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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