Rating: Hold
Current Market Price: N51.50

Latest Dividend: N2.00
Year High: N57.05
Year Low: N36.45
Fair Value: N53.00
Equity Analyst:  Tunde Segun Jeariogbe

Key Investment Ratios

• In this report, we observed the half-year financials of Presco Plc for the period ended 30^th June 2020, and compared same with similar result released in 2019 to establish growth.
• Generally, performance for the year was high when compared with a similar period in 2019.
• Also, it was observed that expenses were cautioned appropriately within the quarters observed in this report.
• Our observation is that despite improvements in the profit line in the 2019 and 2018 full-year performance indices, the management paid N2.00, reducing the growth expectations, thereby invariably priced down the company’s shares.

PRESCO
Bourse	Nigerian Stock Exchange
Code Name	PRESCO
Sector	AGRICULTURE
Market Classification	MAIN BOARD
Nature of Business	Palm Plantation and Processing
Date of Incorporation	September 24th 1991
Date Listed	October 10th 2002
End of Accounting Year	31ST DECEMBER
Website	www.presco-plc.com
Registrar	First Registrars & Investor Services Limited
Auditor	AKINTOLA WILLIAMS DELOITTE, Grant Thornton Nigeria
Share Price@Relsd (N)	47.45
Earnings per Share	4.39
Intrinsic Value(N)	53.00
Share Outstanding	1,000,000,000
Market Capitalisation	47,450,000,000

Company figures

• Turnover in the half-year period stood at N13.45 billion, same as 29.35% above the turnover in similar quarter of 2019.
• Cost of Sales for the quarter stood at N4.41 billion, same as 24.06% above the stated N3.56 billion in the corresponding period of 2019.
• Operating Profit equally rose 51.73% above comparable period to N6.60 billion, against N4.35 billion.
• Operating Expenses dropped below the comparable period by 20.75% to N2.07 billion, from the previous N2.64 billion.
• Finance Cost through the first six months of 2020 was valued at N831.79 million, 16.64% below the N997.81 million reported at the end of the 2019 half-year business cycle.
• Profit before Tax equally stood above that of similar period by 67.71% at the current estimate of N5.77 billion, as against N3.44 billion in 2019H1.
• Tax Expense equally soared above comparable period by 59.37% to N1.38 billion, versus N866.26 million in the comparable period of last year.
• After taking care of Tax Expense, a total of N4.39 billion was reported as half-year profit, which was above comparable quarter by 70.51%

PRESCO
Statement of Comprehensive Income
	2020(000)	2019(000)	%CHG
Turnover	13,458,422	10,404,610	29.35
Cost of Sales	4,416,849	3,560,265	24.06
Operating Profit	6,602,415	4,351,329	51.73
OPEX	2,079,683	2,624,187	-20.75
DEPRECIATION	870,718	610,955	42.52
FINANCE COST	831,799	997,810	-16.64
PBT	5,770,616	3,440,880	67.71
TAX	1,380,606	866,268	59.37
PAT	4,390,011	2,574,612	70.51
TOTAL COMP INCOME	4,390,011	2,574,612	70.51
Statement of Financial Position
Current Assets	20,336,787	20,376,275	-0.19
Non Current Assets	49,867,276	47,299,007	5.43
Total Assets	70,204,063	67,675,282	3.74
Current Liabilities	21,796,340	22,380,535	-2.61
Non Current Liabilities	16,129,836	18,103,820	-10.90
Total Liabilities	37,926,176	40,484,355	-6.32
Net Assets	32,277,888	27,190,927	18.71
Retained Earnings	30,644,097	27,190,927	12.70
Shares Outstanding	1,000,000,000	1,000,000,000

• Current Asset was valued at N20.33 billion as against N20.37 billion at the end of 2019 half year. The difference between both valuations is the same as 0.19%.
• Similarly, Non-Current Assets stood at N49.86 billion, 5.43% higher than the N47.29 billion quoted in its 2019 half-year result.
• Meanwhile, Current Liabilities dropped by a marginal 2.61% to N21.76 billion, as against the previously reported N22.38 billion in the 2019 half-year result.
• Similarly, Non-Current Liabilities dropped below the similar quarter of 2019 by 10.90% at the current estimate of N16.12 billion, compared to N18.10 billion in 2019.
• Net Assets therefore amounted to N32.27 billion, same as 18.71% above the previous value of N27.19 billion in the corresponding period.
• Also, Retained Earnings improved by 12.70% to N30.64 billion versus the N27.19 billion recorded in 2019.

Financial Strength/Solvency Ratios

• Debt Ratio is currently estimated at 54.02%, same as 9.69%% below the 59.82 estimated in the similar period of 2019. This implies that, Total Liabilities is same as 54.02% of Total Assets.
• Total Debt to Equity ratio estimated at 117.50%, as against 148.89 estimated in the comparable quarter, implying far higher Debt than equity through the period.
• It is established that Equity is same as 45.98% of Presco’s Assets Value, this is growthwhen compared to the 40.18% achieved in similar period of 2019.
• Going by the beta value of 0.31, which dropped far below unity, we can safely conclude that shares of Presco are relatively not liquid.

Financial Strength/Solvency Ratio
TICKERS	2020	2019	%CHG
Debt Ratio	54.02%	59.82%	-9.69
Total Debt to Equity Ratio (MRQ)	117.50%	148.89%	-21.08
Equity Ratio	45.98%	40.18%	14.43
TICKERS	2020	Industrial Average	%CHG
Beta Value	0.31	1.00	-69.00

Profitability Ratios

• Profit before Tax is estimated at 42.88% of the Turnover, as against the 33.07% achieved at the end of the 2019 half-year.
• As noted above, the tax rate within the two periods compared is fairly the same. As such, Tax Rate is currently valued at 31.45% as against 33.65% in the corresponding quarter.
• Cost of Sales was 32.82% of the Turnover, which is only 4.09% above the 34.22% estimated in 2019, confirming management’s effort at controlling direct cost.
• Return on Equity stood at 13.60% against 9.47% of 2019.
• See below for details.

PROFITABILITY RATIOS
TICKERS	2020	2019	%CHG
EBITDA MARGIN	49.06%	41.82%	17.30
PRE-TAX MARGIN	42.88%	33.07%	29.65
EFFECTIVE TAX RATE	31.45%	33.65%	-6.53
CS toTO	32.82%	34.22%	-4.09
ROE	13.60%	9.47%	43.64
ROA	6.25%	3.80%	64.37

Efficiency Ratios

• Operating Expenses to Turnover value is same as 15.45%, which is 38.73% improvement in efficiency from the 25.22% estimated for the 2019 half-year financial indices.
• Turnover to Total Assets Ratios stood at 19.17%, as against 15.37% when compared to the ratio estimated in 2019 result, it is a 24.69% improvement in efficiency.
• Working Capital Ratio, which indicates a company’s effectiveness in using working capital, was estimated at -9.22x as against the 5.19x estimated in similar period of 2019.
• See below for details.

EFFICIENCY RATIOS
	2020	2019	%Chg
OPEX toTO	15.45%	25.22%	-38.73
TO to TA	19.17%	15.37%	24.69
Working Capital Turnover	(9.22)	(5.19)	77.62
Working Capital Ratio	0.93	0.91	2.48

Investment/Valuation Ratios

• At the end of the quarter, the management made N4.39 on every unit of Presco shares listed on the Nigerian Stock Exchange (NSE), which is 70.51% above the N2.57 earned at the end of 2019 half-year.
• The price of Presco shares as at the time this report was made available to the investing public was found to have replicated that EPS 10.81 times, which is means P/E-Ratio is 10.81x, as against 17.40x.
• The said earnings per share is a 9.25% yield of the current market price of Presco at released this is higher than the 5.75% yield achieved in 2019.
• Book Value per shares shows an under-valued position at N27.19, as against the previous estimate of N27.19, which is due to the large drop in the Net Assets Value.
• Further confirming this position is the Price to Book value which stood above unity in the current period, as against below unity estimated in the corresponding quarter.

Investment/Valuation Ratios
Tickers	2020	2019	%Chg
Price at Released	47.45	44.80	5.92
EPS	4.39	2.57	70.51
TCIP/SHARE	4.39	2.57	70.51
P/E-Ratio	10.81	17.40	-37.88
Earnings Yield	9.25%	5.75%	60.99
BV/Share	32.28	27.19	18.71
PBV	1.47	1.65	-10.78

Valuation

While valuing Presco shares, we considered the low Pay-Out Ratio as noted above, and other key valuation items. Thus, we have fairly valued each unit of Presco Plc share price for N53.00and have Rated it a Hold.