, which is a 24.88% drop in management efficiency, when compared to estimates from the 2019 nine months’ performance indices.
  • Working Capital Ratio, a ratio that  indicates a company’s effectiveness in using its working capital was estimated at 1.36x up from the 3.72x in 2019
  • See below for other efficiency ratios tested.
OPEX to TO24.26%23.38%3.77
TO to TA46.38%61.75%-24.88
Working Capital Turnover                                       1.36                                   3.72-63.51
Working Capital Ratio                                       2.21                                   1.5146.37

Investment/Valuation Ratios

  • When put side by side the comparable quarter earnings, the management of May & Baker built the earnings per to N0.40 from the N0.27 achieved in similar period of 2019.
  • Our nine-month Adjusted P/E-ratio stood at 7.72x, slightly below the 7.29x of 2019.
  • The said earnings per share is a yield of 12.96% of the price of May & Baker on the floor of the exchange on the day the result was released, this is a lower yield when compared to the 13.72% in the corresponding period. Note that the share price grew by 52.50% within the comparable dates.
  • The value of May & Baker’s shares in its book is currently estimated at N3.55, a 10.17% improvement over that of the previous valuation.
  • Thus, Price to Book Value showed that the stock is undervalued on the exchange.
  • See the below table for details.
Investment/Valuation Ratios
Price at Released3.052.0052.50
Earnings Yield12.96%13.72%-5.60


Having considered the financials of May & Baker, along with various fiscal and monetary policies that currently favour its line of business, while maintaining our conservative valuation approach, we project with the assumption that the management will work on reduced interest yielding liabilities and marginally build dividend over the years, we have valued each unit of May & Baker at N4.21 and have rated it a Hold.