Coy: FBN Holdings Plc
Rating: Hold
Current Market Price: N7.40
NPL RATIO (Q1-2019): 25.3%
Year High: N9.00
Year Low: N7.00
Fair Value: N10.11
By: JeariogbeTundeSegun (Equity Analyst)
Introduction
- This report observed the financial performance indices of FBN Holdings for the period ended 31st March, 2018; compare same with released statistics for similar period in 2018 and established growth
- Nonperforming loan (NPL) ratio is currently 25.30% of gross loans as at the end of March 2019, and 25.90% at year-end 2018.
- The Loan growth status posted at the end of this quarter is quite worrisome, as it will require higher loan-loss provisions to achieve reasonable adjustment, and this will negatively impact its profitability level.
- In our opinion, FBNH Holdings looks very strong on key levels such as deposits, and assets amongst others. Should the management achieved improvement in its high NPL stance, we foresee a rapid recovery of its financial performance
- We have fairly valued its shares at N10.11 and rated it a Hold, in expectations that the management of FBNH will wake up to its higher risk stand and tactically reduce same.
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FBNH |
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| Bourse | Nigerian Stock Exchange |
| Code Name | FBNH |
| Sector | FINANCIAL SERVICES |
| Market Classification | Premium Board |
| Nature of Business | Provision of Banking and Other Financial Services to corporate and Individual customers |
| Date of Incorporation | August 13th 2012 |
| Date Listed | November 26th 2012 |
| End of Accounting Year | 31st December |
| Website | www.fbnholdings.com |
| Registrar | FIRST REGISTRARS NIGERIA LIMITED |
| Auditor | Price waterhouse Coopers |
| Share Price@Relsd (N) | 7.25 |
| Earnings per Share |
0.44 |
| Intrinsic Value(N) | 10.11 |
| Share Outstanding | 35,895,292,792 |
| Market Capitalisation | 260,240,872,742 |
Company figures
- Gross earnings reported for the period improved over comparable period by 6.61% as it moved from the previous estimate of N13.63 billion to N139.27 billion.
- Interest income stood at N112.04 billion as against the N110.89 billion reported in similar period of 2018.
- Interest Expenses builds by 7.73% to stand at N37.86 billion as against the N35.15 billion reported in corresponding quarter of 2018
- Thus, Net Interest Income stood at N1.95 billion, this is 41.67% below the N3.35 billion achieved in the corresponding period of 2018
- Operating Expenses appreciated by 27.82% over the reported figure in 2018 first quarter financial performance. Please understand that this index is currently estimated at N65.51 billion against N51.25 billion
- Profit before Tax for the period is estimated at N19.30 billion, this is only 2.59% above the N18.81 billion achieved in the similar period of 2018
- Having consider Tax expense, the profit reported for the period stood at N15.79 billion, an inch of 6.93% over the N14.76 billion earned through the first three months of 2018 financial activities
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FBNH |
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Statement of Comprehensive Income |
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| Tickers | 2019(Mill) | 2018(Mill) | %CHG |
| GROSS EARNINGS | 139,274 | 130,639 | 6.61 |
| INTEREST INCOME | 112,049 | 110,899 | 1.04 |
| INTEREST EXPENSES | 37,868 | 35,152 | 7.73 |
| NET INTEREST INCOME | 1,957 | 3,355 | 41.67 |
| OPEX | 65,514 | 51,255 | 27.82 |
| DEPR/AMOR | 4,688 | 3,979 | 17.82 |
| PBT | 19,304 | 18,817 | 2.59 |
| TAX | 3,512 | 4,048 | 13.24 |
| PAT | 15,792 | 14,769 | 6.93 |
| TOTAL COMP INCOME | 12,786 | 17,717 | 27.83 |
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Statement of Financial Position |
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| Total Assets | 5,580,215 | 5,354,489 | 4.22 |
| Total Liabilities | 5,036,782 | 4,694,717 | 7.29 |
| Net Assets | 543,433 | 659,772 | 17.63 |
| Retained Earnings | 19,321 | 148,854 | 87.02 |
| Total Deposits | 4,228,049 | 3,932,318 | 7.52 |
| Total Loans and Advances | 2,657,361 | 2,805,102 | 5.27 |
- Total Assets valuation improved by marginal 4.22% to N5.58 trillion compared to the N5.35 trillion assets valuation released at the end of 2018 first quarter business
- In similar trend, Total Liabilities grew by 7.29% to stand at N5.03 trillion against the N4.69 trillion reported in 2018
- Net Assets dipped to N543.43 billion against N659.77 billion in 2018, difference between the two figures is same as a drop of 17.63%
- Similarly, retained earnings slide to N19.32 billion to stand at 87.02% below the N148.85 trillion reported in similar period of 2018
- Total Deposits achieved through the first three months of 2019 grew marginally by 7.52% to N4.22 trillion compared to N3.93 trillion in 2018 first quarter
- Total Loans and Advances adjusted down by 5.27% to stand at N2.65 trillion as against the N2.80 trillion in 2018
Financial Strength/Solvency Ratios
- Debt Ratio which compared both Total Assets to Total Liabilities stood at 0.9x or 90%, implying that the Total Liabilities is 90% of Total Assets. Please understand that Total Liabilities is inclusive of Total Deposits for the period
- Total Debt to Equity for the quarter stood at 9.27x, same as 30.25% above the 7.12x estimated in 2018. This implies that the company used 9.27 times of its equity through the period (note debt used is total liabilities and is inclusive of total deposits for the period)
- Equity Ratio which compared Equity to Total Assets stood at 0.10x as against 0.12x implying that the reported Equity value at the end of the period is 10% of FBNH Total Assets, although this is a reduction from the previously estimated 12%.
- Estimated Beta value for FBNH as at the time this report was compiled stood at 1.04 this stood above market beta though its below the industrial average for the period
| Financial Strength/Solvency Ratio | |||
| TICKERS | 2019 | 2018 | %CHG |
| Debt Ratio | 0.90 | 0.88 | 2.95 |
| Total Debt to Equity Ratio (MRQ) | 9.27 | 7.12 | 30.25 |
| Equity Ratio | 0.10 | 0.12 | 20.97 |
| TICKERS | FBNH | Industrial Average | %CHG |
| Beta Value | 1.04 | 1.49 | 30.20 |
Profitability Ratios
- EBITDA margin estimated for the period stood at 7.29%, 16.30% below the 8.71% estimated from the corresponding quarters’ numbers
- Pre-Tax Margin dipped by marginal 3.77% to 13.86% against the 14.40% estimated at the end of 2018 first quarter
- Interest Expenses to Gross Earnings inched up by 1.05% to 27.19% against the previously estimated 26.91%
- Return on Average Equity through the first three months of 2019 was 2.91% against 2.24%
- See below table for detailed profitability ratios and comparison
| PROFITABILITY RATIOS | |||
| TICKERS | 2019 | 2018 | %CHG |
| EBITDA MARGIN | 7.29% | 8.71% | 16.30 |
| PRE-TAX MARGIN | 13.86% | 14.40% | 3.77 |
| EFFECTIVE TAX RATE | 18.19% | 21.51% | 15.43 |
| IE TO GE | 27.19% | 26.91% | 1.05 |
| ROAE | 2.91% | 2.24% | 29.82 |
| ROAA | 0.28% | 0.28% | 2.60 |
Efficiency Ratios
- Operating Expenses figure posted at the end of the period is estimated to be 47.04% of the estimated Gross Earnings, this is higher than the 39.23% seen in 2018 first quarter financials. Please note that this implies increased rate of expenses
- Gross Earnings estimated from the bank financials is same as 2.50% of the Total Assets value posted for the period under analysis
- Total Loan and Advances posted for the quarter is 62.85% of Total Debt, this is a lower rate when compared to 71.33% estimate of 2018 first quarter
| EFFICIENCY RATIOS | |||
| 2019 | 2018 | ||
| OPEX TO GE | 47.04% | 39.23% | 19.89 |
| GE TO TA | 2.50% | 2.44% | 2.30 |
| LDR | 62.85% | 71.33% | 11.89 |
Investment/Valuation Ratios
- The profit earned per each units of FBNH shares is estimated at N0.44 a slight growth over the N0.41 earned in 2018
- Total Comprehensive Income is estimated at N0.36, this is 27.83% below the N0.49 TCI/share achieved in 2018. Two items responsible for the difference are; Unrealised net gains/(losses) arising during the period and Exchange difference on translation of foreign operations
- P/E-Ratio reduced to 4.12x from 6.96x, this is implying reduced investors’ sentiments for the shares of FBNH and also confirming faster investment recovery period
- The said earnings per share is a yield of 6.07% of the price of each units of FBNH shares on the floor of the exchange on the day the result was unveiled to the investing public through the exchange
- Estimated value of each units of FBNH shares in its book is N15.14, this is 17.63% drop from the previous estimate of N18.38
- Confirming the academic under-priced stand of FBNH shares on the floor of the exchange is the Price to Book Value estimate that stood below unity
| Investment/Valuation Ratios | |||
| Tickers | 2019 | 2018 | %Chg |
| EPS | 0.44 | 0.41 | 6.93 |
| TCIP/SHARE | 0.36 | 0.49 | 27.83 |
| P/E-Ratio | 4.12 | 6.96 | 40.78 |
| Earnings Yield | 6.07% | 3.59% | 68.87 |
| BV/Share | 15.14 | 18.38 | 17.63 |
| PBV | 0.48 | 0.62 | 23.13 |
| CAPEX | 0.17 | -0.37 | 146.43 |
Valuation
Assuming a constant growth rate of the current dividend of FBNH, the constant perpetual growth rate of Gordon Growth Model was put to play, assuming our discount rate at 11% and making use of the estimated sustainable growth rate; we therefore arrived at N10.11 valuation for each units of FBNH shares. Thus, we have rated FBNH a Hold.
| FBN HOLDINGS PLC | |||
| VALUATION BY CONSTANT PERPETUAL GROWTH RATE | |||
| D0 | 0.26 | V0 | N10.11 |
| k | 11.00% | ||
| g | 17.63% | ||
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