Current Market Price: N5.50
Latest Dividend: N0.15
Year High: N5.85
Year Low: N3.75
Fair Value: N5.13
Equity Analyst: Tunde Segun Jeariogbe
Key Investment Ratios
- This report observed the half-year financial performance of PZ Cussons Nigeria Plc for the period ended 30th September, 2020, compared same with numbers released in the similar period of 2019 to establish growth.
- Meanwhile, the full-year financials for the year ended 31st December, 2019 along few other years was very instrumental in the valuation and projection of future returns expected from the stock in focus.
- Generally, the result is positive, after recording negative earnings in the corresponding period of last year.
- Nevertheless, the last dividend of 15 kobo had a negative impact on the valuation as it reduced the expected returns ratio used for the analysis.
- See below for detailed numbers and comparisons:
|P Z CUSSONS NIGERIA|
|Bourse||Nigerian Stock Exchange|
|Market Classification||MAIN BOARD|
|Nature of Business||Manufacture and Distribution of Personal Care, Home Care and Electricals|
|Date of Incorporation||April 12th 1948|
|End of Accounting Year||31st May|
|Auditor||Deloitte & Touche|
|Share Price@Relsd (N)||5.00|
|Earnings per Share||0.21|
- Turnover for the period stood at N37.37 billion, same as 10.11% above the N33.94 billion posted in the corresponding period.
- Direct Cost is estimated at N22.22 billion, slightly below the N28.15 billion reported at the end of similar period in 2019.
- Operating Profit was N1.99 billion, compared to the N1.49 billion operating loss in the corresponding period of last year.
- Operating Cost is estimated at N8.16 billion, same as 11.91% above the N7.29 billion in the comparable quarter.
- Finance Cost used through the six months is estimated at N58.58 million, 80.05% lower than the N293.66 million posted in the prior half-year.
- A total of N1.02 billion was reported as Profit before Tax at the end of the quarter, as against the Loss before tax of N1.58 billion posted in the corresponding quarter.
- After making allowance for Tax Expenses, a total of N820.93 million was posted as Profit for the year, as against the loss after tax of N1.58 billion.
|P Z CUSSONS NIGERIA|
|Statement of Comprehensive Income|
|Cost of Sales||27,221,384,000||28,153,896,000||-3.31|
|NET FINANCE INCOME||51,213,000||117,630,000||-143.54|
|TOTAL COMP INCOME||820,934,000||1,580,277,000||151.95|
|Statement of Financial Position|
|Non Current Assets||27,831,214,000||29,966,023,000||-7.12|
|Non Current Liabilities||5,725,594,000||3,341,249,000||71.36|
- Current Assets is currently valued at N55.05 billion, compared to N48.55 billion in the corresponding quarter.
- Non-Current Assets stood at N27.83 billion, higher than the N34.78 billion achieved at the end of previous half-year.
- Thus, Total Assets at the end of the period is valued at N82.88 billion, same as 5.55% improvement over the N78.52 billion in the similar period of 2019.
- Current Liabilities is estimated at N41.77 billion, same as 32.86% growth over the N31.44 billion in the same quarter.
- Non-Current Liabilities is valued at N5.72 billion, as against N3.34 billion in the comparable quarter of 2019.
- Thus, Total Liabilities for the period stood at N47.50 billion, higher than the N38.78 billion posted in the comparable quarter.
- Net Assets is estimated at N35.38 billion, versus N43.73 billion in the corresponding quarter.
- Retained Earnings dropped by 25.18% to stand at the current estimate of N23.77 billion against N31.77 billion in 2019.
Financial Strength/Solvency Ratios
- Debt Ratio is currently estimated at 57.31%, same as 29.37% above the 44.30% estimated in the similar period of 2019, implying that Total Liabilities is same as 57.31% of Total Assets.
- Total Debt to Equity was equally estimated at 134.27% as against 79.54% estimated in the comparable quarter, meaning that more debt was used to service the company’s assets through the period.
- It was established that Equity is same as 42.69% of Assets Value estimate from the 2019 six-month performance indices yielded 55.70%.
- Nevertheless, we can conclude that the company’s shares are fairly liquid, even as the estimated Beta stood slightly above industry average, and below market beta.
|Financial Strength/Solvency Ratio|
|Total Debt to Equity Ratio (MRQ)||134.27%||79.54%||68.80|
- EBITDA margin estimated for the period stood at 5.34%, as against the negative 4.42% estimated from 2019 half year earnings numbers.
- Pre-Tax Margin revealed improved profitability at 2.75%, compared to the negative margin estimated from 2019 six months performance indices.
- Cost of Sales is 72.82% of the Turnover Figure; this is 12.19% below the 82.93% estimated in 2019, a confirmation of the management’s effort at controlling direct cost.
- Return on Equity is currently estimated at 0.99%, from the negative return in 2019.
|EFFECTIVE TAX RATE||25.26%||0.00%||#DIV/0!|
|CS TO TO||72.82%||82.93%||-12.19|
- Operating Expenses to Turnover value is currently measured at 21.83%, a marginal 1.64% drop in efficiency in the compared periods.
- Turnover to Total Assets Ratios stood at 45.10% against 43.23%, a 4.32% improvement in management efficiency when compared to estimate from the 2019 six-month performance indices.
- Working Capital Ratio, which indicates a company’s effectiveness in using working capital was estimated at 2.82x, as against the 1.98x estimated in 2019.
- See below for other efficiency ratios tested:
|OPEX TO TO||21.83%||21.48%||1.64|
|TO TO TA||45.10%||43.23%||4.32|
|Working Capital Turnover||2.82||1.98||41.93|
|Working Capital Ratio||1.32||1.54||-14.66|
- When put side-by-side the comparable quarter’s earnings, the company earned N0.21 per share, as against the loss per share reported in the corresponding quarter.
- Our six months Adjusted P/E-ratio stood at 24.18x.
- The said earnings per share is a yield of 4.14% of the price of PZ Cussons on the Nigerian Stock Exchange on the day the result was filed.
- The value of PZ Cussons shares in its book is currently estimated at N8.91, representing 19.10% drop from the previous estimated value.
- Thus, Price to Book Value showed a seemingly undervalued state for its shares on the exchange.
- See the table below for details:
|Price at Released||5.00||5.10||-1.96|
As noted above, returns expectation dropped due to the cut in the dividend paid, also, although, the fact that it exited a negative region should build up our valuation approach, we chose a more conservative valuation, thus we valued each unit of the shares at N5.13, and have rated it a Hold.