unilever nigeria plc - capital bancorp plcadmin.capitalbancorpng.com/portal_reports/unilever nigeria...
Embed Size (px)
TRANSCRIPT
-
Nigeria Equities Consumer Goods July 12, 2017
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 1
Unilever Nigeria Plc
Passionately Eager to weather the storm Investment Summary
Unilever Nigeria Plc, a consumer goods company last reported a significant
increase in both top and bottom line in its Q117 earnings release showing
signs of a better return on investments for investors. However, the company is
still highly geared at a debt to equity ratio of 1.79x though down from a high
of about 2.24x in FY14. This high debt burden is expected to continue to
impact the companys operations as it is expected to continue to service its
loan obligations amidst the harsh economic conditions which the consumer
goods company has continued to suffer from in recent time. Unilever Nigeria
Plc has continued to leverage on its years of experience as well as its array of
products which have remained market leaders in their various segments to
keep its revenue base at decent levels over the years. Its top brands include the
likes of Blue Band, Knorr, Lifebuoy, Omo, Vaseline, Sunlight e.t.c. Unilever
Overseas Holding B.V owned about 50.04% of the company till 2016 when it
increased its stake by another 10.02%; now approximately 60.06% while
Stanbic Nominees Nigeria limited has a total holding of about 10.43%.
Despite the stiff competition to grow market share from rival companies with
substitute products coupled with the harsh economic conditions over the last
three years, it is believed that the parent company still believe strongly in the
potential of its Nigerian business to post significant profit in the long term
thereby indicating its interest to increase its shareholding via a tender offer up
to 75% in 2015 despite the companys profit plummeting to a new low during
the period. Going forward, we anticipate that the company will strategize ways
of actualising its initial target equity stake of 75% through its proposed rights
issue which was approved at its last Annual General Meeting (AGM) except
priorities have changed for the parent company. After proper analysis and
valuation of the companys shares, we place a short term SELL rating on the
shares given its future outlook and historical dividend payments to
shareholders. We are of the opinion that improved returns to shareholders
may only be possible in the long-term but at current market price the
company shares may drift either way though profitability is expected to
improve even as the economy continues on its path to recovery.
2015 2016 % 2017F %F
Revenue (NGNm) 59,222 69,777 17.82 87,919 26.00
Operating Profit (NGNm) 4,640 5,805 25.11 11,342 95.38
Profit after tax (NGNm) 1,192 3,072 157.72 6,734 119.21
Source company report, CBP Research
Price: .
- Current price 34.00 - Recommended entry price 20.00 - Target price 23.43
Recommendation(Short term) SELL As at Monday July 10, 2017
STOCK DATA
Year End 31st Dec YTD high 43.00 YTD low 27.81 YTD change -2.86% 52 weeks high 50.01 52 weeks low 27.81 3 months Average volume 620,235 Market cap (NGNmn) 128,632.06 Trailing EPS (NGNmn) 0.81 Shares Outstanding (mn) 3,783
Source company report, CBP Research
Profitability ratios FY16 FY17F
Gross profit margin 29.09% 27.00% Net Profit Margin 4.40% 7.66% Fixed Asset Turnover 0.42x 0.35x
Valuations FY14 FY15 FY16 FY17F
P/S ratio 2.31x 2.17x 1.84x 1.46x P/E 53.32x 107.87x 41.87x 19.10x Sales per
share() 14.74 15.65 18.44 23.24
NAPS() 1.98 2.12 3.09 4.46 P/B 17.20x 16.07x 11.00x 7.62x ROE(%) 32.26 14.90 26.28 39.89 ROA(%) 5.27 2.38 4.24 7.43 Div.
Yld%
0.29 0.15 0.29 0.88
Source company report, CBP Research
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
3-J
an-1
7
20
-Jan
-17
6-F
eb-1
7
23
-Feb
-17
12
-Mar
-17
29
-Mar
-17
15
-Ap
r-1
7
2-M
ay-1
7
19
-May
-17
5-J
un
-17
22
-Ju
n-1
7
9-J
ul-
17
NSE ASI vs. Unilever 52-weeks movement Rebased
NSE Unilever
Capital Bancorp Plc (Member of the Nigerian Stock Exchange) 114135
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 2
Revenue base failed to impress; though year on year revenue growth for the
company has been erratic, over a five year period Unilever managed to grow
its revenue by a compound annual growth rate of 5.87% to 69.77 billion in
FY16 from 55.54 billion in FY12. Drop in revenue was reported in FY14
in which the company reported a 7.08% decline to 55.75 billion (vs. 60.00
billion in FY13). This drop for the period was as a result of a larger decline in
income from its home and personal care segment which dropped by 15.33%
to 28.11 billion in FY14 (vs. 33.20 billion in FY13) though income from
its food products increased by 3.14% to 27.63 billion in FY14 (vs. 26.79
billion in FY13). FY16 reported a much improved performance over a five
year period as revenue grew by 17.82% to 69.77 billion (vs. 59.22 billion in
FY15) though this growth was not replicated into improved profits as the
company reported a faster rise in cost of sale for the period. As reported in its
Q117 scorecard, the company seems well on the part to report a much
improve top line growth as its revenue grew by 32.12% to 22.17 billion (vs.
16.78 billion in Q116).
The impressive growth reported in Q117 was aided by the impressive growth
in all its operating income segments for the period. Contribution to revenue
from its home care product impressed the most for the period having grown
by 49.73% to 5.64 billion (vs. 3.77 billion in Q116), personal care
contribution to revenue was reported at 6.03 billion (vs. 4.39 billion in
Q116) representing an increase of 37.20% while revenue contribution from
its food products grew by 21.81% to 10.49 billion (vs. 8.61 billion in Q116).
This improved performance has been traced to the ability of the company to
drive sales increase as well as benefiting from the price increase on all of its
product offerings triggered by the high cost of production which was
evidently reported in its cost of sale for the period. Going forward, we expect
this growth in revenue to be reflected into the other quarters of the year and
even into the FY17 scorecard as the company is expected to benefit from the
improvement in economic activity.
As reported in its Q117
scorecard, the company seems
well on the part to report a
much improve top line growth
as its revenue grew by 32.12%
to 22.17 billion (vs.
16.78 billion in Q116).
FY'12 FY'13 FY'14 FY'15 FY'16 FY'17F
55.55 60.00 55.75
59.22
69.78
87.92 Unilever Revenue 2012 - 2017F (Billion NGN)
HY'16 9M'16 FY'16 Q1'17 HY'17F
32,278 49,871
69,777
22,172
41,344
Unilever Revenue HY'16 - HY'17F (Billion NGN)
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 3
Rising input cost drive cost of sale higher; from 2012 to 2015, cost of sale
to revenue has constantly been on the rise but remained below 65%, having
been reported at 61.03% in FY12, 62.59% in FY13, 63.82% in FY14 and
64.46% in FY15. FY16 saw cost of sale to revenue surge to 70.91% while
Q117 followed in similar pattern, growing to 71.62% (vs. 64.05% in Q116).
Analysis into the spike in cost of sale showed a jump in cost of raw materials
and consumables growing from 28.63 billion in FY15 to 35.67 billion in
Q116 representing an increase of 24.59% while bought in products also grew
significantly by 106.08% to 6.10 billion in FY16 (vs. 2.96 billion in
FY15). The significant rise in raw materials and bought in products was
driven mainly by the massive depreciation of the naira which has led to a
massive increase in cost of sale as raw materials become more expensive to
acquire compared to previous quarters. Q117 cost of sale grew by 47.72% to
15.87 billion (vs. 10.74 billion in Q116).
Operating expenses continues to fluctuate; over the last five years,
Unilever Nigeria has impressively kept selling and distribution expense as well
as marketing and administrative expense to revenue at decent levels. Selling
and distribution to revenue has ranged between 4.51% and 4.86% while
marketing and administrative expense has ranged from 16.43% to 23.40%
over the last five years. Selling and distribution expense to revenue for Q117
was reported at 4.27% (vs. 4.59% in Q116) while marketing and
administrative expense to revenue stood at 11.71% (vs. 19.99% in Q116)
respectively. Four year CAGR for selling and distribution expense stood at
3.37% having grown from 2.69 billion in FY12 to 3.15 billion in FY16
while CAGR for marketing and administrative expenses stood at 3.37%
growing from 10.03 billion in FY12 to 11.46 billion in FY16. Q117
scorecard reported a 22.60% decline in marketing and administrative expense
to 2.59 billion (vs. 3.35 billion n Q116) while selling and distribution
expense grew by 22.95% to 0.94 billion (vs. 0.77 billion in Q116).
Four year CAGR for selling and
distribution expense stood at
3.37% having grown from
2.69 billion in FY12 to
3.15 billion in FY16 while
CAGR for marketing and
administrative expenses stood at
3.37% growing from 10.03
billion in FY12 to 11.46
billion in FY16.
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
FY'12 FY'13 FY'14 FY'15 FY'16 FY'17F
NGN'bn REVENUE COS MARGIN GP MARGIN
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 4
Cash flow position continues to oscillates; Apart from FY14 in which net
cash flow used in operating activities reported a net outflow of 1.82 billion,
other periods between FY12 to FY16 reported a net inflow though net cash
flow generated from operating activities have remained erratic over the five
year period. The 58.89% drop (6.73 billion in FY16 vs. 16.37 billion in
FY15) in cash generated from operations was significant enough to drop Net
cash flow generated from operating activities to 5.99 billion (vs. 15.58
billion in FY15) representing a decline of 61.55%. Decline in cash flow from
operating activities for FY16 was largely as a result of the 453.46% increase
in trade and other receivables to the tune of 8.80 billion in FY16 (vs. 1.59
billion in FY15) as well as increase in stock pile (inventory) causing an out
flow of 3.70 billion against an inflow of 2.44 billion in FY15. Net cash
flows generated from operating activities however improved for Q117 to
5.64 billion (vs. 3.49 billion in Q116) representing an increase of 61.60%.
Over the five year period, net cash used in investing activities has mainly been
driven by the purchase of property, plant and equipment. FY16 reported
similar trend as its Net cash used in investing activities stood at an outflow of
3.88 billion against an outflow of 4.68 billion in FY15 while Q117 stood
at an outflow of 0.61 billion against an outflow of 0.02 billion in Q116
even as purchase of property plant and equipment accounted for a significant
portion of the investments.
Net cash used in financing activities reported net outflows in FY12, FY13
FY15 and Q116 while it reported net inflows in FY14, FY16 and Q117
due to increased drawdown on short-term loans for this periods. Q117 net
cash used in financing activities stood at an inflow of 2.42 billion against an
outflow of 0.63 billion in Q116 as the company reported a drawdown of
short term loan for the period to the tune of 3.26 billion against nothing in
Q116. As at Q117, cash and cash equivalents at the end of the period stood
at an inflow of 14.93 billion against an outflow of 4.25 billion in Q116.
Decline in cash flow from
operating activities for FY16
was largely as a result of the
453.46% increase in trade and
other receivables to the tune of
8.80 billion in FY16 (vs.
1.59 billion in FY15) as
well as increase in stock pile
(inventory) causing an out flow
of 3.70 billion against an
inflow of 2.44 billion in
FY15
-7,702.18 -9,757.56
-12,799.67 -13,689.84
-11,970.85
-7,367.62
FY'12 FY'13 FY'14 FY'15 FY'16 FY'17F
Unilever Working Capital FY'12 - FY'17F (Million NGN)
65.66%
34.34%
Debt Q1'16 Equity Q1'16
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 5
Debt to equity ratio remains high: The Companys debt to equity ratio has
significantly grown over the last five years as the company has injected more
debt financing into its operations while also increasing its gearing ratio in the
process. Its debt to equity ratio stood at 0.45x for FY12, 0.66x for FY13,
2.24x for FY14, 1.57x for FY15 and 1.79x for FY16. Total liabilities to
equity has also significantly risen over the years as it stood at 2.61x for FY12,
3.54x for FY13, 5.12x for FY14, 5.27x for FY15 and 5.20x for FY16. Given
the current trend, returns to shareholders may continue to be threatened as a
significant portion of its expected return would be paid out as interest on
borrowing leaving little or nothing to worthy investors. Having reported a
further rise in debt to equity ratio in Q117 to 2.07x (vs. 1.79x in Q116) while
total liabilities to equity also rose to 6.12x (vs. 5.20x in Q116), we expect that
any further capital injection should be more of equity financing than debt
financing to give room for the company to effectively sweat its assets and
significantly reward shareholders in the medium to long term. Its quick ratio
stood at 0.59x for FY16 and improved to 0.71x for Q117. Going forward,
the companys liquidity ratios will need to be adequately managed to avert any
unforeseen concerns regarding its operations.
Expense margin remain fairly stable across board; Unilever Nigeria Plc
has averaged a marketing and administrative expense of 12.00 billion
between FY12 to FY16. Marketing and administrative expense to revenue for
the five year period stood at 18.07% in FY12, 19.71% in FY13, 23.40% in
FY14, 23.03% in FY15 and 16.43% in FY16. Over the five year period, the
companys marketing and administrative expense has also grown by a
compound annual growth rate of 3.94% signalling the companys intention to
keep a large part of its expense line in check. Q117 result reported a 22.60%
decline in marketing and administrative expense to 2.59 billion (vs. 3.35
billion in Q116) as all line items under marketing and administrative expenses
dropped for the period. Marketing and administrative expense to revenue for
Q117 period also dropped to 11.71% (vs. 19.99% in Q116) while we
anticipate that the companys marketing and administrative expense margin
for FY17E is expected to be at 8.10%.
Marketing and
administrative expense to
revenue for the five year
period stood at 18.07% in
FY12, 19.71% in
FY13, 23.40% in
FY14, 23.03% in FY15
and 16.43% in FY16.
-
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
FY'12 FY'13 FY'14 FY'15 FY'16 FY'17F
10,039.05
11,825.02 13,044.79
13,641.22
11,464.15
-
2,699.87 2,720.86 2,516.35
2,844.10 3,151.09 3,692.60
NGN"Mn
Marketing & Admin. Exp. Selling & Distribution Exp.
84.98%
15.02%
Total Liabilities Q1'17 Net Asset Q1'17
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 6
Finance cost eating deep into companys operating profit; Net finance
cost in the last five years have continued to negatively increase except for
FY16 in which it dropped. The company reported a negative net finance cost
of 709 million in FY12, which grew to 969 million in FY13, to 1.74
billion in FY14, to 2.8 billion in FY15 before easing down to 1.69 billion
in FY16. The company has been unable to report a positive net finance cost
over the years because it has continued to report significantly higher interest
payable on borrowings and amortised cost interest, two line items under its
finance costs which has continued to increase the companys total finance
cost when compared to its interest income on call deposits and bank
accounts, employee loans, derivative gains and Exchange gain which are line
items under its finance income. Over the review period, finance cost to
operating profit continued to rise eating into the companys profit as it stood
at 9.18% in FY12, 14.37% in FY13, 41.39% in FY14, 68.33% in FY15 and
46.96% in FY16. Q117 reported a slightly improved performance at 26.30%
(vs. 28.60% in Q116).
Profits soar after three years of consecutive decline; profit after tax for the
company suffered years of consistent decline having continuously dropped
year on year (YoY) from FY13 to FY15. Having grown by 1.49% in FY12
from the preceding year the company reported a 14.13% drop in FY13, a
49.82% drop in FY14 and a 50.57% drop in FY15 before turning the tides
into an increase of 157.63% in FY16. Given the growth projectile in profits,
the company now currently reports a negative compound annual growth rate
of -13.93%. Profit margin for the last audit period has however failed to
impress as the companys FY16 profit margin stood below the level reported
in FY12 and FY13. Profit after tax margin for FY12 stood at 10.08%, FY13
at 8.01%, FY14 at 4.33% FY15 at 2.01% and FY16 at 4.40% while we have
projected FY17F PAT margin to impressively rise to 9.02%.
The company reported a
negative net finance cost of
709 million in FY12,
which grew to 969 million in
FY13, to 1.74 billion in
FY14, to 2.8 billion in
FY15 before easing down to
1.69 billion in FY17.
0.11 0.16 0.17 0.30
1.03
1.47
0.82
1.13
1.91
3.17
2.73
3.44
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
FY'12 FY'13 FY'14 FY'15 FY'16 FY'17F
NGN'bn Finance income Finance Cost
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
0.00
2.00
4.00
6.00
8.00
10.00
12.00
FY'12 FY'13 FY'14 FY'15 FY'16 FY'17F
NGN"Bn
Operating profit Operating profit margin
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected]ng.com Tel +234(1)4622371-5, Page 7
Q117 numbers suggest the company may be on its way to reporting an
improved profit if things continue as reported in its unaudited account
released to the market, having reported a bottom line increase of 53.94% to
1.60 billion (vs. 1.04 billion in Q116). We however estimate profit after
tax for FY17F at 8.02 billion (vs. 3.07 billion in FY16) representing an
increase of 161.36% as we expect cost of sales and finance cost to remain
relatively moderate, even as the company continues revenue base is expected
to grow on price increases and increased sales volume. Over the years, the
companys profits have been mainly supported by its core business as income
from investments and other segments have remained insignificant to boost
profits. Finance income for FY17F has therefore been estimated to come to
1.48 bn (vs. 1.02 bn in FY16) representing a rise of 44.58% for the
period.
Consistent but uninspiring dividends payments: Over the last five years,
the companys dividend paid to shareholders have continued to dwindle and
have failed to impress in recent times evidently due to the companys inability
to report improved profits. Though Q117 numbers have shown improvement
in profits, we are weary to suggest that dividend payment to shareholders
would significantly improve to previous levels in FY17F as we are aware of
the companys decision to raise funds by way of a rights issue to assist in
managing its debt obligation. Thus we anticipate that the company may be
more inclined to re-invest more of its profits back into its business operations
to help improve productivity and enable it compete favourably in an
environment packed full of aggressive competition to grow individual market
share. Though dividends have significantly dropped, the company has
remained consistent in rewarding its shareholders with dividend payment,
having paid a dividend of 1.40 in FY12, 1.25 in FY13, 0.10 in FY14,
0.05 for FY15 and paid out 0.10 for FY16 representing pay-out ratio of
94.62%, 98.37%, 15.68%, 15.68% and 12.31% respectively. We have also
estimated dividend payment for the FY17F to be at 0.30 (vs. 0.10 in
FY16).
We have also estimated
dividend payment for the
FY17F to be at 0.30 (vs.
0.10 in FY16).
-35.00%
-30.00%
-25.00%
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
0.00
2.00
4.00
6.00
8.00
10.00
FY'12 FY'13 FY'14 FY'15 FY'16 FY'17F
NGN'bn PBT PAT Tax Margin
4.12%
3.68%
0.29%
0.15% 0.29%
0.88%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
FY'12 FY'13 FY'14 FY'15 FY'16 FY'17F
NGN Div per Share Div yield @34
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 8
Other highlights; Unilever rights issue;
Unilever Nigeria Plc in June 2017 notified the public of its intention to do a
rights issue of 1,961,709,167 ordinary shares of 50 kobo each at 30.00 per
share on the basis of 14 new ordinary shares for every 27 ordinary share held
with a qualification date of June 28, 2017. In our view, we believe that the
massive discount in the rights price is mainly to increase investor interest in
picking up their rights as well as giving the share price enough room to trade
and remain above the proposed rights issue price as we know that a market
price below or similar to the rights issue price will negatively impact the
success of the proposed rights issue. On the other hand the rights may be
successful as we recall that in 2015, Unilever Overseas B.V. holding launched
a tender offer for 75% of the company and they may be well in place to pick
up shares from shareholders who do not pick up their rights thereby taking
them closer to their initial target of 75% holding. Going forward, for
investors with a long term interest in the company we advise them to pick up
their rights as we see value in the company over the long term horizon, while
for short term players we expect their rights to be sold as we anticipate the
price to drop and further converge towards the rights issue price. Finally, on
the use of the rights proceeds we envisage that most of the funds will be
channelled towards paying down some of its debt obligation and also on
expanding its businesses operation. This we expect to free up funds as
interest expense is projected to drop in the next financial year and
shareholders will eventually benefit in the long term though the companys
shares outstanding would further increase after the listing of the rights issue.
Valuation;
We used the discounted cash flow model for our valuation, though the model
is based on forecasted cash flows and therefore represents cash generating
nature of the business and provides long term outlook. The model was based
on a five year projected cash flow and terminal value in a bid to calculate the
target price of the company which led us to a fair value of 34.30 per share.
We also used optimistic forward estimates of key ratios and forecast of FY17
earnings to arrive at a target price of 20.76 per share, while Retained earning
model was used to arrive at a value of 15.24. We then took the average of all
values and arrived at a target price of 23.43 which suggests a downside
potential of -31.09% at current market price.
In our view, we believe that the
massive discount in the rights
price is mainly to increase
investor interest in picking up
their rights as well as giving the
share price enough room to
trade and remain above the
proposed rights issue price
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
8-J
ul-
16
8-A
ug-
16
8-S
ep-1
6
8-O
ct-1
6
8-N
ov-
16
8-D
ec-1
6
8-J
an-1
7
8-F
eb-1
7
8-M
ar-1
7
8-A
pr-
17
8-M
ay-1
7
8-J
un
-17
8-J
ul-
17
NGN Unilever 52 - Weeks Price Movement
Sell
Hold
Buy
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 9
Given the companys current financial position, its business operations as well
as our financial forecasts and estimates, we have recommended a SELL
position in the short term for the company shares. However for investors with
interest in the company over the long term we advise that they gradually
accumulate the company shares as we expect the companys business
operations to improve in the long term and the value of their shares improve
over the period. EPS for Q116 stood at 0.28 while for Q117 currently
stands at 0.42 (FY17F 2.12). Sales per share increased for the period,
rising to 5.86 in Q117 from 4.44 in Q116, while price to sales ratio
dropped to 5.80x for Q117 against 7.66x for Q116. The companys share
price has also dropped by -2.86% year to date compared to the 21.36% year to
date change on the NSE ASI as at July 10th 2017.
Conclusion; Unilever Nigeria has indicated plans to restructure its business
operations, in April 2017 the company announced its intention to divest from
its spread business and inform the public on subsequent development on the
matter. Going by this decision our forecast estimates may quickly be adjusted
depending on the outcome of events as the companys spread segment falls
under the food business which accounts for a majority of the companys
revenue, as the food business accounted for about 52% of total revenue
reported in FY16 (vs. 50% in FY15). Thus, selling that segment of its
business may affect the companys revenue from its food business in the short
term except margins are quickly replaced by sales of other close substitutes or
higher sales volume from other business segments. Going forward, we remain
optimistic that the companys operations will improve in the long term and
expect the company to leverage on the strength of its parent company to
boost operations and improve top and bottom line in the long term.
Sales per share increased for the
period, rising to 5.86 in
Q117 from 4.44 in Q116,
while price to sales ratio dropped
to 5.80x for Q117 against
7.66x for Q116. The
companys share price has also
dropped by -2.86% year to date
compared to the 21.36% year to
date change on the NSE ASI
as at July 10th 2017.
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
Unilever vs. PZ vs. Flourmills 52-weeks Price Movement Rebased
Unilever PZ Flourmill
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 10
Statement of profit or Loss
million FY14 FY15 FY16 FY17F Revenue 55,754 59,222 69,777 87,919 % change -7.08% 6.22% 17.82% 26.00% Cost of sales (35,584) (38,174) (49,481) (64,181) % change -5.25% 7.28% 29.62% 29.71% Gross profit 20,170 21,048 20,296 23,738 % change -10.15% 4.35% -3.57% 16.96% Admin, Selling & Dist. exp. (2,516) (2,844) (3,151) (3,693) % change -7.52% 13.02% 10.79% 17.19% Operating profit 4,615 4,640 5,805 11,342 % change -41.44% 0.54% 25.12% 95.37% Net finance cost / income (1,742) (2,869) (1,699) (1,969) % change 79.70% 64.72% -40.79% 15.94% Profit Before Taxation 2,873 1,771 4,106 9,372 % change -58.43% -38.36% 131.86% 128.23% Profit After Taxation 2,412 1,192 3,072 6,734 % change -49.82% -50.57% 157.63% 119.21%
Source: Company Financials, CBP Research
Statement of Financial Position million FY14 FY15 FY16 FY17F Total noncurrent assets 27,165 29,165 30,949 32,442 Total current assets 18,571 21,008 41,543 58,194 Total Assets 45,736 50,172 72,491 90,636 TOTAL Current Liabilities 31,371 34,698 53,513 65,561 TOTAL Non-current Liabilities 6,887 7,472 7,288 8,194 Total Liabilities 38,257 42,169 60,801 73,755 Shareholders equity 7,479 8,003 11,690 16,880 Total liabilities and Equity 45,736 50,172 72,491 90,636
Source: Company Financials, CBP Research
Profitability and Returns
FY14 FY15 FY16 FY17F Gross Profit Margin 36.18% 35.54% 29.09% 27.00% Operating Profit Margin 8.28% 7.83% 8.32% 12.90% Net Profit Margin 4.33% 2.01% 4.40% 7.66% Tax Margin -16.04% -32.68% -25.19% -28.15% ROCE 46.99% 43.81% 44.01% 34.01% ROE 32.26% 14.90% 26.28% 39.89% ROA 5.27% 2.38% 4.24% 7.43%
Source: Company Financials, CBP Research
Asset Utilization FY15 FY16 FY17F Cash/Sales 0.07 0.18 0.23 Sales to inventory 9.59 7.06 7.66 Sales to total Assets 1.18 0.96 0.97 Sales to fixed asset 2.16 2.38 2.85 Equity multiplier 6.27 6.20 5.37 Fixed asset turnover 0.46 0.42 0.35
Source: Company Financials, CBP Research
Liquidity Ratios FY15 FY16 FY17F Quick ratio 0.43 0.59 0.71 Current ratio 0.61 0.78 0.89 Cash ratio 0.13 0.23 0.31 Interest Coverage 1.79 0.66 0.37 Debt to asset 0.25 0.29 0.32 Debt to Net income 10.53 6.81 4.24 Debt to equity 1.57 1.79 1.69 T. Liabilities to Equity 5.27 5.20 4.37 Inventory turnover 2.58 3.08 5.59 Inventory turnover days 59.02 72.87 65.30 Acct receivable days 62.51 99.10 109.14 Account payable days 215.54 239.57 210.00
Source: Company Financials, CBP Research
Valuation Multiples FY15 FY16 FY17F
P/E (x) on current price 107.87 41.87 19.10 P/B (x) on current price 16.07 11.00 7.62 Dividend Yield (%) 0.00 0.00 0.01 Pay-out ratio (%) 0.16 0.12 0.17 Sales per share 15.65 18.44 23.24 P/S ratio 2.17 1.84 1.46
Source: Company Financials, CBP Research
Stock Data FY15 FY16 FY17F
Total Div Paid (bn) 0.18 0.38 1.13 Earnings per share() 0.32 0.81 1.78 DiV per share() 0.05 0.10 0.30 NAVPS () 2.12 3.09 4.46 Earnings yield (%) 0.93% 2.39% 5.24%
Source: Company Financials, CBP Research
Growth Performance FY15 FY16 FY17F
Turnover Growth (%) 6.22 17.82 26.00 PBT Growth (%) -38.36 131.86 128.23 PAT Growth (%) 50.27 157.63 119.21
Source: Company Financials, CBP Research
mailto:[email protected]
-
Unilever Nigeria Plc CBP Equity Research
Published by CBP Research, 1, Davies Street Off Marina Lagos Nigeria. E-mail: [email protected] Tel +234(1)4622371-5, Page 11
Our investment recommendation is supported by the upside or downside potential of a stock under coverage. This potential is estimated by
comparing the stocks current market price to its target price and fair value, on a percentage increase or decrease basis.
Analyst: Chiazor Victor Email: [email protected]
Ratings Specification
> 15% BUY
-15% to 15% HOLD < -15% SELL
Source: CBP Research
From our analysis, fair value is our opinion of the actual fundamental worth of a stock, irrespective of what the market thinks of the stock or what investors are willing to pay for it. A BUY recommendation directly means investors should accumulate the stock according to their risk appetite. A SELL recommendation prompts investors to exit their positions in the stock, as the analyst believes the stock will lose value. A HOLD recommendation tells investors to do nothing; if you have not bought the stock, do not buy it and if you have bought it, do not sell it.
Disclaimer & Disclosure
The value of any investment is subject to fluctuations, i.e. may arise and fall. Past performance is no guide to the future. The rate of exchange
between currencies may cause the value of investment to increase or decrease. Hence investors may not get back the full value of their original
investment.
This document is not an offer to buy or sell any security. This document does not provide individually tailored investment advice. It has been
prepared without regard to the individual financial circumstances and objectives of persons who receive it. The appropriateness of a particular
investment will depend on an investors individual circumstances and objectives. The investments and shares referred to in this document may
not be suitable for all investors.
This document is based on information Capital Bancorp Plc received from publicly available reports and industry sources. Capital Bancorp Plc may
not have verified all of this information with third parties. Neither Capital Bancorp Plc nor its advisors, shareholders, directors or employees can
guarantee the accuracy, reasonableness or completeness of the information received from any sources consulted for this publication, and neither
Capital Bancorp Plc nor its advisors, shareholders, directors or employees accepts any liability whatsoever (in negligence or otherwise) for any
loss howsoever arising from any use of this document. This document is not to be relied upon and should not be a substitute for the exercise of
independent judgment.
This document includes certain statements, estimates and projections with respect to the anticipated future performance of securities listed on the
Nigerian Stock Exchange and as to the market for these shares. Such statements, estimates and projections are based on information that we
consider reliable and may reflect various assumptions made concerning anticipated economic developments, which have not been independently
verified and may or may not prove correct. No representation or warranty is made as to the accuracy of such statements, estimates and
projections or as to their appropriateness for the purpose intended and it should not be relied upon such. Opinions expressed are current opinions
as of the date appearing on this material only and may change without notice. Other third parties may have issued other reports that are
inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions,
views and analytical methods of the analysis who prepared them.
mailto:[email protected]