Earnings ReportFeatured

Berger Paints to Pay 25k Cash Dividend, Recommended for Long Term Investment Objectives

Company: Berger Paints Nigeria Plc (BERGER)

Rating: Buy (Long Term Investment Objective)

Current Market Price: 7.16

Latest Dividend: N0.25

Year High: N7.00

Year Low: N6.10

Fair Value: N12.03

By: Jeariogbe Tunde Segun (Equity Analyst- Tradelines Dotbz Inv. Ltd)

Report Objective:

  • In this report, the full year financial report of Berger Paints Plc for the year ended, 31st December, 2019 is carefully observed and compared with figures representing the corresponding year (2018), our target is to establish growth status, project future expected returns and arrive at a conservative fair value for Berger Paints.
  • The report also established various ratios targeted at previewing the following areas
    • Financial Strength/Solvency stand of the company
    • Profitability of the business
    • Management Efficiency
    • Investment Ratios

Analysis Brief:

  • Generally, the current result improved perfectly above 2018 performance indices, Finance Cost only reduced marginally and Financial Income stood above Cost, releasing the pressure of interest yielding liabilities on the company’s profitability
  • We observed that the company adjusted down its pay-out ratio despite the earnings growth, in our opinion, this might be the management’s approach to prepare the company against the fall-out of Covid-19 Pandemic. In other words, we see this as a step taken in the right direction
  • Considering the difference between Berger Paints current market price and our estimated Fair Value, we have rated Berger Paints as Buy for long term investment objectives
  • The earnings yield is very impressive at 21.62%, this is a big attraction to the stock. Although due to its preservation of earnings for better position, the N0.25 dividend proposed has a lower yield of 3.49%
BERGER PAINTS
Bourse Nigerian Stock Exchange
Code Name BERGER
Sector INDUSTRIAL GOODS
Market Classification Main Board
Nature of Business Manufacturing of decorative, industrial automotive and marine paints, putty and allied products
Date of Incorporation September 1st 1959
Date Listed  
End of Accounting Year 31ST DECEMBER
Website www.bergerpaintsnig.com
Registrar Meristem Registrars Limited
Auditor KPMG Professional Service
Share Price@Relsd (N) 7.16
Earnings per Share 1.55
Intrinsic Value(N) 12.03
Share Outstanding 289,823,447
Market Capitalisation 2,075,135,881

 Statement of Comprehensive Income

  • The amount reported as Turnover for the year stood at 6.15% above the corresponding year figure. A total of N3.58 billion was reported as the Turnover figure versus N3.37 billion in the corresponding year
  • Partly due to the marginal difference in the Turnover figure, Cost of Sales was stable at N1.92 billion versus N1.89 billion in the comparable year
  • Operating Profit improved by 15.97% to stand at the current estimate of N512.92 million against N442.30 million in the similar year
  • Operating Expenses is currently valued at N1.16 billion, same as 9.13% above the N1.06 billion in the corresponding year
  • Finance Cost used through the year is valued at N17.99 million, this is only 6.09% below the N19.16 million used in 2018
  • Meanwhile, Net Finance Income remained positive at N38.63 million against N12.02 million in the corresponding year
  • Profit After Tax is valued at N533.09 million, same as 17.34% above N454.32 million in the similar year of 2018
  • Tax Expenses stood at N84.36 million, lower than the N133.81 million stated in its 2018 full year report
  • Thus, N448.73 million was reported at the Profit for the year 2019, this is 40.015 improvement over 2018 profit (N320.50 million)
BERGER PAINTS FULL YEAR 2019
Statement of Comprehensive Income
  2019(000) 2018(000) %CHG
Turnover 3,584,804 3,377,223 6.15
Cost of Sales 1,920,480 1,896,862 1.25
Operating Profit 512,928 442,300 15.97
OPEX 1,164,299 1,066,917 9.13
DEPRECIATION 143,385 125,569 14.19
AMORTISATION 20,857 20,922 -0.31
FINANCE COST 17,993 19,160 -6.09
NET FINANCE INCOME 38,633 12,029 221.17
PBT 533,099 454,329 17.34
TAX 84,366 133,819 -36.96
PAT 448,733 320,509 40.01
TOTAL COMP INCOME 448,733 320,510 40.01
Statement of Financial Position
Current Assets 1,773,609 1,646,124 7.74
Non Current Assets 3,292,840 2,889,175 13.97
Total Assets 5,066,449 4,535,299 11.71
Current Liabilities 1,488,025 1,285,038 15.8
Non Current Liabilities 505,024 437,209 15.51
Total Liabilities 1,993,049 1,722,247 15.72
Net Assets 3,073,400 2,813,052 9.26
Retained Earnings 2,293,414 2,033,066 12.81
Shares Outstanding 289,823,447 289,823,447  

Statement of Financial Position

  • At the end of 2019 business session, Berger Paints’ Current Assets was valued at N1.77 billion, a marginal improvement over the N1.64 billion stated in its 2018 result
  • Non-Current Assets was valued at N3.29 billion, this is same as 13.97% above the N2.88 billion stated in the corresponding year
  • Thus, Total Assets Valuation grew by 11.71% over comparable period. Total Assets is currently valued at N5.06 billion against N4.35 billion in the corresponding year
  • On the other hand, Berger Paints Current Liabilities is now valued to worth N1.48 billion, this is 15.80 above the stated N1.28 billion in the corresponding year
  • Non-Current Liabilities stood at N505.002 million against N437.20 million in the similar year
  • That is, Total Liabilities Portfolio of Berger Paints at the end of 2019 business session is valued at N1.99 billion versus N1.72 billion in 2018 financial year
  • Net Assets equally improved by 9.26% to stand at N3.07 billion against N2.81 billion in 2018
  • Retained Earnings improved to N2.29 billion, same as 12.81% growth over the N2.03 billion stated in its 2018 full year report

Dividend Details

  • As noted above, the management of Berger Paints proposed a dividend of N0.25 for the year ended 31st December, 2019, this is lower than the N0.65 paid in the corresponding year
  • The said N0.25 is same as 16.15% of the amount earned on each unit of its listed shares through the year. Please note that 58.78% of its earnings was paid as dividend in 2018
  • As at the time the result was made available to the investing public, the said dividend is same as 3.49% of the shares price of Berger Paints on the floor of the exchange
DIVIDEND INFORMATION
Tickers 2019 2018 %Chg
Final Dividend 0.25 0.65 -61.54
Pay-out Ratio 16.15% 58.78% -72.53
Dividend Yield 3.49% 7.18% -51.39

Financial Strength/Solvency Ratios

  • At the end of 2019 financial year, Total Debt of Berger Paints is same as 39.34% of the Total Assets Valuation, this is a marginal growth over the 37.97% estimated from 2018 numbers
  • Meanwhile, Total Debt is estimated at 64.85% of the Equity, this is 5.92% growth over the 61.22% in the corresponding year
  • Shareholders’ funds is 60.66% of the Company Total Asset valuation at the end of 2019 financial year, this is a reduced position when compared to 62.03% in the comparable year
  • Going by the estimated beta value of Berger Paints which now stand below unity, one can safely conclude that the share of Berger Paint is less liquid especially when compared to industrial peers liquidity
Financial Strength/Solvency Ratio
TICKERS 2019 2018 %CHG
Debt Ratio 39.34% 37.97% 3.59
Total Debt to Equity Ratio (MRQ) 64.85% 61.22% 5.92
Equity Ratio 60.66% 62.03% -2.20
TICKERS 2019 Industrial Average %CHG
Beta Value                                        0.61                                    1.01 -39.60

Profitability Ratios

  • Berger Paints EBITDA Margin is estimated at 14.31% against 13.10% in the comparable year
  • Also, the amount declared as Profit before Tax is 14.87% of the Turnover figure, this is a 10.54% improvement over 13.45% in the similar year
  • Cost of Sales to Turnover is stable through the two years under comparison. Please note that Cost of Sales is 53.57% of Turnover value against 56.17% in 2018
  • Return on Equity is impressive at 14.60% against 11.39% in 2018
  • See below for other profitability ratios observed in this report
PROFITABILITY RATIOS
TICKERS 2019 2018 %CHG
EBITDA MARGIN 14.31% 13.10% 9.25
PRE-TAX MARGIN 14.87% 13.45% 10.54
EFFECTIVE TAX RATE 18.80% 41.75% -54.97
CS TO TO 53.57% 56.17% -4.62
ROE 14.60% 11.39% 28.15
ROA 8.86% 7.07% 25.33

Efficiency Ratios

  • Operating Expenses rate remains stable through the two years compared. It was established that Operating Expenses is 32.48% of Turnover Value against 31.59% in 2018.
  • Turnover is same as 70.76% of the Total Assets Value at the end of 2019 business session, this is only 4.98% drop in management efficiency within the observed years
  • Working Capital Ratio, a ratio that indicates a company’s effectiveness in using its working capital was estimated at 12.55x a 34.21% increase from the 9.35x estimated in 2018
  • Further testing the management efficiency, we tested the Working Capital Ratio, which confirmed that Current Assets can replicate Current Liabilities 1.19 times against 1.28 times in the corresponding year
EFFICIENCY RATIOS
  2019 2018 %Chg
OPEX to TO 32.48% 31.59% 2.81
TO to TA 70.76% 74.47% -4.98
Working Capital Turnover  12.55 9.35 34.21
Working Capital Ratio                                        1.19                                    1.28 -6.95

Investment Ratios

  • The management of Berger Paints earned N1.55 on each unit of its listed shares, this is same as 40.01% improvement over the N1.11 earned in the comparable year
  • P/E-Ratio dropped to 4.62x from the previously estimated 8.18x in the corresponding year. Impacting factor to the improvement in this ratio is the growth in EPS and reduction in share price on the floor of the exchange between the two years compared
  • The said N1.55 EPS yielded 21.62% of the price of Berger Paints as at the time the result was made available to the investing public. This is an outstanding yield compared to returns on most fixed income products
  • Presently, each unit of Berger Paints share is estimated to worth N10.60 in its book, this is an improvement from the previously estimated N9.71
  • The Price to Book Value Ratio stood below unity, confirming that the share price of Berger Paints is priced lower on the floor of the exchange
Investment/Valuation Ratios
Tickers 2019 2018 %Chg
Price at Released 7.16 9.05 -20.88
EPS 1.55 1.11 40.01
TCIP/SHARE 1.55 1.11 40.01
P/E-Ratio 4.62 8.18 -43.49
Earnings Yield 21.62% 12.22% 76.96
BV/Share 10.60 9.71 9.26
PBV 0.68 0.93 -27.59

Valuation

  • In valuing Berger Paints, we considered its consistency in dividend payment along consistent earnings growth, thus, we
  • Anticipated a growth in earnings over the years, especially since it had retained good portion of its 2019 earnings. In our opinion, this should improve its financial strength through 2020, and depending on the economic state, we expect a better Pay-Out at the end of the ongoing financial year
  • Thus, our valuation Model priced each unit of Berger Paint shares at N12.03 and we rated the Berger Paints a Buy.

Comment here

Earnings ReportFeatured

Berger Paints to Pay 25k Cash Dividend, Recommended for Long Term Investment Objectives

Company: Berger Paints Nigeria Plc (BERGER)

Rating: Buy (Long Term Investment Objective)

Current Market Price: 7.16

Latest Dividend: N0.25

Year High: N7.00

Year Low: N6.10

Fair Value: N12.03

By: Jeariogbe Tunde Segun (Equity Analyst- Tradelines Dotbz Inv. Ltd)

Report Objective:

  • In this report, the full year financial report of Berger Paints Plc for the year ended, 31st December, 2019 is carefully observed and compared with figures representing the corresponding year (2018), our target is to establish growth status, project future expected returns and arrive at a conservative fair value for Berger Paints.
  • The report also established various ratios targeted at previewing the following areas
    • Financial Strength/Solvency stand of the company
    • Profitability of the business
    • Management Efficiency
    • Investment Ratios

Analysis Brief:

  • Generally, the current result improved perfectly above 2018 performance indices, Finance Cost only reduced marginally and Financial Income stood above Cost, releasing the pressure of interest yielding liabilities on the company’s profitability
  • We observed that the company adjusted down its pay-out ratio despite the earnings growth, in our opinion, this might be the management’s approach to prepare the company against the fall-out of Covid-19 Pandemic. In other words, we see this as a step taken in the right direction
  • Considering the difference between Berger Paints current market price and our estimated Fair Value, we have rated Berger Paints as Buy for long term investment objectives
  • The earnings yield is very impressive at 21.62%, this is a big attraction to the stock. Although due to its preservation of earnings for better position, the N0.25 dividend proposed has a lower yield of 3.49%
BERGER PAINTS
Bourse Nigerian Stock Exchange
Code Name BERGER
Sector INDUSTRIAL GOODS
Market Classification Main Board
Nature of Business Manufacturing of decorative, industrial automotive and marine paints, putty and allied products
Date of Incorporation September 1st 1959
Date Listed  
End of Accounting Year 31ST DECEMBER
Website www.bergerpaintsnig.com
Registrar Meristem Registrars Limited
Auditor KPMG Professional Service
Share Price@Relsd (N) 7.16
Earnings per Share 1.55
Intrinsic Value(N) 12.03
Share Outstanding 289,823,447
Market Capitalisation 2,075,135,881

 Statement of Comprehensive Income

  • The amount reported as Turnover for the year stood at 6.15% above the corresponding year figure. A total of N3.58 billion was reported as the Turnover figure versus N3.37 billion in the corresponding year
  • Partly due to the marginal difference in the Turnover figure, Cost of Sales was stable at N1.92 billion versus N1.89 billion in the comparable year
  • Operating Profit improved by 15.97% to stand at the current estimate of N512.92 million against N442.30 million in the similar year
  • Operating Expenses is currently valued at N1.16 billion, same as 9.13% above the N1.06 billion in the corresponding year
  • Finance Cost used through the year is valued at N17.99 million, this is only 6.09% below the N19.16 million used in 2018
  • Meanwhile, Net Finance Income remained positive at N38.63 million against N12.02 million in the corresponding year
  • Profit After Tax is valued at N533.09 million, same as 17.34% above N454.32 million in the similar year of 2018
  • Tax Expenses stood at N84.36 million, lower than the N133.81 million stated in its 2018 full year report
  • Thus, N448.73 million was reported at the Profit for the year 2019, this is 40.015 improvement over 2018 profit (N320.50 million)
BERGER PAINTS FULL YEAR 2019
Statement of Comprehensive Income
  2019(000) 2018(000) %CHG
Turnover 3,584,804 3,377,223 6.15
Cost of Sales 1,920,480 1,896,862 1.25
Operating Profit 512,928 442,300 15.97
OPEX 1,164,299 1,066,917 9.13
DEPRECIATION 143,385 125,569 14.19
AMORTISATION 20,857 20,922 -0.31
FINANCE COST 17,993 19,160 -6.09
NET FINANCE INCOME 38,633 12,029 221.17
PBT 533,099 454,329 17.34
TAX 84,366 133,819 -36.96
PAT 448,733 320,509 40.01
TOTAL COMP INCOME 448,733 320,510 40.01
Statement of Financial Position
Current Assets 1,773,609 1,646,124 7.74
Non Current Assets 3,292,840 2,889,175 13.97
Total Assets 5,066,449 4,535,299 11.71
Current Liabilities 1,488,025 1,285,038 15.8
Non Current Liabilities 505,024 437,209 15.51
Total Liabilities 1,993,049 1,722,247 15.72
Net Assets 3,073,400 2,813,052 9.26
Retained Earnings 2,293,414 2,033,066 12.81
Shares Outstanding 289,823,447 289,823,447  

Statement of Financial Position

  • At the end of 2019 business session, Berger Paints’ Current Assets was valued at N1.77 billion, a marginal improvement over the N1.64 billion stated in its 2018 result
  • Non-Current Assets was valued at N3.29 billion, this is same as 13.97% above the N2.88 billion stated in the corresponding year
  • Thus, Total Assets Valuation grew by 11.71% over comparable period. Total Assets is currently valued at N5.06 billion against N4.35 billion in the corresponding year
  • On the other hand, Berger Paints Current Liabilities is now valued to worth N1.48 billion, this is 15.80 above the stated N1.28 billion in the corresponding year
  • Non-Current Liabilities stood at N505.002 million against N437.20 million in the similar year
  • That is, Total Liabilities Portfolio of Berger Paints at the end of 2019 business session is valued at N1.99 billion versus N1.72 billion in 2018 financial year
  • Net Assets equally improved by 9.26% to stand at N3.07 billion against N2.81 billion in 2018
  • Retained Earnings improved to N2.29 billion, same as 12.81% growth over the N2.03 billion stated in its 2018 full year report

Dividend Details

  • As noted above, the management of Berger Paints proposed a dividend of N0.25 for the year ended 31st December, 2019, this is lower than the N0.65 paid in the corresponding year
  • The said N0.25 is same as 16.15% of the amount earned on each unit of its listed shares through the year. Please note that 58.78% of its earnings was paid as dividend in 2018
  • As at the time the result was made available to the investing public, the said dividend is same as 3.49% of the shares price of Berger Paints on the floor of the exchange
DIVIDEND INFORMATION
Tickers 2019 2018 %Chg
Final Dividend 0.25 0.65 -61.54
Pay-out Ratio 16.15% 58.78% -72.53
Dividend Yield 3.49% 7.18% -51.39

Financial Strength/Solvency Ratios

  • At the end of 2019 financial year, Total Debt of Berger Paints is same as 39.34% of the Total Assets Valuation, this is a marginal growth over the 37.97% estimated from 2018 numbers
  • Meanwhile, Total Debt is estimated at 64.85% of the Equity, this is 5.92% growth over the 61.22% in the corresponding year
  • Shareholders’ funds is 60.66% of the Company Total Asset valuation at the end of 2019 financial year, this is a reduced position when compared to 62.03% in the comparable year
  • Going by the estimated beta value of Berger Paints which now stand below unity, one can safely conclude that the share of Berger Paint is less liquid especially when compared to industrial peers liquidity
Financial Strength/Solvency Ratio
TICKERS 2019 2018 %CHG
Debt Ratio 39.34% 37.97% 3.59
Total Debt to Equity Ratio (MRQ) 64.85% 61.22% 5.92
Equity Ratio 60.66% 62.03% -2.20
TICKERS 2019 Industrial Average %CHG
Beta Value                                        0.61                                    1.01 -39.60

Profitability Ratios

  • Berger Paints EBITDA Margin is estimated at 14.31% against 13.10% in the comparable year
  • Also, the amount declared as Profit before Tax is 14.87% of the Turnover figure, this is a 10.54% improvement over 13.45% in the similar year
  • Cost of Sales to Turnover is stable through the two years under comparison. Please note that Cost of Sales is 53.57% of Turnover value against 56.17% in 2018
  • Return on Equity is impressive at 14.60% against 11.39% in 2018
  • See below for other profitability ratios observed in this report
PROFITABILITY RATIOS
TICKERS 2019 2018 %CHG
EBITDA MARGIN 14.31% 13.10% 9.25
PRE-TAX MARGIN 14.87% 13.45% 10.54
EFFECTIVE TAX RATE 18.80% 41.75% -54.97
CS TO TO 53.57% 56.17% -4.62
ROE 14.60% 11.39% 28.15
ROA 8.86% 7.07% 25.33

Efficiency Ratios

  • Operating Expenses rate remains stable through the two years compared. It was established that Operating Expenses is 32.48% of Turnover Value against 31.59% in 2018.
  • Turnover is same as 70.76% of the Total Assets Value at the end of 2019 business session, this is only 4.98% drop in management efficiency within the observed years
  • Working Capital Ratio, a ratio that indicates a company’s effectiveness in using its working capital was estimated at 12.55x a 34.21% increase from the 9.35x estimated in 2018
  • Further testing the management efficiency, we tested the Working Capital Ratio, which confirmed that Current Assets can replicate Current Liabilities 1.19 times against 1.28 times in the corresponding year
EFFICIENCY RATIOS
  2019 2018 %Chg
OPEX to TO 32.48% 31.59% 2.81
TO to TA 70.76% 74.47% -4.98
Working Capital Turnover  12.55 9.35 34.21
Working Capital Ratio                                        1.19                                    1.28 -6.95

Investment Ratios

  • The management of Berger Paints earned N1.55 on each unit of its listed shares, this is same as 40.01% improvement over the N1.11 earned in the comparable year
  • P/E-Ratio dropped to 4.62x from the previously estimated 8.18x in the corresponding year. Impacting factor to the improvement in this ratio is the growth in EPS and reduction in share price on the floor of the exchange between the two years compared
  • The said N1.55 EPS yielded 21.62% of the price of Berger Paints as at the time the result was made available to the investing public. This is an outstanding yield compared to returns on most fixed income products
  • Presently, each unit of Berger Paints share is estimated to worth N10.60 in its book, this is an improvement from the previously estimated N9.71
  • The Price to Book Value Ratio stood below unity, confirming that the share price of Berger Paints is priced lower on the floor of the exchange
Investment/Valuation Ratios
Tickers 2019 2018 %Chg
Price at Released 7.16 9.05 -20.88
EPS 1.55 1.11 40.01
TCIP/SHARE 1.55 1.11 40.01
P/E-Ratio 4.62 8.18 -43.49
Earnings Yield 21.62% 12.22% 76.96
BV/Share 10.60 9.71 9.26
PBV 0.68 0.93 -27.59

Valuation

  • In valuing Berger Paints, we considered its consistency in dividend payment along consistent earnings growth, thus, we
  • Anticipated a growth in earnings over the years, especially since it had retained good portion of its 2019 earnings. In our opinion, this should improve its financial strength through 2020, and depending on the economic state, we expect a better Pay-Out at the end of the ongoing financial year
  • Thus, our valuation Model priced each unit of Berger Paint shares at N12.03 and we rated the Berger Paints a Buy.

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