Julius Berger Plc released its 2012 year ended audited results posting a revenue of N201.5billion for the year. The revenue beats estimates of N175billion which the company projected for the year ended. The revenue is also higher than the N169billion posted in the corresponding year. Operating profit was N12.9billion, 21% higher than recorded a year earlier. Profit after tax rose 87% to N8.2billion higher than the N4.4billion posted the same period last year.
This is by no small measure a fantastic result for the company and the shareholders who now expect to approve a proposed dividend of N2.5 per share. Their share price currently sits at N53 and has a year to date capital appreciation of about 89%. A N1million investment a year ago costing N31 per share will today be worth about N1.7million today (March 29,2013) at todays share price. Dividend yield is also 5% inline with average market expectations. Return on Average equity of 66.4% is also a massive improvement on the 45% posted last year. The company is basically using clients money to make money…what else is as sweet as that?
Enough of the highlights and here comes some bad news. JB’s business model is a profitable one quite alright even though profit margins are just under 5% at 4.4%. That is typical with construction companies and for the type of equity capital they have, that probably isn’t too much of a worry. The worry however, is the huge pile up of amount due to customers under contracts mean to the operations of the company. That figure currently stands at N105billion compared to the equivalent in receivables of just N5.5billion. So the company will have to rely on money from new contracts and probably hope that other debtors pay up. Admin cost is also a worry eating up about 71% of Gross Profit compared to 68% the year before.
All this might be a worry but JB has over the years consistently delivered profits. They are also the foremost construction company in Nigeria with very heavy patronage from the Federal Government. These are all economic boons the company can and has always leveraged on. Current holders of the stock will mostly hold for the longterm as the stock good for a value portfolio. For intending owners of the stock, the current share price is about 7.7x its earnings while the price to book ratio 4.1x. This in value terms is a buy proposition as the stock currently appears cheap. Unfortunately, intending buyers may have to wait a little more as the shares are hardly available in the market.