Company: Red Star Express Plc (REDSTAREX)
Market Price at Earnings Release: N4.80
Current Market Price: N5.50
Highest Price 52wks: N6.50
Lowest Price 52wks: N4.15
Intrinsic Value: N7.73
Last Dividend Paid: N0.40
Current Shares Outstanding: 589,496,760
By: Jeariogbe Tunde Segun (Equity Analyst)
Key Financial Tickers:
- This report treats the nine months financial performance of RedStar Express for the period ended 31stDecember, 2018 and compares same with figures released in the similar period of 2017. The report also put into consideration, the latest full year performance indices to arrive at fair value for each units of RedStar Express Plc.
The Company’s Product/Strength
- Red Star Express Plc provides a portfolio of full logistic solutions in the following categories:
- International and Domestic express delivery,
- Freight Forwarding,
- Integrated Logistics Solutions,
- Information and Document Management Solutions,
- Warehousing and e-commerce Solutions.
- As a public liability company it enjoys large scale advantage over other participants, taking wide percentage of its market.
- The company is wholly owned by Nigerians with principal shareholders controlling 58.9% stake, chief among which is Stanbic Nominees’ 25.6%; followed by Koguna Hammed Hassan, 18.6% and another 14.7% in the name of Koguna Babura Insurance Brokers Ltd. Other Nigerians own the remaining 41.1%.
- It also enjoys the support of its international Partner- Federal Express Corporation (FedEx), USA.
|RED STAR EXPRESS PLC|
|Bourse||Nigerian Stock Exchange|
|Market Classification||Main Board|
|Nature of Business||Courier Services, Freight Services, Logistics, warehousing and General Haulage|
|Date of Incorporation||July 10th 1992|
|Date Listed||November 14th 2007|
|End of Accounting Year||31st March|
|Registrar||United Securities Limited|
|Auditor||Ernst & Young|
|Share Price (N)||4.80|
- Turnover for the first nine months of 2018 stood at 21.86% above the corresponding quarter in 2017, rising to N7.557billion from N6.202 billion reported in Q3-2017.
- Cost of Sales stood at 75.89% of turnover, slightly below the 74.00% estimated from the similar quarter of 2017.
- Selling and distribution expense was 8.79% above what was reported in 2017, moving from N1.109 Billion to N1.207 billion.
- Similarly, Administrative Expensive posted for the period increased by 8.79% to N1.207 billion from N1.109 billion.
- Operating Profit therefore grew by 24.92% over 2017 figure, improving to N538.94 million from the previous N538.94 million posted in Q3-2017.
- Profit before Tax was estimated at N534.00 million, compared to the N428.18 million reported in the same period in 2017.
- Having considered Tax Expenses for the period, N363.12 million was reported as the Profit for the period, which is 24.71% above corresponding quarter’s profit of N291.16 million.
- Retained earnings improved over the corresponding period by 8.83%, moving from N1.896 billion to N2.063 billion
- Non Current Assets stood at 15.19% above what was reported in the previous quarter of 2017. In the report under analysis, it was estimated at N1.537 billion as against N1.334 billion in 2017.
- Meanwhile, Current Assets improved by 3.62% from the previously reported N3.602 billion to N3.733 billion.
- Non Current Liabilities on the other hand dropped by 8.04% as it is currently estimated at N311.23 million, compared to the N338.45 million in third quarter of 2017.
- Current Liabilities is currently valued at N2.304 billion, 9.14% above the N2.111 billion reported in 2017.
- See the table below for details.
|RED STAR EXPRESS PLC|
|Cash and Cash Equivalence||323,561||620,383||-47.84|
|Total Comp. Income||363,120||291,166||24.71|
|Non Current Assets||1,537,079||1,334,408||15.19|
|Non Current Liabilities||311,230||338,457||-8.04|
- Debt to Equity Ratio is quite impressive, although within industry range, the estimated 1.60% (Industry average is 1.26%) confirmed the company’s financial strength and shareholder safety.
- Current Ratio stood above unity, implying the strength of the company in settling its current liabilities as at when due.
- The Beta value which measures volatility of the equity on the floor of the exchange stood below market Beta and the industry average. Signifying low volatility/patronage.
- As noted above, the company currently runs at strong financial levels; could smoothly service all its interest yielding liabilities; and even take in more.
|Liquidity/Risk Ratios||RED STAR EXPRESS PLC||Industry||%CHG|
|LT Debt to Equity Ratio||1.60%||1.26%||26.98|
- Cost of Sales margin is currently estimated at 75.89%, slightly above the 74.00% estimated in the comparable period of 2017.
- Profit before Tax margin is 7.07% also above the 6.90% margin estimated from the corresponding quarter figures.
- Similarly, Profit after Tax margin stood mildly above that of Q1-2017. We have currently estimated 4.80% as against the previous 4.69%.
- Return on Average equity is estimated at 13.68%, 16.84% above the 11.71% achieved in similar period of 2017
- Return achieved on Average Assets is now 6.89% as against the previous 5.90%.
|Cost of Sales Margin||75.89%||74.00%||2.56|
- Testing the management efficiency, the Asset Turnover was gauged; the ratio soared by 14.15% from 125.63% to 143.40%.
- Also tested was the Equity Turnover, which currently stands at 284.67% as against the 249.34% estimated in 2017
- In other words, the equity was multiplied 1.99 times through the first nine months of 2018 financial activities, slightly above the 1.98 times in Q3-2017.
- It was also estimated that Fixed Assets turnover is same as 143.40% above the 125.63% estimated in Q3-2017.
|Total Asset Turnover||143.40%||125.63%||14.15|
|Fixed Asset Turnover||143.40%||125.63%||14.15|
- Following same trend as in the earnings, the amount earned per unit of Red Star Express in its Q3 financial performance improved by 24.71% from the comparable period’s estimate. The current EPS estimate is N0.62
- The yield of the said earnings per share (as at the current market price when the result was made available to the investing public) is estimated at 12.83%, far above the 8.95% yield achieved in comparable period.
- Price Earnings Ratio (PE/Ratio) is currently estimated at 2.60x as against the previous 3.72x. Although this is mainly used when confirming investment recouping time, it is also indicative of investors’ sentiments on the price of Red Star Express Ltd
- As we speak, the Book Value of Red Star Express is currently N4.50, better than the N4.22 estimated in 2017. When this is placed side by side the current market price (N5.50), one might assume an overpriced position.
Our weighted average DCF and P/E valuation for Red Star Express Plc gives fair value of N7.73 (which implies a 40.54% upside potential from current price of N5.50. We therefore rate Red Star Express a BUY.