Business News
Berger Paints’ improved margins ride on the back of cost efficiency
Berger Paints Plc (BERGER) started the year on a weak note as its Q1:2019 revenue declined marginally by 1.08% YoY to NGN797.62mn (vs. NGN806.33mn in Q1:2018) and by 13.66% QoQ.
Marginal Decline in Revenue: Berger Paints Plc (BERGER) started the year on a weak
note as its Q1:2019 revenue declined marginally by 1.08% YoY to NGN797.62mn (vs.
NGN806.33mn in Q1:2018) and by 13.66% QoQ.
The marginal reduction was the effect of 3.03% decline in sales of paints and allied products to NGN781.94mn. Although it made additional NGN15.68mn in contract services, specifically, supply and apply services contract, the contribution to total revenue is paltry at 2.01%.
We believe that higher infrastructural spending, further deepening of the real estate
sector, and the recent change in the company’s management team (with respect to the Managing Director and Chief Operating Officer) will help position BERGER on the path to achieve modest revenue growth in 2019. We forecasted revenue growth of 6.5% to NGN3.59bn for the year.
Larger Decline in Production Cost Delivers Better Margins: Decline in cost of sale by
9.78% YoY to NGN416.63mn led to improvement in the gross margin from 42.73%
(NGN344.55mn) in Q1:2018 to 47.73% (NGN380.99mn) in Q1:2019. Although
operating expenses (OPEX) was 4.34% higher as personnel (NGN129.53mn) and
corporate (NGN14.53mn) expenses increased by 13.36% and 39.32% respectively,
operating margin remained solid at 15.19%, greater than 12.22% reported in the
corresponding period of 2018. Pre-tax and after-tax profit settled at NGN124.17mn and NGN84.43mn apiece with margins of 15.57% and 10.59% respectively.
We believe the lower cost-to-sales ratio is sustainable through the year, owing to the
positive outlook on FX stability, which will support the company’s cost management
for the purchase of raw materials. Hence, we project a cost-to-sales ratio of 53%, while
we forecast OPEX/sales ratio of 34%. Based on our expectation of revenue and cost,
we expect 2019FY profit to grow by 6.13% to NGN340.15mn, implying a net margin of
9.47%.
More Working Capital Tied in Inventory and Receivables: BERGER’s total asset grew
moderately by 1.89% to NGN4.62bn (vs. NGN4.54bn as at 2018FY). The growth was
largely driven by investment in inventories and receivables, which increased by
13.82% (+NGN83.83mn) and 27.17% (+NGN51.89) respectively.
Meanwhile, BERGER maintained a stable current ratio of 1.28x, although the cash
ratio fell from 0.40x to 0.24x. Also, net operating cashflow was negative as a direct
consequence of more working capital tied up in inventory and receivables.
Recommendation: We forecast EPS of NGN1.17 (vs. NGN1.11 in 2018FY) for 2019FY.
Based on a likely mean reversion tendency, we project BERGER closing the year at a
P/E multiple of 7.5x, which combined with our EPS expectation, gives a revised target
price of NGN8.78, down from the previous target of NGN9.45. This represents an upside
of 19.39% based on the closing price of NGN7.35 on May 10, 2019, we therefore rate
the stock a BUY.
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Coronavirus
COVID-19 Update in Nigeria
On the 27th of October 2020, 113 new confirmed cases and 3 deaths were recorded in Nigeria
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 62,224 confirmed cases.
On the 27th of October 2020, 113 new confirmed cases and 3 deaths were recorded in Nigeria, having carried out a total daily test of 2,326 samples across the country.
To date, 62,224 cases have been confirmed, 57,916 cases have been discharged and 1,135 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 614,480 tests have been carried out as of October 27th, 2020 compared to 612,154 tests a day earlier.
COVID-19 Case Updates- 27th October 2020,
- Total Number of Cases – 62,224
- Total Number Discharged – 57,916
- Total Deaths – 1,1135
- Total Tests Carried out – 614,480
According to the NCDC, the 113 new cases were reported from 12 states- Lagos (51), FCT (15), Plateau (11), Kaduna (8), Oyo (8), Rivers (8), Ogun (4), Edo (2), Imo (2), Kwara (2), Delta (1), Kano (1).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 20,935, followed by Abuja (6,008), Plateau (3,614), Oyo (3,433), Rivers (2,781), Edo (2,654), Kaduna (2,625), Ogun (2,014), Delta (1,813), Kano (1,743), Ondo (1,666), Enugu (1,314), Kwara (1,069), Ebonyi (1,049), Katsina (952), Osun (923), Abia (898), Gombe (883). Borno (745), and Bauchi (710).
Imo State has recorded 616 cases, Benue (486), Nasarawa (479), Bayelsa (403), Ekiti (332), Jigawa (325), Akwa Ibom (295), Anambra (277), Niger (274), Adamawa (257), Sokoto (165), Taraba (140), Kebbi (93), Cross River (87), Yobe (82), Zamfara (79), while Kogi state has recorded 5 cases only.
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Lock Down and Curfew
In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.
The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.
On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.
On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.
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ENDSARS
Oyo sets up N500 Million fund each for youth entrepreneurs, compensation for victims of police brutality
Governor Seyi Makinde plans to disburse N500 million fund to youth entrepreneurs in Oyo state.
ENDSARS
VP Osinbajo leads Committee to address unemployment, poverty among others
The National Economic Council (NEC) is ready to address the concerns of youths and Nigerians at large.
After over four hours of deliberations at the emergency meeting of the National Economic Council (NEC), a Committee was set up to meet the needs and demands of Nigerian youths behind the #EndSARS protests. The head of the Committee is Vice President Yemi Osinbajo.
This information is contained in the circular issued by the National Economic Council and shared by Laolu Akande, the Senior Special Assistant-Media & Publicity to the Vice President.
According to Akande, the Joint Committee was consequently set up by Osinbajo, SAN, to work with State governments represented by the Governors of Ebonyi, Ondo, Niger, Delta, Borno and the Sokoto States to implement the resolutions of the emergency meeting.
The National Executive Council during the meeting affirmed an unequivocal belief and assurance that most members of the nation’s security personnel are law-abiding and are capable of restoring law and order in the country.
After over 4 hours of deliberations:
NEC SETS UP COMMITTEE TO ENGAGE YOUTHS, OTHERS ON EMPLOYMENT, SOCIAL SAFETY NETS & NATIONAL UNITY*COMMENDS NIGERIAN POLICE, SECURITY AGENCIES ON HANDLING OF DISTURBANCES IN SOME STATES
— Laolu Akande (@akandeoj) October 26, 2020
What you should know
The Joint Committee set-up by the NEC, to see to the implementation of the following frameworks and the given objectives:
• Framing of a new security and stability architecture for the country.
• A framework of engagement with the youths, civil society, and religious leaders, in a bid to promote national unity.
• A framework to engage with security agencies that will devolve more control to State governors who are the chief security officers of their states.
• A framework for the Federal Government to provide compensation for those who have incurred losses in the last few weeks.
• A social security framework for the youths and Nigerians to deal with the problem of unemployment and poverty in the country.
COVID-19 Update in Nigeria
Oyo sets up N500 Million fund each for youth entrepreneurs, compensation for victims of police brutality
Federal Government declares Thursday October 29 public holiday, to mark Eidl-Mawlid
FG disburses MSMEs Survival Fund in Lagos, Kano, FCT and 9 other states
VP Osinbajo leads Committee to address unemployment, poverty among others
COVID-19 Update in Nigeria
Daily Parallel Market Exchange Rate – ₦461/$1
ASUU discloses why it is yet to call off nationwide strike
Guinness Nigeria Plc jostles to improve from its insipid 2020 financial year
CACOVID reacts to looting of food items, explains why distribution of palliatives was delayed
