Rating: Hold
Current Market Price: N1.85
Year High: N2.27
Year Low: N0.40
Fair Value: N1.15
Equity Analyst: Tunde Segun Jeariogbe
Key Investment Ratios
- In this report, the numbers of Neimeth International Pharmaceutical Plc for the third quarter ended 30th June, 2020 were observed, and compared with similar numbers for 2019 to establish growth. We have also explored the full-year numbers to make projections for valuation purposes.
- The financials under consideration reflect an improved performance probably due to the existing fiscal policy regime that favours the sector, following the management was able to grow key financial indices significantly above those of the corresponding period of last year, thereby boosting expectations for the full year earnings.
- Management reported a zero tax expenses for the two quarters observed in this report, though it quoted its tax rate as 30%.
- Going through Neimeth’s Nine months financials, it was observed that the company used far more long-term debts through the observed nine-month period, compared to Equity.
- It was also noticed that the company still carried an accumulated Loss which dwarfed the probability of rewarding investors at the end of the ongoing financial year. Nevertheless, the growth status is impressive.
- See below for other financial numbers/ratios
| NEIMETH INT’L | |
| Bourse | Nigerian Stock Exchange |
| Code Name | NEIMETH |
| Sector | HEALTHCARE |
| Market Classification | MAIN BOARD |
| Nature of Business | Manufacturing & Marketing of Pharmaceuticals, Animal Health Products and general healthcare products. |
| Date of Incorporation | August 13th 1957 |
| Date Listed | September 21st 1979 |
| End of Accounting Year | September 30th |
| Website | www.neimethplc.com |
| Registrar | Meristem Registrars and Probate Services Ltd |
| Auditor | PKF Professional Services |
| Share Price@Relsd (N) | 1.50 |
| Earnings per Share | 0.13 |
| Intrinsic Value(N) | 1.12 |
| Share Outstanding | 1,899,157,108 |
| Market Capitalisation | 2,848,735,662 |
Company figures
- At the end of the nine-month period the management of Neimeth posted a turnover of N2.00 billion, 42.21% improvement over the N1.41 billion achieved at the end of 2019 third quarter.
- Cost of Sales for the period rose to N908.56 million, from N764.52 billion in the corresponding quarter of 2019.
- Meanwhile. Operating Profit is estimated at N406.38 million, same as 29.24% above the N521.44 million estimated in the similar quarter of 2019.
- Finance Cost used through the nine months was valued at N168.75 million, almost doubled what was spent in the corresponding period of 2019.
- As noted above, the Company reported a zero Tax Expenses, following which profit before and after Tax stood at N237.62 million, versus N31.07 million in the corresponding quarter of 2019.
- It is important to note that profit soared by 664.71% over comparable period.
| NEIMETH INT’L | |||
| Statement of Comprehensive Income | |||
| 2020 | 2019 | %CHG | |
| Turnover | 2,006,036,000 | 1,410,573,000 | 42.21 |
| Cost of Sales | 908,568,000 | 764,524,000 | 18.84 |
| Operating Profit | 406,381,000 | 117,063,000 | 247.15 |
| OPEX | 673,894,000 | 521,440,000 | 29.24 |
| DEPRECIATION | 83,666,000 | 105,868,000 | -20.97 |
| FINANCE COST | 168,754,000 | 85,989,000 | 96.25 |
| PBT | 237,627,000 | 31,074,000 | 664.71 |
| TAX | – | – | |
| PAT | 237,627,000 | 31,074,000 | 664.71 |
| TOTAL COMP INCOME | 237,627,000 | 31,074,000 | 664.71 |
| Statement of Financial Position | |||
| Current Assets | 5,000,781,000 | 1,995,922,000 | 150.55 |
| Non-Current Assets | 1,179,851,000 | 757,878,000 | 55.68 |
| Total Assets | 6,180,632,000 | 2,753,800,000 | 124.44 |
| Current Liabilities | 1,484,135,000 | 1,435,085,000 | 3.42 |
| Non-Current Liabilities | 3,396,685,000 | 246,697,000 | 1,276.87 |
| Total Liabilities | 4,880,820,000 | 1,681,782,000 | 190.22 |
| Net Assets | 1,299,812,000 | 1,072,018,000 | 21.25 |
- Current Assets was valued at N5.00 billion, a 150.55% improvement over the N1.99 billion 0f the corresponding quarter of 2019.
- Similarly, Non-Current Assets stood at N1.17 billion, same as 55.68% above the amount stated in its 2019 third quarter earnings document.
- Thus, Total Assets at the end of the quarter was valued at N6.18 billion, as against N2.75 billion in the corresponding quarter of 2019.
- Current Liabilities on the other hand inched north by 3.42% to N1.48 billion, as against N1.43 billion in the similar quarter of 2019.
- Non-Current Liabilities jumped significantly to N3.39 billion from N246.69 billion in the corresponding period of last year.
- Thus, Total Liabilities at the end of the period was valued for N3.39 billion as against the previous N246.69 million.
- Net Assets at the end of the nine-month business session was estimated at N1.29 billion, a 21.25% growth over the N1.07 billion stated in 2019.
- Meanwhile, the company had Accumulated Losses of N660.53 million, down from N895.16 million.
Financial Strength/Solvency Ratios
- Debt Ratio is currently estimated at 78.97%, same as 29.31% above the 61.07% estimate in the similar period of 2019, which implies that Total Liabilities is same as 78.97% of Total Assets.
- Total Debt to Equity ratio was 375.50% as against 156.88% estimated in the comparable period.
- It was established that Equity is same as 21.03% of Neimeth’s Assets Value, this is a 45.98% drop when compared to the 38.93% achieved in the similar period of 2019.
- Going by the above unity beta value (1.10), we can safely conclude that shares of Neimeth are quite liquid and well patronised by traders.
| Financial Strength/Solvency Ratio | |||
| TICKERS | 2020 | 2019 | %CHG |
| Debt Ratio | 78.97% | 61.07% | 29.31 |
| Total Debt to Equity Ratio (MRQ) | 375.50% | 156.88% | 139.36 |
| Equity Ratio | 21.03% | 38.93% | -45.98 |
| TICKERS | 2020 | Industrial Average | %CHG |
| Beta Value | 1.10 | 0.52 | 111.54 |
Profitability Ratios
- EBITDA margin was estimated at 20.26% a swell improvement over the 8.30% achieved in the corresponding period.
- Pre-Tax Margin stood at 11.85%, an outstanding growth over the 2.20% estimated in the comparable period of 2019.
- Cost of Sales was 45.29% of the Turnover this is 16.44% below the 54.20% estimated in 2019. This is a confirmation of the management’s effort at controlling direct costs.
- Return on Equity stood at 18.28%, a confirmation of the effective use of the high debt used through the period.
- Kindly see the table below for details:
| PROFITABILITY RATIOS | |||
| TICKERS | 2020 | 2019 | %CHG |
| EBITDA MARGIN | 20.26% | 8.30% | 144.10 |
| PRE-TAX MARGIN | 11.85% | 2.20% | 437.72 |
| CS TO TO | 45.29% | 54.20% | -16.44 |
| ROE | 18.28% | 2.90% | 530.70 |
| ROA | 3.84% | 1.13% | 240.72 |
Efficiency Ratios
- Operating Expenses to Turnover value is same as 33.59%, this is 9.13% efficiency improvement over the 36.97% estimated from the 2019 third quarter financial indices.
- Turnover to Total Assets Ratios stood at 32.46%, as against 51.22% in the comparable quarter. This is a confirmation of effective use of funds and evidence that more businesses were done through the nine months under review.
- Working Capital Ratio, which indicates a company’s effectiveness in deploying working capital was estimated at 0.57x as against the 2.52x estimated in similar period of 2019.
- See below for details:
| EFFICIENCY RATIOS | |||
| 2020 | 2019 | %Chg | |
| OPEX TO TO | 33.59% | 36.97% | -9.13 |
| TO TO TA | 32.46% | 51.22% | -36.64 |
| Working Capital Turnover | 0.57 | 2.52 | -77.32 |
| Working Capital Ratio | 3.37 | 1.39 | 142.27 |
Investment/Valuation Ratios
- As observed in the company’s figures above, the amount earned per unit of Neimeth’s shares is estimated at N0.13, far above the N0.02 recorded at the end of the corresponding period.
- The share price of Neimeth as at the time this financials were released to the public was found to have replicated price in 11.99 times, as against the 33.61 estimated at the end of the 2019 nine months business session.
- The said estimated Earnings per Share is same as 8.34% of the share price of Neimeth on the floor of the exchange when the result was released.
- The Book Value of Neimeth at the end of the quarter betrayed the overvalued status of its shares on the floor of the exchange. It is important to observe that the current value of each unit on its books is N0.68.
- Further confirming this position is the Price to Book value which stood far above unity at the current estimate. It is 2.19x versus 0.97x in the corresponding period. Please note that public sentiment regarding its shares through the period was high, which accounts for the large difference in the Price to Book Value estimate.
| Investment/Valuation Ratios | |||
| Tickers | 2020 | 2019 | %Chg |
| Price at Released | 1.50 | 0.55 | 172.73 |
| EPS | 0.13 | 0.02 | 664.71 |
| TCIP/SHARE | 0.13 | 0.02 | 664.71 |
| P/E-Ratio | 11.99 | 33.61 | -64.34 |
| Earnings Yield | 8.34% | 2.97% | 180.39 |
| BV/Share | 0.68 | 0.56 | 21.25 |
| PBV | 2.19 | 0.97 | 124.93 |
Valuation
Supporting the valuation of Neimeth is the improvements observed in its figures as against the corresponding period, nevertheless, we are careful to properly incorporate its accumulated losses status, while projecting the expected returns, even at the end of the on-going period. Thus, we conservatively valued each unit of Learn Africa Plc at N1.15and considering the fact that it is currently growing its performance indices, we have rated it a Hold, despite the large differences between our valuation and the current market price.
