Company Analysis

Neimeth 2021Q3: Cautious Optimism, Amidst Wait To Confirm Growth Trajectory

Rating: Hold
Current Market Price: N2.05

Latest Dividend: N0.065
Year High: N2.23
Year Low: N1.48
Fair Value: N1.08
Equity AnalystTunde Segun Jeariogbe

Key Investment Ratios

  • This report reviews the score-card of Neimeth International Pharmaceutical Plc for the third quarter ended 30th June 2021 and compares the same with numbers for the similar period of 2020 to establish growth. We have explored the full-year numbers while projecting for valuation purposes.
  • Generally, the scorecard is unimpressive given the drop from the prior third quarter.
  • See the table below for other analysis and ratio comparisons.
Sources: Company report, NGX Exchange, Investdata Research

Company figures

  • At the end of the third quarter 2021, the company posted a N1.99 billion Turnover, a marginal 0.73% lower than the N2.00 billion achieved at the end of 2020 third quarter
  • Cost of Sales for the period stood at N1.06billion, as against N908.56 million in the corresponding quarter.
  • Meanwhile. Operating Profit at N198.24 million was the same as 51.21% below the N406.38 million estimated at the end of 2020 nine months business session.
  • Operating Expenses stood at N741.38 million, versus N673.89 million in the similar quarter of 2020.
  • Finance Cost during the quarter till was dropped to N113.44 million, 32.77% below the N168.75 million used through the 2020 period.
  • Profit before Tax stood at N84.82 million, versus N237.62 million posted in the corresponding quarter. Note that Profit before Tax dropped by 64.30% from that of the comparable quarter.
  • Similarly, Profit for the quarter was estimated at N84.82 million, the same as 64.30% below the N237.62 million in the comparable quarter.
Sources: Company report, NGX Exchange, Investdata Research
  • The Current Assets of Neimeth is currently valued at N5.12 billion, 2.57% better than the N5.00 billion Assets Valuation at the end of the 2020 third quarter.
  • Similarly, Non-Current Assets stood at N1.38 billion same as 17.73% above the N1.17 billion posted in its 2020 nine-month report.
  • Thus, Total Assets at the end of the year was valued at N6.51 billion, against N6.18 billion in 2020.
  • Current Liabilities on the other hand grew north by 57.69% to N2.34 billion from the N1.48 billion reported in 2020.
  • Non-Current Liabilities dipped to N2.94 billion against N3.39 billion in the comparable quarter.
  • Thus, Total Liabilities at the end of the year was valued at N5.29 billion against N4.88billion in the corresponding quarter.
  • The company’s Net Assets for the period was estimated at N1.22 billion, 5.50% lower than the N1.29 billion stated at the end of 2020.
  • Meanwhile, it posted Retained Earnings of N173.85 million, after reporting accumulated losses in the comparable quarter.

Financial Strength/Solvency Ratios

  • The Debt Ratio is currently estimated at 81.16%, the same as 2.77% above the 78.97% estimated in the similar quarter. This indicates that the company’s Assets Value was ahead of the total liability at the end of the quarter under reference.
  • The Total Debt to Equity ratio was estimated at 430.67% against 375.50% estimated in the comparable quarter. This implies that more debt was deployed to service the company’s assets through the quarter.
  • It was established that Equity is the same as 18.84% of Neimeth’s Assets Value, representing a 10.40% drop when compared to the 21.03% achieved in the 2020 third quarter.
  • Going by the unity beta value (0.80), we can safely conclude that shares of Neimeth are less liquid when compared to those of the general market.
Sources: Company report, NGX Exchange, Investdata Research

Profitability Ratios

  • EBITDA margin was estimated at 9.96%, the same as a 50.85% drop from the 20.26% achieved in the corresponding quarter.
  • Pre-Tax Margin stood at 4.26%, also a drop in profitability when compared to the 11.85% achieved at the end of 2020 third quarter.
  • The Cost of Sales is the same as 53.45% of the Turnover figure, this is 18.01% above the 45.29% estimated in 2020. This shows lower profitability when compared to the numbers for the corresponding quarter.
  • Return on Equity stood at 6.91% as against 18.28% in the corresponding quarter of 2020, a clear drop by 62.22% in profitability between the two quarters compared in this report
  • See the table below for details:
Sources: Company report, NGX Exchange, Investdata Research

Efficiency Ratios

  • Operating Expenses to Turnover value is the same as 37.23%, a 10.83%% drop in management efficiency when compared to the 33.59% estimated from 2020 nine-month financial indices.
  • Turnover to Total Assets Ratios stood at 30.55% against 32.46% in the comparable quarter.
  • Working Capital Ratio, a ratio that indicates a company’s effectiveness in using its working capital was estimated at 0.71x, up from the 0.57x estimated in the similar period of 2020.
  • See the table below for details:
Sources: Company report, NGX Exchange, Investdata Research

Investment/Valuation Ratios

  • As observed in the figures above, the amount earned per unit of Neimeth shares at the end of the quarter is estimated at N0.04, down from the N0.13 earned at the end of the 2020 nine-month period.
  • The share price of Neimeth as of the time these financials were released replicated earnings per share 39.18 times, compared to an 11.99 replicate estimated at the end of the 2020 third quarter.
  • The said estimated Earnings per Share is the same as 2.55% of the share price of Neimeth on the Exchange when the result was first released.
  • The Book Value of Neimeth at the end of the quarter showed an over-valued status of its shares on the Exchange. Note that the current worth of its shares in the book is N0.65 each.
  • Further confirming this position is the Price to Book value which stood far above unity at 2.71x, versus 2.19x in the corresponding quarter. Note also that public sentiments on its shares through the period was high, which accounted for the large difference in the Price to Book Value estimate.
Sources: Company report, NGX Exchange, Investdata Research

Valuation

Supporting the valuation of Neimeth is the reported cash dividend paid at the end of the 2020 financial year, nevertheless, we are careful not to overblow our expectations, Thus, we conservatively valued each unit of Neimeth at N1.08, considering the fact that it is currently growing its performances indices, we Rated it a Hold since our intrinsic value is only a little below the current market price.

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