Coy: Vitafoam Plc. (VITAFOAM)
Rating:
Short Term: Hold
Long Term: Buy
Current Market Price: N4.40
Latest Cash Dividend: N0.42
Latest Bonus- 2018: 1:5
Year High: N4.99
Year Low: N3.22
Fair Value: N9.06
By: Jeariogbe Tunde Segun
Introduction
- In this report, the full year financial performance indices of Vitafoam Plc for the year ended 30th September, 2019 was carefully observed, compare same with figures released for the corresponding year (2018) to establish growth, projection and valuation accordingly
- Please note that the shares outstanding used to estimate ratios within the two years compared were different. This is because at the end of the 2018 full year business, the management of Vitafoam issued a 1 for 5 scrip the increased the shares outstanding from 1,042,370,053 to 1,250,844,064.
- At the end of 2019 business session, the management of Vitafoam recommended N0.42 cash dividend as against the N0.25 and 1:5 scrip in the corresponding year.
- The Closure Date for the said dividend is Friday, 7th February, 2020, while the Payment date is 5th March, 2020
- Generally the result for the year is outstanding, as the management of Vitafoam smartly adjusted down various cost except the Operating Expenses and build income appreciably.
| VITAFOAM NIGERIA | |
| Bourse | Nigerian Stock Exchange |
| Code Name | VITAFOAM |
| Sector | CONSUMER GOODS |
| Market Classification | MAIN BOARD |
| Nature of Business | Manufacturing and Distribution of Flexible and Rigid Foam, Technical Foam Products and Fibre Products |
| Date of Incorporation | April 8th 1962 |
| Date Listed | 1978 |
| End of Accounting Year | 30TH SEPTEMBER |
| Website | www.vitafoamng.com |
| Registrar | Meristem Registrars Limited |
| Auditor | Akintola Williams Deloitte |
| Share Price@Relsd (N) | 4.40 |
| Earnings per Share | 1.91 |
| Intrinsic Value(N) | 9.06 |
| Share Outstanding | 1,250,844,064 |
| Market Capitalisation | 5,503,713,882 |
Statement of Comprehensive Income
- The turnover figure posted for the year grew over comparable year by 14.07% to stand at N22.28 billion as against the N19.53 billion achieved in 2018 business session
- Cost of Sales adjusted down by marginal 1.15% to stand at N13.52 billion against the previously reported N13.67 billion
- Operating Profit for the year was estimated at N4.44 billion, far above the N2.09 billion posted at the end of 2018 financial year
- Operating Expenses on the other hand stood over comparable period by 13.60%, in other words, it is currently estimated at N4.70 billion against N4.14 billion
- Finance Cost used through the year reduced by 23.79% at the current estimate of N1.04 billion against the N1.37 billion used through 2018 financial session
- Profit before Tax was therefore valued at N3.49 billion, this is same as 340.36% above the N793.85 million achieved in 2018
- A total of N1.03 billion was separated for Tax Expense, as against N191.92 million in 2018
- Thus, the profit reported for the 2019 full year transactions is N2.38 billion, same as 296.51% above the N601.92 million earned in 2018
- Enhanced by Fx Translational Rate differences, the Total Comprehensive Income for the year stood at N2.39 billion versus N673.89 million in the corresponding year
| VITAFOAM NIGERIA | |||
| Statement of Comprehensive Income | |||
| Indices | 2019(000) | 2018(000) | %CHG |
| Turnover | 22,283,163 | 19,534,101 | 14.07 |
| Cost of Sales | 13,520,270 | 13,677,859 | -1.15 |
| Operating Profit | 4,444,510 | 2,092,098 | 112.44 |
| OPEX | 4,708,214 | 4,144,668 | 13.60 |
| DEPRECIATION | 198,378 | 202,555 | -2.06 |
| FINANCE COST | 1,049,732 | 1,377,432 | -23.79 |
| NET FINANCE INCOME | (948,672) | (1,298,246) | -26.93 |
| PBT | 3,495,838 | 793,852 | 340.36 |
| TAX | 1,031,133 | 191,929 | 437.25 |
| PAT | 2,386,708 | 601,923 | 296.51 |
| TOTAL COMP INCOME | 2,398,883 | 673,893 | 255.97 |
| Statement of Financial Position | |||
| Current Assets | 8,006,663 | 10,123,030 | -20.91 |
| Non Current Assets | 5,814,911 | 5,912,927 | -1.66 |
| Total Assets | 13,821,574 | 16,035,957 | -13.81 |
| Current Liabilities | 5,157,448 | 8,795,977 | -41.37 |
| Non Current Liabilities | 2,694,416 | 3,357,273 | -19.74 |
| Total Liabilities | 7,851,864 | 12,153,250 | -35.39 |
| Net Assets | 5,969,710 | 3,882,707 | 53.75 |
| Retained Earnings | 4,658,091 | 2,851,081 | 63.38 |
| Shares Outstanding | 1,250,844,064 | 1,042,370,053 | |
Statement of Financial Position
- Due to appreciable drop in both Trade and Other Receivables & Other Assets, the Current Assets was estimated at N8.00 billion, a 20.91% below the N10.12 billion at the end of 2018 financial period
- Non Current Assets also dipped by marginal 1.66% to stand at N5.81 billion against N5.91 billion in 2018
- Due to lower Trade & Other Payables and Borrowings, the Current Liabilities figure for the year dropped by 41.37% to stand at N5.15 billion against N8.79 billion
- Non Current Liabilities experienced mixed numbers that brought the value below comparable period by 19.74%. It is currently estimated at N2.69 billion versus N3.35 billion
- Net Assets was therefore estimated at N5.96 billion, same as 53.75% above the N3.88 billion in the corresponding year
- Retained Earnings was now valued at N4.65 billion against N2.85 billion in the corresponding year
Financial Strength
- The amount reported as Total Assets is same as 57% of the Total Assets figure for the year. In other words, the Debt Ratio is 0.57x this is 25.04% below the 0.76x in the corresponding period.
- Total Debt to Equity Ratio is currently estimated at 1.32x against 3.13x in the corresponding year, this implies that the Total Debt Value for the year can replicate Equity 1.32 times, this is a better position over the 3.13 times replicate of the previous year
- Equity Ratio is also valued at 0.43x versus 0.24x, that is Equity is same as 43% of the Total Assets Value for the year this is better than the 24% in 2018
- Going by the current estimated beta value, the shares of Vitafoam can be said to be less liquid as its beta value currently stands below the market beta
| Financial Strength/Solvency Ratio | |||
| TICKERS | 2019 | 2018 | %CHG |
| Debt Ratio | 0.57 | 0.76 | -25.04 |
| Total Debt to Equity Ratio (MRQ) | 1.32 | 3.13 | -57.98 |
| Equity Ratio | 0.43 | 0.24 | 78.38 |
| TICKERS | 2019 | 2018 | %CHG |
| Beta Value | 0.67 | 0.63 | 6.35 |
Profitability Ratio
- EBITDA Margin is Currently estimated at 19.95%, this is 86.23% above the 10.71% estimate at the end of 2018 financial year
- Pre-Tax Margin stood at 15.69% as against 4.06% in 2018, difference between the two ratios is same as 286.04% into the positive territory
- Cost of Sales is estimated to be 60.67% of the Turnover Figure this is 13.35% below the 70.02% in the corresponding year. Please note that this is signifies the management attempt in cost management
- The Company achieved a high return on Equity to the tune of 39.98% up from the previously estimated 15.50%
- Similarly, estimated Return on Average Assets is quite impressive at 17.27% up from 3.75% in the corresponding year
| PROFITABILITY RATIOS | |||
| TICKERS | 2019 | 2018 | %CHG |
| EBITDA MARGIN | 19.95% | 10.71% | 86.23 |
| PRE-TAX MARGIN | 15.69% | 4.06% | 286.04 |
| EFFECTIVE TAX RATE | 43.20% | 31.89% | 35.49 |
| CS TO TO | 60.67% | 70.02% | -13.35 |
| ROE | 39.98% | 15.50% | 157.89 |
| ROA | 17.27% | 3.75% | 360.04 |
Efficiency Ratio
- Operating Expenses is estimate at 21.13% of the Turnover Value, a marginal improvement in the management efficiency when compared to the 21.22% estimated in 2018
- Turnover Value is 161.22% to the Total Assets Value, the ratio is 32.35% above the 121.81% estimated from 2018 figures. This is an a laudable achievement, as it implies an effective use of the company’s assets through the year
- Working Capital Turnover dipped to 7.82% from the previously estimated 14.72%
- Working Capital Ratio, within the two compared year stood above unity and confirmed the firm’s strength to settle its current liabilities with current assets as at when due through the season
| EFFICIENCY RATIOS | |||
| 2019 | 2018 | ||
| OPEX TO TO | 21.13% | 21.22% | -0.42 |
| TO TO TA | 161.22% | 121.81% | 32.35 |
| Working Capital Turnover | 7.82 | 14.72 | -46.87 |
| Working Capital Ratio | 1.55 | 1.15 | 34.89 |
Investment Ratios
- Price of Vitafoam shares was stable within the two released periods compared in this report as shown in the table below
- The latest dividend as announced by the company is N0.42 a 68% above the previous cash dividend of N0.25. Please understand that the previous year incentive was supported by a scrip of 1:5
- The amount Earned per unit of Vitafoam shares is currently estimated as N1.91 as against the N0.58 earned in the corresponding year
- Estimate shows that 22.01% of the said earnings will be paid to investors as cash dividend, this payout ratio is below the 43.29% of 2018
- P/E-Ratio increased to 1.92x versus 0.65x, confirming investors’ renewed confidence in the shares of Vitafoam Plc
- The above mentioned earnings per share is a 43.37% yield over the price of Vitafoam shares on the floor of the exchange as at the time the result was made available to the investing public
- We have established that each units of Vitafoam shares is worth N4.77 in its book, slightly above the market price when the result was released
- See the below table for detailed investment analysis.
| Investment/Valuation Ratios | |||
| Tickers | 2019 | 2018 | %Chg. |
| Price at Released | 4.40 | 4.80 | -8.33 |
| Latest Dividend | 0.42 | 0.25 | 68.00 |
| Pay-out Ratio | 22.01% | 43.29% | -49.16 |
| EPS | 1.91 | 0.58 | 230.43 |
| TCIP/SHARE | 1.92 | 0.65 | 196.64 |
| P/E-Ratio | 2.31 | 8.31 | -72.26 |
| Earnings Yield | 43.37% | 12.03% | 260.47 |
| BV/Share | 4.77 | 3.72 | 28.13 |
| PBV | 0.92 | 1.29 | -28.46 |
| CAPEX/SHARE | 1.95 | 5.73 | -65.95 |
Valuation
- We have carefully explored two valuation models- FCFE Growth Model and 2-Stage H-Model, our conclusion on the intrinsic value of Vitafoam was arrived by averaging the outcome of the two valuation models.
- In our opinion the growth established in the dividend payment positively impacted the valuation and projection of Vitafoam’s numbers. Thus, our fair value for each units of Vitafoam is 06.
- Considering the gap between our valuation and the current market price of the stock, along the estimated Book Value, we Rated Vitafoam a Buy for long term investors and Hold for short term
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