Union Bank analysis has remained somehow elusive......good job though.

MacLovington: Union Bank analysis has remained somehow elusive......good job though.

The results are not out yet

Ugodre
 gbadun ў☺ΰr analysis,based on ў☺ΰr reviews,which are the stocks with sound fundamentals and currently undervalued.

ugodre:

The results are not out yet

thank you for doing a good job. Can you please analyse daar communication shares

Hi Ugodre,

Unity bank just released their result and i think it's fairly ok giving the stock price (0.67) as at the moment. I need your professional analysis for guidance. Attached is a copy of the result

SKYE BANK POST N12.6BILLION PAT: LOAN LOSS STILL SKY HIGH

Skye Bank Plc released its 2012 Audited Accounts posting a Gross Earnings of N127.7billion up from the N102.3billion posted in 2011. Net operating profit at the end of the period was N15.6billion, a massive 480% improvement from N2.8billion posted in 2011. The bank will proceed to post a profit after tax of N12.6billion an over 870% rise from the N1.3billion posted a year earlier. Things couldn't have been better or is it getting worse?

Result overview

When a bank increases earnings by more than 8x it is either the prior year result was a loss or a major plummeting of profits. It could off course also mean that the current result was due to some exceptional income or extra-ordinary income that are unlikely to occur again. So what was Skye Bank's issue? Skye Bank suffered a tumultuous 2011 writing off about N26billion in loan losses. The bank just barely managed to post a profit of N1.3billion. In August 2012, the CBN put restriction on banks participating in foreign exchange auctions. Their share price took a beating on that announcement as investors expected the bank to incur huge cost in its inter-bank lending rate.

Skye Bank's Net interest Income Margin for 2012 was 44% way lower than the industry average of 60%. The bank thus incurred N66 in interest expense for every N100 of interest income earned. As if that was not enough, the bank further wrote of another N13billion in loan losses during the year taking the total write offs for just two years to a whopping N40billion. Their 2012 write off is about 30% its Net Interest Income. Compare that the Diamond Bank at 19%, Zenith at 5.8% and GTB at 0.6% and you know how bad that is. Return on Equity at the end of the period will end up being 12.2% and Return on Assets just 1.6%. Financial Year 2012, despite being an improvement on 2011 results, provides a platform for erasing the errors of the past. The only problem is that for banks, the past is mostly always representatives of the future.

To buy or not?

Skye Bank announced a plan to raise 150m (N24billion) to shore up its value and furthermore the capital adequacy ratio. Its share price was N5.80 today shedding 3.3% on the day. The share price is currently 6x its current earnings per share of N0.95 (95 kobo) and 28% less than its net book value per share. So if you are asking if the share price is cheap on those basis then it surely is. But that would be a misleading pricing mechanism. The risk of further loan losses is still lurking and competition is rife in the industry, so putting an extra 17% discount on the current price will be a good start for the bargain hunter. Nevertheless, for those who have the risk appetite, it probably time to buy,



Skye Bank 2012 Audited Accounts is posted on the website of the NSE

Aks: Hi Ugodre,

Unity bank just released their result and i think it's fairly ok giving the stock price (0.67) as at the moment. I need your professional analysis for guidance. Attached is a copy of the result

I have seen the result and it is a marked improvement. However, they need to improve on their efficiency by reducing operating expenses and increasing operating income. At N0.67 the stock is quite cheap considering its book value and earnings. But they have negative retained earnings of N14.7billion,meaning they cannot pay dividends this year and going by their current PAT, it would take them two more years. If you factor that in, then 67kobo may well look expensive. The stock even shed 5.63% today but that shouldn't deter you. There lies a buying opportunity if you believe in the ability of the management to turn things around. Cheers

Sterling Bank Q1 2013, Results is out

Sterling Bank released its 2013 Q1 Unaudited Results. My first impressions are that they seem to be reigning in on cost. They also earned good money (over N5b) on other investments. They also continued with their aggressive lending by N18billion. Their deposit base also grew 13% from last year. Does this erase all the worried of 2013? certainly not. But is it a good start, yes it is. Your opinions pls

GT BANK Q1 2013 RESULTS REVIEW: PRE-TAX PROFITS UP, MARGINS DOWN

GT Bank Plc released its 2013 Q1 unaudited results with Gross Earnings increasing 20.83% over the same period last year to N63.5billion. Net Interest Income, the core revenue streams for banks, increased 6.34% to N33.4billion. Pre-tax profits at the end of the period was N28.5billion (2011:N24.3billion).

The above results while better than last year's, is a reflection of shrinkage now being experienced as yields on government securities start to drop. Net Interest Margins which was 81% in 2011 dropped to 77.3% and 73.9% in 2012 and 2013 respectively. Whilst this is pretty much the trend now, the large increase of loan losses is a worry. Could it be a one time write off, or beginning of several write offs that may occur during the course of the year? It will be interesting to see where this takes us to.

Loans and advances increased 5.4% year on year though, some might expect that it should have been more. Loans and advances grew 10% between Q1 2012 and Q1 2011. Deposits also grew 5.4% to N826billion as the bank strives to hit the N1.5trillion mark. GT Bank share price at the close of business 18/4/2013 was N23.7.





GT Bank Q1 Earnings Report was posted on the website of the NSE

PZ CUSSONS INCREASE 9MONTHS PAT BY 200% TO N2.9B

PZ Nigeria Plc released its 9months to 2013 unaudited financial statements with revenue nearly flat at N51.5billion (2011: N51.8billion). Gross Profit at the end of the period was N12.8billion up 12% from the same period last year. Pre-tax profits at the end of the 9months to March 2013 was N3.9billion (2011: N2.3billion).

PZ Operational Overview

PZ Cussons is very well known in Nigerian and has been in operations for decades selling the likes of Robb, Morning fresh, Cussons baby products etc. In the last few years the company has been struggling with dwindling revenue growth and high operating cost. Their parent company PZ Cussons Worldwide (which owns 69% of PZ Nigeria) noted this in the 2012 Audited Accounts claiming that the January 2012 strikes and unrest in the north affected the groups growth prospects. Africa contributed about 42% (£362million or N90.5billion) of PZ worldwide revenues, second only next to Europe. Thus Nigeria effectively contributed about 24% in Global revenues making the country an integral part of its global push for growth.

Result Overview

The fast moving consumer goods market (FMCG) is a highly competitive industry often facing flat revenues and increasing operational cost. To keep afloat, will involves a robust attempt at cost cutting and delivering products that consumers find important and willing to pay for. PZ also operates in the WhiteGoods Household (Home Appliances) sector very well represented by Haer Thermocool products. In 2012, their branded consumer goods segment constituted about 71% of revenues up 13.6% from the prior year. Revenues from Home Appliances however, remained flat growing just 4% year on year. Giving this backdrop, 2013 may well be a more challenging year for the company in terms of top line growth considering revenues remained flat year on year at the end of March 2013. However, cost of sale seemed to have dropped 4% and operating expenses flat both helping the company increase its operating profit by a commendable 73% to N3.8billion. This has helped operating profit margin increase to 7.5% and inevitably more than doubling pre-tax profits margin.

Its probably too early to celebrate but this result gives one a sense of direction at reigning down on cost. Revenue might probably also not get anywhere close to meeting 2012 five year high of N72billion. But if cost is kept low (no debt) then earnings will surely beat 2012's disappointing result. Whether they can keep Gross Profit Margins to around 20% by year ends will be key.

Share Price Valuation

PZ Cussons rose highest in February 12, 2013 N44.48 and dropped to N35 on April 8. Today (19/4/2013) it traded for N42 up 7% on release of this result. The current P.E ratio is a high 69X and Price to book ratio 4.07. The two valuation metrics is enough to conclude its an expensive stock. Nothing in the valuations justifies this type of premiums on their earnings. Last year's ROE was just 6% and based on the current result increased to 6.6%, factor in inflation at thats a negative returns already. As it is, April 2012 may have been the best time to buy this stock.



PZ Cussons, 2013 9months unaudited results was posted on the website of the NSE

STANBIC IBTC PLC POST N10.1BILLION PAT - SHARE PRICE TANKING??

Stanbic IBTC released its 2012 audited accounts with Gross Earnings rising 45% to N91.8billion. Net Interest income rose 21% to N33.5billion and income from commission and fees adding another N25.5billion about 42% of total Operating Income. The bank will go on to declare a profit after tax of N10.1billion, 53% higher than the N6.6billion posted in 2011.

Result Overview

Stanbic IBTC is a well known respectable bank boasting quality employees who have over the years prided themselves as sound investment bankers. In 2011 the bank made N18.3billion in commission and feed following in that up with an impressive N25.5billion in 2012. That's not surprising as most M&A deals involving foreign corporations will often list the bank as a financial adviser. What is surprising however is the huge loan loss write off of about N6.89billion in the year under review. That amount was about 20.5% Net Interest Income, way higher than the industry average of 11.5%. This huge drop affected profitability ratios helped only by taxes which helped pushed PAT higher in comparative terms to N10.1billion.

Market Price Metrics

The bank's share price took a beating today, dropping 5.69% to N12.26 about 24.5x its earnings per share of 50kobo. They also propose dividend of 1o kobo per share yielding just 0.8%. The bank helps investors derive the intrinsic value of equities and investments. It will be a great surprise if they dim the current share price worthy of its value considering the price multiples placed on its better performing peers.


Stanbic IBTC posted its 2012 Audited Accounts on the website of the NSE

UNITY BANK PLC POST N2.5BILLION Q1 2013 PRE-TAX PROFITS

Unity Bank Plc released it 212 Q1 earnings report with pre-tax profits rising 8.3% to N2.49billion. Loans and advances increased 6.76% to N237.7billion and deposits also rose 10.8% to N299billion compared to 2012 Q1 respectively. Breakdown of the results is below;

ZENITH BANK PLC Q1 EARNINGS SEE PRE-TAX PROFITS RISE 25.5% TO N28.8BILLION

Zenith Bank released its Q1 2013 earnings report with pre-tax profits rising 25.5% to N28.8billion. Loans and advances also rose 21% to N1trillion and customer deposits also rose 16.5% to N1.9trillion compared to the prior quarter respectively. Below is a break-down of the results

@ugodre, All the banks seem to be doing well. Forward p/e's average at about 5.

BERGER PAINTS POST 2013 Q1 RESULTS - EARNINGS DROP BY 23%

Berger paints Plc posted its 2013 First Quarter earnings report with Revenue rising 12% to N606million. Gross Profit despite rising 6% to N230million did not better 2012 comparative results as margins dropped 5.3%. The company posted a pre-tax profit of N44million (2012 Q1: N57million) SG& A continues to eat deep on Gross Profit Margins. SG& A sliced off 91% of Gross Profit compared to 85% the year before.

I am yet to see an improvement in the companies operational efficiency.

shigidi: @ugodre, All the banks seem to be doing well. Forward p/e's average at about 5.

True that. My worry however, is their loan losses. Seems not to be abating. But lets see their Q2

ugodre:

True that. My worry however, is their loan losses. Seems not to be abating. But lets see their Q2

A reason why i still favour diamond bank. NPL are 5% despite growing loans.

shigidi:

A reason why i still favour diamond bank. NPL are 5% despite growing loans.

Banks mostly manipulate NPL's so you should adjust that to about 7-8% in my opinion.

ECOBANK - INCREASE PRE-TAX PROFITS BY 95% TO N15.5BILLION - BUY BABY BUY?

Ecobank Transnational Inc (ETI)released its first quarter earnings report for 2013 today to the delight of investors. The company increased its Gross Earnings by 21% to N94.1billion when compared to the same period last year (2011 Q1: N77.7billion). Pre-tax profits also rose an incredible 95% to N15.5billion (2011: N7.9billion). The banks earnings per share at the end of the period was 66kobo more than double the 32kobo posted same period 2011.

What's exciting?

ETI's 2012 result was a mix bag of higher profitability but lower margins. Their profits after tax rose 41% to N45.4billion during the year whilst profitability margins dropped on nearly all fronts. The bank had claimed that the increase in operating expenses as well as loan losses was as a result "one time cost" incurred in acquisition (including Oceanic bank) and provisioning. In 2012, Nigeria contributed over 40% of the banks revenue whilst only contributing 18% of pre-tax profits. However, in the first quarter of 2013, pre-tax profits increased 95% to N15.5billion whilst profitability margins all came out higher than the prior year. This indicates that the bank had not only bettered the prior year earnings, it also did so more efficiently.

A downside of the results for me however, is the increase in loan loss expenses to N4.1billion during the period. In addition, the banks lent less on average than they did the prior year whilst deposits also dropped marginally. The banks lower lending probably is an indication that they are willing to allocate funds to safer assets represented by an increase in their Treasury Bill Assets by 71% to N254billion.

Share Valuation

ETI closed today (23/4/2012) at N15per share. Their trailing P.E ratio is 5.8x whilst their price to book ratio is just under 70%. The share price appears under valued at the moment and an investment I will like to own. However, their ability to reign in on the rise of operating expenses resulting from their M&A activities and expansions into other regions in Africa is key to their underlying growth.





Ecobank posted its results on the website of the NSE

.

Ugodre,Thanks so much for that wonderful analysis on ETI.My question is this,they awarded shareholders with a dividend of 0.04cent.How much does that translate in naira?If i own like 20,000 units of ETI how much dividend am i entitled to?

janykute: Ugodre,Thanks so much for that wonderful analysis on ETI.My question is this,they awarded shareholders with a dividend of 0.04cent.How much does that translate in naira?If i own like 20,000 units of ETI how much dividend am i entitled to?

At the time they proposed that, the Naira value would be about 63kobo meaning you get a Gross Dividend of Net of N11,340 (after deducting 10% WHT). And its 0.4cents not 0.04cents

Many Thanks Ugodre.

CORRECTED==>> PRESCO RELEASE UPDATED 2012 AUDITED ACCOUNTS

Some weeks back I blogged about the seemingly erroneous Audited Financial Statements released by Presco on the website of the NSE. They have now updated the results correcting some of the glaring errors in the financials. Though, I still have some unanswered questions, particulary with the cash flow statements as well as their valuation metrics for revaluation of biological assets and the tax implications. All the same, Presco looks like a fundamentally sound company and still worthy of my investment.



Presco 2012 Audited Accounts was updated on the website of the NSE

IS THIS THE HIGHEST EVER PROFIT DECLARED BY A PLC?? DANGOTE CEMENT POST N151.9BILLION PAT

Dangote Cement released its 2012 Audited Accounts with revenues rising 23.6% to N298.4billion. The company also raised its operational profit by 24.4% to N146.5billion (2011: N117.7billion). The company made a pre-tax profit of N135.6billion up 19% from the prior year. Dangote Plc's earnings per share (EPS) at the end of 2012 was N8.92 (2011: N7.13).

Result overview

Dangote Plc is arguably the most profitable quoted company in Nigeria. They operate in a very competitive market that includes importers, manufacturers and a hybrid of both. However, a lot of the competitiveness in the sector is not very reflective on their financial statements as margins remained considerably flat. A look at their indices shows a flat performance in all aspects. Operational profit margins and profit margins all came out flat. So while the cement industry maybe worried about a clog, which may help crash prices and probably raised operating expenses, this has not happened going by this result.

Despite this, I expect Dangote's profitability growth to slow in the next 3-5yrs as the effects of the wear and tear of their huge property, plants and equipments (PP&E) starts to add to the expense line. Last year, 57.5% of the PP&E was under construction as such those assets will not be depreciated and not affecting expensed till those projects are completed. Top line revenue may also come under some pressures as government waivers and friendly policies expire. Dangote Cement also carries about N160billion in debt (38% of its equity). However, most of its debts cost about 10% or below, very cheap considering market expectations. In addition, they have a high return on asset of 24.4% giving them enough buffer in the unlikely event that their lending rates start to rise. All in all, the company will still remain hugely profitable considering the much awaited and potential boom in the housing sector.

For now a return on equity of 43% is by all means a fantastic result to any shareholder. It is way above the average returns on the NSEAI last year and twice the government bond yields. The company promised a dividend payment of N3 which some might frown upon considering it is just a yield of about 2%. However, this amounts to 33% distribution of earnings and will gulp about N51billion in cash. But then, what is worrying about the yield when the they can post average ROE of 43%. The point is, if the company can give me a better yield on my investment (ROE) why complain about paltry dividend yield. I will be dully compensated from capital gains on the stock (which even comes tax free).

Any value opportunity yet?

Dangote Cement traded at N160 up 2.56% at the close of business 24/4/2013. The current price provides a multiple of about 18x on the current earnings. Its price to book ratio is about 6.6 as the market places a higher premium on its net assets. Though, this price may seem high on the surface, the company's size and moat in the industry portends an upside going forward. Besides, going by the dividend thirsty Nigerian bourse, the price may shed some value in the next few days presenting a buying opportunity.


Dangote Cement 2012 Audited Accounts is posted on the website of the NSE

2012 RESULTS SEES FCMB BACK TO PROFITABILITY - NO DIVIDEND BUT 1 FOR 25 BONUS

FCMB Bank released a double dose of full year audited accounts for 2012 and first quarter unaudited accounts for the period ending March 2013. During the year ended December 2012, Net Interest Income rose 17% to N43.3billion. This resulted in a net interest margin of 50% down from 60% the year before. The bank ended the year with a return to profitability as they made a post tax profit of N16billion (2011: (N9.2billion).



Result Overview

2011 was a tumultuous year for FCMB just as it was for many other banks. Despite posting strong Net Interest margins of about 60% that year it was not enough to absorb loan losses of over N27billion during the period. 2012 was no different, even though the N12.6billion in loan loss suffered was 54% lower 2011. The bank claims its non-performing loans (NPL) ratio fell year on year by 10.9% to 2.5% inching higher to 3.3% at the end of first quarter 2013. Operating profit margin though below industry average, may be due to its merger and acquisition cost.

The period ended March 2013 gives an insight as to what to expect for 2013. The bank seems to have learnt lessons during the period as loan and advances dropped by 8%. Pre-tax profits rose moderately by 10% to N4.8billion as the bank continues to contend with rising operational cost. Bank's this year will mostly declare profits however, it is those that are able to generate return on equity in excess of 20% that will have the competitive advantage. FCMB delivered ROE of 12% in 2012 and 3.2% at the first quarter of 2013, fairly flat in my opinion. The likes of Skye Bank, Diamond Bank and Sterling posted above 5% ROE for the first quarter.

Share Price/Dividend/Bonus

FCMB share price has had a negative return of 17.7% in the last year according to Bloomberg. Their share price also shaved off 8% in value to close at N4.30 today (29/4/2013). Their price earnings ratio is based on the current price is about 5x whilst price to book ratio is about 0.61x. Banking stocks are mostly undervalued and this indices shows just why. But for the price to take a beating after crawling back to profitability the market is probably punishing the bank for not issuing dividends even after issuing a 1 for 25 bonus shares (4 shares for every 100 held). But you can't blame the bank can you? The bank has distributable reserves of just N5billion. If it distributed all of that (a big IF) earnings, it will only amount to 26kobo per share, a yield of 6%...but even that will send a wrong signal. CBN will ask them to recapitalize..a worse proposition.

The better option for the bank was to therefore give out 4% of its 18.7billion outstanding shares as a bonus issue. Shareholders can then go to the market and sell to recoup investments. That will be about N3.2billion at todays price for shareholders. To the bank, the only cost is a share dilution and possibly a further devaluing of its already undervalued share price. Not sure they mind though!!





FCMB released its 2012 Audited Accounts on the website of the NSE

ugodre:
2012 RESULTS SEES FCMB BACK TO PROFITABILITY - NO DIVIDEND BUT 1 FOR 25 BONUS

FCMB Bank released a double dose of full year audited accounts for 2012 and first quarter unaudited accounts for the period ending March 2013. During the year ended December 2012, Net Interest Income rose 17% to N43.3billion. This resulted in a net interest margin of 50% down from 60% the year before. The bank ended the year with a return to profitability as they made a post tax profit of N16billion (2011: (N9.2billion).



Result Overview

2011 was a tumultuous year for FCMB just as it was for many other banks. Despite posting strong Net Interest margins of about 60% that year it was not enough to absorb loan losses of over N27billion during the period. 2012 was no different, even though the N12.6billion in loan loss suffered was 54% lower 2011. The bank claims its non-performing loans (NPL) ratio fell year on year by 10.9% to 2.5% inching higher to 3.3% at the end of first quarter 2013. Operating profit margin though below industry average, may be due to its merger and acquisition cost.

The period ended March 2013 gives an insight as to what to expect for 2013. The bank seems to have learnt lessons during the period as loan and advances dropped by 8%. Pre-tax profits rose moderately by 10% to N4.8billion as the bank continues to contend with rising operational cost. Bank's this year will mostly declare profits however, it is those that are able to generate return on equity in excess of 20% that will have the competitive advantage. FCMB delivered ROE of 12% in 2012 and 3.2% at the first quarter of 2013, fairly flat in my opinion. The likes of Skye Bank, Diamond Bank and Sterling posted above 5% ROE for the first quarter.

Share Price/Dividend/Bonus

FCMB share price has had a negative return of 17.7% in the last year according to Bloomberg. Their share price also shaved off 8% in value to close at N4.30 today (29/4/2013). Their price earnings ratio is based on the current price is about 5x whilst price to book ratio is about 0.61x. Banking stocks are mostly undervalued and this indices shows just why. But for the price to take a beating after crawling back to profitability the market is probably punishing the bank for not issuing dividends even after issuing a 1 for 25 bonus shares (4 shares for every 100 held). But you can't blame the bank can you? The bank has distributable reserves of just N5billion. If it distributed all of that (a big IF) earnings, it will only amount to 26kobo per share, a yield of 6%...but even that will send a wrong signal. CBN will ask them to recapitalize..a worse proposition.

The better option for the bank was to therefore give out 4% of its 18.7billion outstanding shares as a bonus issue. Shareholders can then go to the market and sell to recoup investments. That will be about N3.2billion at todays price for shareholders. To the bank, the only cost is a share dilution and possibly a further devaluing of its already undervalued share price. Not sure they mind though!!





FCMB released its 2012 Audited Accounts on the website of the NSE

If diamond can trade at a pe of3.5, FCmb should find a support level at 4 naira. And even that is been a bit kind to them

UNION BANK PLC IS BACK TO PROFITABILITY BUT.....

If I was told to predict Union Bank's results at the end of the year ended December 2012, I would have lost out horribly. To explain what I mean, at my review of Union Bank's Half year result for 2012, the bank's net interest income was N44billion, 14% less than 2011. At the end of 2012 Interest Income had jumped to N93billion....adding an extra 49billion in the last six months of 2012.

On the result

On the back of its improved Gross Earnings, Union Bank is back to profitability posting a pre-tax profit of N9billion (EPS of 61kobo) at the end of the year following the over N107billion loss it posted in 2011. The first step on the long walk to getting back to profitability and creating shareholder value is well on track. Their Gross Earnings puts them ahead of Stanbic Bank and just behind FCMB. Net Interest margins is well above industry average and the bank's total loans is currently less than its total equity. Margins are still very much thin as operational expenses continue to eat deep into revenues, slicing off 91% of operating income.

Despite the seeming effective rebuilding process, Union Bank still isn't a bullish proposition in my opinion. The bank is still weighed down by huge negative distributable reserves of about N265billion to contend with. A clear cut plan explaining how it intends to set this off against premium is ket to his ability to repay shareholders some returns on their investment. Its huge and aging work force is still a worry coupled with its antediluvian perception amongst the younger generations of depositors.

Share Price

Their share price has declined month to date by N10.20 to N8.60 as at April 29, 2013. Price Earnings is like 14x and about 1.8billion of the stock is traded monthly on average according to Bloomberg. Price to book ratio is just about 0.76. Some might find this metric enticing and find a buying opportunity whilst some may just see the stock as over priced. This stock should be trading at about N2.50 at the most. For me, I'd wait on the sidelines. There are better opportunities out there.



Union Bank Plc Audited Accounts for 2012 is posted on the website of the NSE

MacLovington: Union Bank analysis has remained somehow elusive......good job though.

Just reviewed Union Bank. What's your opinion?

Here was my review on GSK after their 9months results some months back. Their 2012 full year result is out. I will be posting that shortly

The Nigerian Pharmaceutical Industry is one which is badly in need of the right pill required to cure the burden of low profit margins and huge debts associated with their financials. Its a plague that has contaminated almost every quoted company in the industry save for GSK. The Pharmaceutical Giant in the first 9 months of the year increased revenue by 18% year on year to N18.7b. Operating profit also increased marginally by 14% year on year to N2.7b representing a margin of 15%. Pre tax profits also rose 14% to N2.7b in the first 9 months of this year. Return on Equity 20% and N1.97 (12% increase) in the first 9 months of the year.

These are results when compared to industry averages always appear as a stand out. But that’s like thinking protection is a cure to an STD. GSK’s margins have been down year to date with profit margin dropping 5%. At 10.1% profit margin it is unlikely the company will match the 15% it was able to achieve last year even though taxes have a way of skewing these figures. One way to know though is to look at operational profit margin. It has dropped more than 3% in the past year indicating that the plague may well be looking for its next victim.

;

Thats not to say the company can’t shake this common threat away. It’s still very very low on debt and generates of N3.2b in operational cash flow (that is down as well) and closed the period with a cash pile up of N5b. That is also after spending N1b on investments. Investors like to reward stand outs, justifying why its trading at its highs of N43! A price that is 22x its current earnings per share (eps) and 24.8x its trailing eps. It was just 16X about a year ago. Is it pricey? Sure it is but would you rather settle for a sick pod?

You forgot to include the fact that this stock GSK at a time dropped to N21 and only rose to N43 when the news filtered out that its parent body wanted to increase its stake to 70% or there about!

Now that the parent body is back, i expect them to increase capacity and also maybe acquire one or two small pharm coys in the medium to long term! Just throw in the fact that Nigeria is soon to be made the Hub for vaccine production in the whole of west Africa and maybe beyond!

GSK PLC POST N2.8BILLION PAT - BUY? BUY!!

GSK Plc, the leading pharmaceutical company has released its 2012 Audited accounts with revenues jumping 17.6% year on year to N25.3billion (2011: N21.5billion). Operating profit at the end of the period was 15% higher at N3.9billion on the back of income from other sources as operating expenses sliced over half of gross profit. GSK at the end of the period posted a pre-tax profit of N4.1billion and post tax profit of N2.8billion.

Earnings per share at the end of the period improved to N2.95 from N2.4 during the year. Return on Average Equity at the end of the period was 28.7%, a return very few stocks on the NSE will beat. GSK traded for N49 today (30/4/2013) and has risen 152% in the last one year. The current share price is a 17X multiple on his earnings.

GSK is currently debt free and still has a better competitive advantage to its competitors. Inventory turnover has increased from 2.76 last year to 3.3 this year, showing the company is shipping drugs better that it did last year.

GSK may not look cheap but its price is just right for a buy.