Earnings ReportFeaturedUncategorized

Red Star Express Plc: Need to Improve Performance for Better Valuation

Coy: Red Star Express Plc (REDSTAREX)
Rating: Hold
Current Market Price: N4.95
Year High: N5.50
Year Low: N4.20
Fair Value: N4.89
By: JeariogbeTundeSegun (Equity Analyst)

Key Investment Ratios

  • In this report we have observed the full year financial statistic of Red Star Express for the year ended 31st March, 2019. In other to effectively rate the result, we have compared same with similar result in 2018
  • Our valuation technique utilized the Free Cash Flow for Equity (Stable Growth), thus, we have conservatively valued each unit of Red Star Express at N4.89, this is within the market trading range for Red Star Express for the past 3 years. In other words, market seems to have rightly placed the equity over the years.
  • In our opinion, outstanding performance by the company will definitely attract higher valuation by the investing public.
  • Please understand that, for the financial year currently being analysed, the management of Red Star Express had announced 43k cash dividend, which is scheduled for closure between 17th and 19th July, 2019. Thus, the qualification date will be 16th July, 2019
  • See below for comparison of released figures/our opinions
Bourse Nigerian Stock Exchange
Market Classification MAIN BOARD
Nature of Business Courier Services, Freight Services, Logistics, warehousing and General Haulage
Date of Incorporation July 10th 1992
Date Listed November 14th 2007
End of Accounting Year 31st March 
Website www.redstarplc.com
Registrar United Securities Limited
Auditor Ernst & Young
Share Price@Relsd (N)                                                    4.95
Earnings per Share                               2,762,923,000.00
Intrinsic Value(N)                                                    4.89
Share Outstanding 589,496,310
Market Capitalisation                                    2,918,006,735

Company figures

  • Turnover figure for the year stood above comparable year of 2018 by 19.73% having moved from the previous N8.40 billion to N10.05 billion in the just concluded financial year
  • Cost of Sales equally increased by 29.60% to stand at N7.29 billion compared to N5.62 billon posted at the end of 2018 financial year
  • Operating Profit is estimated at N764.58 million, this is same as 24.54% above the N613.93 million in 2018
  • Meanwhile Operating Expenses was well controlled at 2.79% improvement over 2018. The index is currently valued at N2.25 billion against N2.18 billon
  • Finance Cost improved to N33.90 million against N27.66 million in 2018
  • Profit before Taxation was therefore estimated at N743.46 million, same as 21.76% above the comparable year estimate
  • Having Considered Tax expenses of N277.22 million, the management of Red Star posted N466.24 million as profit for the year as against the N383.63 million in 2018
Statement of Comprehensive Income
  2018 (Mill) 2017 %CHG
Turnover                  10,066,576                 8,407,507 19.73
Cost of Sales                     7,290,061                 5,625,188 29.60
Operating Profit                        764,581                     613,931 24.54
OPEX                     2,250,728                 2,189,564 2.79
DEPRECIATION                        140,747                     110,980 26.82
AMORTISATION                           25,495                       13,404 90.20
FINANCE COST                           33,906                       27,660 22.58
NET FINANCE INCOME                           21,112                         4,342 386.23
PBT                        743,469                     610,589 21.76
TAX                        277,221                     263,031 5.39
PAT                        466,248                     383,637 21.53
TOTAL COMP INCOME                        504,644                     331,338 52.30
Statement of Financial Position
Current Assets                     4,020,887                 3,668,882 9.59
Non Current Assets                     1,527,144                 1,325,113 15.25
Total Assets                     5,548,031                 4,993,995 11.09
Current Liabilities                     2,532,573                 2,129,792 18.91
Non Current Liabilities                        252,535                     336,618 24.98
Total Liabilities                     2,785,108                 2,466,410 12.92
Net Assets                     2,762,923                 2,527,585 9.31
Retained Earnings                     2,171,742                 1,936,404 12.15
Shares Outstanding                        589,496,310                     589,496,310  
  • Current Assets reported at the end of the just concluded year stood at N4.02 billion same as 9.59% over the 3.66 billion of 2018.
  • Non-Current Assets equally improved by 15.25% to stand at the current estimate of N1.52 billion as against the N1.32 billion posted in 2018
  • Current Liabilities was valued at N2.53 billion as against the N2.12 billion posted at the end of 2018 financial year
  • Non-Current Liabilities dropped by 24.98% to N252.53 million compared to the N336.61 million stated in the 2018 full year result
  • Net Assets builds marginally by 9.31% to stand at N2.76 billion from N2.52 billion
  • Retained Earnings is currently valued at N2.17 billion from N1.93 billion in the corresponding year

Financial Strength/Solvency Ratios

  • Debt Ratio is currently estimated at 0.50x higher than the 0.49x estimated from 2018 full year financials.
  • Total Debt to Equity is estimated at 1.01x up from the 0.98x estimated in the comparable quarter.
  • We also tested the Equity Ratio, and established that Equity is same as 50% of the Total Assets Value stated at the end of the quarter, this is slightly below the 51% ratio estimated from 2018 financial indices
  • Beta Value at the time of this report stood below unity at 0.62x, below the industrial average of 0.72x.
Financial Strength/Solvency Ratio
TICKERS 2018 2017 %CHG
Debt Ratio                                        0.50                                    0.49 1.64
Total Debt to Equity Ratio (MRQ)                                        1.01                                    0.98 3.30
Equity Ratio                                        0.50                                    0.51 1.61
TICKERS 2018 Industrial Average %CHG
Beta Value                                        0.62                                    0.72 13.89

Profitability Ratios

  • EBITDA margin estimated for the year stood at 7.60%, 4.01% above the 7.30% estimated from the corresponding year’s numbers
  • Pre-Tax Margin appreciated by 1.69% to 7.39% against the 7.26% estimated at the end of 2018 financial year
  • Effective Tax Rate adjusted down by 13.28% to 59.46% against 68.56% of 2018
  • Cost of Sales figure posted at the end of the quarter is same as 72.42% of the Turnover figure, this shows an upward marginal adjustment of 8.24% from the previous estimate of 66.91%
  • Return on Equity stood at 16.88% against the 15.18% of 2018
  • See the below table for details
TICKERS 2018 2017 %CHG
EBITDA MARGIN 7.60% 7.30% 4.01
PRE-TAX MARGIN 7.39% 7.26% 1.69
EFFECTIVE TAX RATE 59.46% 68.56% 13.28
CS TO TO 72.42% 66.91% 8.24
ROE 16.88% 15.18% 11.18
ROA 8.40% 7.68% 9.40

Efficiency Ratios

  • Operating Expenses is currently estimated to be 22.36% of Total Turnover figure for the year. This is 14.15% below the 26.04% achieved in the corresponding year.
  • Meanwhile, Turnover is same as 181.44% of Total Assets figure posted for the year. This is a marginal improvement over 168.35% of previous financial year
  • Working Capital Ratio, a ratio that indicates a company’s effectiveness in using its working capital was estimated at 6.76x against the 5.46x that was estimated in similar 2018.
  • Further testing the company efficiency, we checked the Working Capital Ratio, which confirmed that Current Assets is 1.59x higher than current liabilities as against the 1.72x multiple of last year
  2018 2017  
OPEX TO TO 22.36% 26.04% 14.15
TO TO TA 181.44% 168.35% 7.78
Working Capital Turnover                                        6.76                                    5.46 23.82
Working Capital Ratio                                        1.59                                    1.72 7.84

Investment/Valuation Ratios

  • At the end of 2019 financial activities, the management achieved earnings per share improvement to the tune of 21.53% from the previously N0.65 to N0.79
  • P/E-Ratio slipped by 37.34% having moved to 6.26x from 9.99x,
  • The said Earnings per Share is a 15.98% yield of the current market price of Red Star Express shares on the floor of the exchange as at the time the result was made available to the investing public
  • We have estimated the Book Value for Red Star Express shares at N4.69 against the previous estimate of N4.29.
  • Confirming that each units of Red Star Express is rightly priced on the floor of the exchange is the Price to Book Value Ratio that is currently estimated below unity at 1.06x
Investment/Valuation Ratios
Tickers 2018 2017 %Chg
Price at Released 4.95 6.50 23.85
EPS 0.79 0.65 21.53
TCIP/SHARE 0.86 0.56 52.30
P/E-Ratio 6.26 9.99 37.34
Earnings Yield 15.98% 10.01% 59.59
BV/Share 4.69 4.29 9.31
PBV 1.06 1.52 30.33
CAPEX/SHARE 1.36 4.73 71.32


As stated above, our blend of valuation models conservatively valued each units of Red Star Express Shares for N4.89, this is 2.06% below the current price as at the time this report was compiled. We have therefore rated Red Star Express a Hold.

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