Earnings ReportFeatured

CAP Plc; Need to Widen Business Space for Better Attraction

 

Coy: CAP Plc
Rating: Hold
Current Market Price: N31.10
Year High: N37.40
Year Low: N31.10
Fair Value: N33.26
By: Jeariogbe Tunde Segun (Equity Analyst)

 

Key Investment Ratios

  • This report observed the first three months of 2019 financial analysis of Chemical & Allied Product, compare with similar quarter in 2018 to establish growth. Meanwhile, while attempting to rightly place each units of CAP Plc price, the 2018 full year financial statistics were used.
  • As at the end of 2019 first quarter, the company do not a any interest yielding liability and so, posted a nil Finance Cost, this is against the N1.38 billion finance cost posted in similar period of 2018 and N14.61 billion Finance Cost at the end of 2018 business cycle.
  • Please understand that the only item carried on the long term liabilities column of the result is Deferred Tax Liabilities to the tune of N127.05 million which is same as what was posted in corresponding quarter of 2018
  • As good as this position is, it’s might also be seen as an equilibrium state of business, meaning building earnings above the previous year might be a little stiff, since the company is now using zero debt to create more wealth.
  • Based on our conservative valuation approach, we have rated the shares a Hold, with a conclusion that the company will need to aggressively expand its business space with the aim of creating wealth for its shareholders.
C A P
Bourse Nigerian Stock Exchange
Code Name CAP
Sector INDUSTRIAL GOODS
Market Classification MAIN BOARD
Nature of Business Manufacture, marketing of paints and sales of fire extinguishing products
Date of Incorporation 21st September, 1965
Date Listed 24th May 1978
End of Accounting Year 31st December
Website www.capplc.com
Registrar UAC Registrars Ltd
Auditor PricewaterhouseCoopers
Share Price@Relsd (N)                                                  34.00
Earnings per Share                               3,307,876,000.00
Intrinsic Value(N)                                                  33.26
Share Outstanding 700,000,000
Market Capitalisation                                  23,800,000,000

 

Company figures

  • Turnover figure improved by marginal 8.04% over comparable period, having moved from N1.96 billion to N2.12 billion.
  • Cost of Sales on the other hand increased with higher rate as the difference between the current COS and that of the comparable quarter in 2018 is estimated at 87.49%
  • With higher operating expenses, the Operating Profit stood at 0.65% above that of 2018 first quarter. The current Operating Profit is N615.13 million as against the N611.15 million achieved in 2018 first quarter
  • As noted above, the Operating Expenses stood at N437.63 million, this is same as 21.34% above N360.67 million posted in 2018-Q1
  • As mentioned above, the company posted a zero Finance Cost at the end of the quarter, this is against the N1.38 million of similar quarter
  • Meanwhile, Net Finance Cost was positive N118.59 million, please understand that this is 72.64% above 2018 first quarter estimate
  • Both Profit before and after Tax builds above the corresponding period by 7.93% each. Current Profit before tax is estimated at N733.73 million while Profit for the year stood at N498.93 million.
C A P
Statement of Comprehensive Income
  2019 2018 %CHG
Turnover                     2,120,285,000                 1,962,467,000 8.04
Cost of Sales                     1,886,087,000                 1,005,949,000 87.49
Operating Profit                        615,135,000                     611,155,000 0.65
OPEX                        437,633,000                     360,676,000 21.34
DEPRECIATION                           29,367,000                       20,744,000 41.57
AMORTISATION                             5,814,000                         5,814,000 0.00
FINANCE COST                                            –                           1,382,000 100.00
NET FINANCE COST                        118,596,000                       68,694,000 72.64
PBT                        733,731,000                     679,849,000 7.93
TAX                        234,794,000                     217,552,000 7.93
PAT                        498,937,000                     462,297,000 7.93
TOTAL COMP INCOME                        498,937,000                     462,297,000 7.93
Statement of Financial Position
Current Assets                     6,383,271,000                 5,445,093,000 17.23
Non-Current Assets                        843,909,000                     766,153,000 10.15
Total Assets                     7,227,180,000                 6,211,246,000 16.36
Current Liabilities                     3,792,251,000                 3,375,254,000 12.35
Non-Current Liabilities                        127,053,000                     127,053,000 0.00
Total Liabilities                     3,919,304,000                 3,502,307,000 11.91
Net Assets                     3,307,876,000                 2,808,939,000 17.76
Retained Earnings                     2,938,622,000                 2,439,685,000 20.45
Shares Outstanding                        700,000,000                     700,000,000  

 

  • Current Assets for the period stood at N6.38 billion, this is 17.23% above the n5.44 billion valuation posted in same period of k2018
  • Non-Current Assets improved by 10.15% to stand at N843.90 million as against N766.15 million
  • Thus, Total Assets for the period improved by 16.36% to stand at N7.27 billion compared to N6.21 billion in 2018
  • Current Liabilities boosted by Trade and other Payables, and Current Income Tax Liabilities, increased by 12.35% as it’s currently valued at N3.79 billion against N3.37 billion
  • Total Liabilities therefore grew by 11.91% to stand at N3.91 billion as against N3.50 billion
  • Netting total assets and liabilities, the company Reported Net Assets of N3.30 billion, same as 17.76% above the N2.80 billion of 2018 first quarter
  • Retained earnings improved by 20.45% to stand at N2.93 billion as against N2.43 billion at the end the first three months of 2018.

Financial Strength/Solvency Ratios

  • Debt Ratio is currently estimated at 0.54x down from the 0.56x estimated from 2018 first quarter financials. This implies that, Total Liabilities is same as 54% of Total Assets. Please note the quality of this ratio is based on its zero long term/interest yielding liabilities
  • Total Debt to Equity was equally estimated at 1.18x as against 1.25x estimated in the comparable quarter
  • It was also estimated that Total Equity is same as 46% of the Total Assets of the company, this is 1.21% improvement over the 45% estimated last quarter
Financial Strength/Solvency Ratio
TICKERS 2019 2018 %CHG
Debt Ratio                                        0.54                                    0.56 3.82
Total Debt to Equity Ratio (MRQ)                                        1.18                                    1.25 4.97
Equity Ratio                                        0.46                                    0.45 1.21
TICKERS 2019 Industrial Average %CHG
Beta Value                                        0.18                                    1.08 83.33

 

Profitability Ratios

  • EBITDA margin estimated for the period stood at 29.01%, 6..84% below the 31.14% estimated from the corresponding quarters’ numbers
  • Pre-Tax Margin dropped marginally by 0.11% to 34.16% against the 34.64% estimated at the end of 2018 first quarter
  • Effective Tax Rate was stable within the two periods compared in this report
  • The company seems to have operated at higher cost through the quarter as it currently posted Cost of Sales of 88.95% of the Turnover Figure, this is 73.54% above the 51.26% COS to Turnover of 2018 first quarter
  • Return on Equity stood at 15.08% against 16.46% of 2018
  • Similarly, Return on Assets dropped by 7.25% to stand at 6.90% as against 7.44% of 2018 first quarter
PROFITABILITY RATIOS
TICKERS 2019 2018 %CHG
EBITDA MARGIN 29.01% 31.14% 6.84
PRE-TAX MARGIN 34.61% 34.64% 0.11
EFFECTIVE TAX RATE 47.06% 47.06% 0.00
CS TO TO 88.95% 51.26% 73.54
ROE 15.08% 16.46% 8.35
ROA 6.90% 7.44% 7.25

 

Efficiency Ratios

  • Operating Expenses to Turnover value is same as 20.64%, this is 12.31% growth over the 18.38% estimated from 2018 first quarter financials
  • Turnover to Total Assets Ratios stood at 29.34% against 31.60% a 7.15% drop in efficiency over comparable period of 2018
  • Working Capital Ratio a ratio that indicates a company’s effectiveness in using its working capital was estimated at 0.82x a 13.69% drop from the 0.95x estimated in similar period of 2018
  • Further testing the company efficiency, we tested the Working Capital Ratio, which confirmed that Current Assets is higher than current liabilities, we also established improvement in this efficiency ratio from the previous 1.61x to 1.68x
EFFICIENCY RATIOS
  2019 2018  
OPEX TO TO 20.64% 18.38% 12.31
TO to TA 29.34% 31.60% 7.15
Working Capital Turnover                                        0.82                                    0.95 13.69
Working Capital Ratio                                        1.68                                    1.61 4.34

 

Investment/Valuation Ratios

  • At the end of the first three months of 2019, the management achieved earnings per share improvement to the tune of 7.93% from the previously estimated N0.66 to N0.71
  • P/E-Ratio slipped by 18.70% having moved to 47.70x to 58.67x, please understand that the high P/E-Ratio is an indication of positive investors’ sentiments
  • The said Earnings per Share is a 2.10% yield of the current market price of CAP Plc shares on the floor of the exchange as at the time the result was made available to the investing public
  • Further confirming the positive sentiments is the low book value of N4.73 as against the market price of N34.00
  • Due to the very low Book Value of CAP Plc shares as against the market value, the Price to Book Value is quite high at 7.19x as against 9.66x estimated from the corresponding
  • Although Capex/Share estimate dropped by 96.59% from the comparable period estimate, the ratio is still very positive, confirming its strength to fund its dividend payments
Investment/Valuation Ratios
Tickers 2019 2018 %Chg
Price at Released 34.00 38.75 12.26
EPS 0.71 0.66 7.93
TCIP/SHARE 0.71 0.66 7.93
P/E-Ratio 47.70 58.67 18.70
Earnings Yield 2.10% 1.70% 23.00
BV/Share 4.73 4.01 17.76
PBV 7.19 9.66 25.49
CAPEX/SHARE 0.16 4.73 96.59

 

Valuation

Our blend of valuation models, considered the consistent dividend payment of CAP Plc and the stability. We also put into consideration the seemingly stability in the performance indices over the period. Thus we valued each unit of CAP Plc shares at N33.26, slightly below the current market valuation of the shares as at the time the latest financials was made available to the investing public. We have therefore rated it a Hold

 

Comment here

Earnings ReportFeatured

CAP Plc; Need to Widen Business Space for Better Attraction

 

Coy: CAP Plc
Rating: Hold
Current Market Price: N31.10
Year High: N37.40
Year Low: N31.10
Fair Value: N33.26
By: Jeariogbe Tunde Segun (Equity Analyst)

 

Key Investment Ratios

  • This report observed the first three months of 2019 financial analysis of Chemical & Allied Product, compare with similar quarter in 2018 to establish growth. Meanwhile, while attempting to rightly place each units of CAP Plc price, the 2018 full year financial statistics were used.
  • As at the end of 2019 first quarter, the company do not a any interest yielding liability and so, posted a nil Finance Cost, this is against the N1.38 billion finance cost posted in similar period of 2018 and N14.61 billion Finance Cost at the end of 2018 business cycle.
  • Please understand that the only item carried on the long term liabilities column of the result is Deferred Tax Liabilities to the tune of N127.05 million which is same as what was posted in corresponding quarter of 2018
  • As good as this position is, it’s might also be seen as an equilibrium state of business, meaning building earnings above the previous year might be a little stiff, since the company is now using zero debt to create more wealth.
  • Based on our conservative valuation approach, we have rated the shares a Hold, with a conclusion that the company will need to aggressively expand its business space with the aim of creating wealth for its shareholders.
C A P
Bourse Nigerian Stock Exchange
Code Name CAP
Sector INDUSTRIAL GOODS
Market Classification MAIN BOARD
Nature of Business Manufacture, marketing of paints and sales of fire extinguishing products
Date of Incorporation 21st September, 1965
Date Listed 24th May 1978
End of Accounting Year 31st December
Website www.capplc.com
Registrar UAC Registrars Ltd
Auditor PricewaterhouseCoopers
Share Price@Relsd (N)                                                  34.00
Earnings per Share                               3,307,876,000.00
Intrinsic Value(N)                                                  33.26
Share Outstanding 700,000,000
Market Capitalisation                                  23,800,000,000

 

Company figures

  • Turnover figure improved by marginal 8.04% over comparable period, having moved from N1.96 billion to N2.12 billion.
  • Cost of Sales on the other hand increased with higher rate as the difference between the current COS and that of the comparable quarter in 2018 is estimated at 87.49%
  • With higher operating expenses, the Operating Profit stood at 0.65% above that of 2018 first quarter. The current Operating Profit is N615.13 million as against the N611.15 million achieved in 2018 first quarter
  • As noted above, the Operating Expenses stood at N437.63 million, this is same as 21.34% above N360.67 million posted in 2018-Q1
  • As mentioned above, the company posted a zero Finance Cost at the end of the quarter, this is against the N1.38 million of similar quarter
  • Meanwhile, Net Finance Cost was positive N118.59 million, please understand that this is 72.64% above 2018 first quarter estimate
  • Both Profit before and after Tax builds above the corresponding period by 7.93% each. Current Profit before tax is estimated at N733.73 million while Profit for the year stood at N498.93 million.
C A P
Statement of Comprehensive Income
  2019 2018 %CHG
Turnover                     2,120,285,000                 1,962,467,000 8.04
Cost of Sales                     1,886,087,000                 1,005,949,000 87.49
Operating Profit                        615,135,000                     611,155,000 0.65
OPEX                        437,633,000                     360,676,000 21.34
DEPRECIATION                           29,367,000                       20,744,000 41.57
AMORTISATION                             5,814,000                         5,814,000 0.00
FINANCE COST                                            –                           1,382,000 100.00
NET FINANCE COST                        118,596,000                       68,694,000 72.64
PBT                        733,731,000                     679,849,000 7.93
TAX                        234,794,000                     217,552,000 7.93
PAT                        498,937,000                     462,297,000 7.93
TOTAL COMP INCOME                        498,937,000                     462,297,000 7.93
Statement of Financial Position
Current Assets                     6,383,271,000                 5,445,093,000 17.23
Non-Current Assets                        843,909,000                     766,153,000 10.15
Total Assets                     7,227,180,000                 6,211,246,000 16.36
Current Liabilities                     3,792,251,000                 3,375,254,000 12.35
Non-Current Liabilities                        127,053,000                     127,053,000 0.00
Total Liabilities                     3,919,304,000                 3,502,307,000 11.91
Net Assets                     3,307,876,000                 2,808,939,000 17.76
Retained Earnings                     2,938,622,000                 2,439,685,000 20.45
Shares Outstanding                        700,000,000                     700,000,000  

 

  • Current Assets for the period stood at N6.38 billion, this is 17.23% above the n5.44 billion valuation posted in same period of k2018
  • Non-Current Assets improved by 10.15% to stand at N843.90 million as against N766.15 million
  • Thus, Total Assets for the period improved by 16.36% to stand at N7.27 billion compared to N6.21 billion in 2018
  • Current Liabilities boosted by Trade and other Payables, and Current Income Tax Liabilities, increased by 12.35% as it’s currently valued at N3.79 billion against N3.37 billion
  • Total Liabilities therefore grew by 11.91% to stand at N3.91 billion as against N3.50 billion
  • Netting total assets and liabilities, the company Reported Net Assets of N3.30 billion, same as 17.76% above the N2.80 billion of 2018 first quarter
  • Retained earnings improved by 20.45% to stand at N2.93 billion as against N2.43 billion at the end the first three months of 2018.

Financial Strength/Solvency Ratios

  • Debt Ratio is currently estimated at 0.54x down from the 0.56x estimated from 2018 first quarter financials. This implies that, Total Liabilities is same as 54% of Total Assets. Please note the quality of this ratio is based on its zero long term/interest yielding liabilities
  • Total Debt to Equity was equally estimated at 1.18x as against 1.25x estimated in the comparable quarter
  • It was also estimated that Total Equity is same as 46% of the Total Assets of the company, this is 1.21% improvement over the 45% estimated last quarter
Financial Strength/Solvency Ratio
TICKERS 2019 2018 %CHG
Debt Ratio                                        0.54                                    0.56 3.82
Total Debt to Equity Ratio (MRQ)                                        1.18                                    1.25 4.97
Equity Ratio                                        0.46                                    0.45 1.21
TICKERS 2019 Industrial Average %CHG
Beta Value                                        0.18                                    1.08 83.33

 

Profitability Ratios

  • EBITDA margin estimated for the period stood at 29.01%, 6..84% below the 31.14% estimated from the corresponding quarters’ numbers
  • Pre-Tax Margin dropped marginally by 0.11% to 34.16% against the 34.64% estimated at the end of 2018 first quarter
  • Effective Tax Rate was stable within the two periods compared in this report
  • The company seems to have operated at higher cost through the quarter as it currently posted Cost of Sales of 88.95% of the Turnover Figure, this is 73.54% above the 51.26% COS to Turnover of 2018 first quarter
  • Return on Equity stood at 15.08% against 16.46% of 2018
  • Similarly, Return on Assets dropped by 7.25% to stand at 6.90% as against 7.44% of 2018 first quarter
PROFITABILITY RATIOS
TICKERS 2019 2018 %CHG
EBITDA MARGIN 29.01% 31.14% 6.84
PRE-TAX MARGIN 34.61% 34.64% 0.11
EFFECTIVE TAX RATE 47.06% 47.06% 0.00
CS TO TO 88.95% 51.26% 73.54
ROE 15.08% 16.46% 8.35
ROA 6.90% 7.44% 7.25

 

Efficiency Ratios

  • Operating Expenses to Turnover value is same as 20.64%, this is 12.31% growth over the 18.38% estimated from 2018 first quarter financials
  • Turnover to Total Assets Ratios stood at 29.34% against 31.60% a 7.15% drop in efficiency over comparable period of 2018
  • Working Capital Ratio a ratio that indicates a company’s effectiveness in using its working capital was estimated at 0.82x a 13.69% drop from the 0.95x estimated in similar period of 2018
  • Further testing the company efficiency, we tested the Working Capital Ratio, which confirmed that Current Assets is higher than current liabilities, we also established improvement in this efficiency ratio from the previous 1.61x to 1.68x
EFFICIENCY RATIOS
  2019 2018  
OPEX TO TO 20.64% 18.38% 12.31
TO to TA 29.34% 31.60% 7.15
Working Capital Turnover                                        0.82                                    0.95 13.69
Working Capital Ratio                                        1.68                                    1.61 4.34

 

Investment/Valuation Ratios

  • At the end of the first three months of 2019, the management achieved earnings per share improvement to the tune of 7.93% from the previously estimated N0.66 to N0.71
  • P/E-Ratio slipped by 18.70% having moved to 47.70x to 58.67x, please understand that the high P/E-Ratio is an indication of positive investors’ sentiments
  • The said Earnings per Share is a 2.10% yield of the current market price of CAP Plc shares on the floor of the exchange as at the time the result was made available to the investing public
  • Further confirming the positive sentiments is the low book value of N4.73 as against the market price of N34.00
  • Due to the very low Book Value of CAP Plc shares as against the market value, the Price to Book Value is quite high at 7.19x as against 9.66x estimated from the corresponding
  • Although Capex/Share estimate dropped by 96.59% from the comparable period estimate, the ratio is still very positive, confirming its strength to fund its dividend payments
Investment/Valuation Ratios
Tickers 2019 2018 %Chg
Price at Released 34.00 38.75 12.26
EPS 0.71 0.66 7.93
TCIP/SHARE 0.71 0.66 7.93
P/E-Ratio 47.70 58.67 18.70
Earnings Yield 2.10% 1.70% 23.00
BV/Share 4.73 4.01 17.76
PBV 7.19 9.66 25.49
CAPEX/SHARE 0.16 4.73 96.59

 

Valuation

Our blend of valuation models, considered the consistent dividend payment of CAP Plc and the stability. We also put into consideration the seemingly stability in the performance indices over the period. Thus we valued each unit of CAP Plc shares at N33.26, slightly below the current market valuation of the shares as at the time the latest financials was made available to the investing public. We have therefore rated it a Hold

 

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