Buy pressures from investors willing to take advantage of the cheap valuation of May & Baker Nigeria Plc, Nigeria’s first pharmaceutical company, coupled with an impressive 2018 earnings pushed the firm’s stock to record its best performance this year.
The stock, which has remained unchanged for seven straight days, rose 5.04 percent on Wednesday, its biggest daily gain since November 28, 2018, to close at a four-month high of N2.50 on the Nigerian Stock Exchange (NSE).
The total volume of May & Baker’s shares transacted at the local bourse on April 10 increased by 296 percent to 657,444 units valued at N1.62 million, its biggest trade in almost five months, from 166,005 units worth N394, 270 that exchanged hands in the previous trading session.
Valuation analysis of the company’s stock reveals that its price-to-earnings (P/E) ratio stood at 7.15x, this compares to an average P/E ratio of 26.63x for companies operating in the pharmaceutical segment, indicating the stock is undervalued compared to peers.
Similarly, a look at the company’s price-to-book (P/B) ratio, another valuation metric that measures the value investors attach to a company’s market value relative to the book value of its equity, shows investors place little value on May & Baker having recorded a P/B ratio of 0.6396x after the close of business on Wednesday, lower than the industry average of 0.8381x.
Further analysis of the pharmaceutical company’s financial results for the full-year 2018 reveals that after-tax profit surged 74 percent profit to N585 million from N336.6 million recorded in the previous year. This is the biggest profit growth posted by any publicly-listed healthcare company in the year.
Sales grew 6.14 percent to N8.55 billion from N8.06 billion in the previous year, but the cost of goods sold rose at a faster pace of 10.7 percent to N5.39 billion compared to N4.87 billion recorded in 2017.
That, as well as increased operating, administrative and income tax expenses, caused the company’s margins to wane in the review year. Gross margin slumped to 37 percent in 2018 from 39.6 percent a year earlier, while net income margin fell 4 percent from 7.8 percent in 2017.
The stock has returned 2.02 percent since the beginning of the year to outperform the NSE All-Share Index (ASI) at -7.09 percent, this places May & Baker as the best-performing healthcare company at the NSE.
May & Baker Nigeria Plc manufactures and distributes pharmaceutical products, such as vaccines, antibiotics, and sera. The company also sells diagnostics, medical equipment and bottled water in Nigeria, it was incorporated on April 9, 1944, and became a publicly-owned company on November 10, 1994.
OLUWASEGUN OLAKOYENIKAN
