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High Headline Inflation: Honeywell Takes Timely Advantage, Builds Profit Outstandingly Despite Reduced Turnover

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Coy: Honey Well Flour Mills Plc (HONYFLOUR)
Rating: Hold
Current Market Price: N1.60

Latest Dividend: N0.07

Full Year EPS: N0.14

Year High: N1.73
Year Low: N1.08
Fair Value: N0.87
By: Jeariogbe Tunde Segun (Equity Analyst)

Key Investment Ratios

  • This report observe the full year financial statistics of Honeywell Flour Mills Plc for the year ended 31st March, 2021, compare same with released numbers for the corresponding year in 2020, so as to established growth accordingly
  • This result, along with few others full year numbers were combined in achieving growth, projection and valuation of the share price of Honeywell Flour Mills as stated in this report
  • The full year numbers released by the management of Honeywell Flour Mills is an outstanding growth with over 70% growth in the profit line when put side by side the corresponding full year’s result
  • Kindly see below for detailed analysis and comparison of ratios with the immediate last full year numbers
Bourse Nigerian Stock Exchange
Market Classification MAIN BOARD
Nature of Business Manufacturing and Marketing of wheat based products including flour, semolina, whole wheat meal, noodles and pasta
Date of Incorporation Jul-09-1985
Date Listed Oct-20-2009
End of Accounting Year 31st March
Share [email protected] (N)                                                          1.18
Earnings per Share                                                          0.14
Intrinsic Value(N)                                                          0.87
Share Outstanding 7,930,199,658
Market Capitalisation                                          9,357,635,596

Dividend Information

  • At the end of the 2021 full year business session, the management of Honeywell Flour Mills excited its investors with the announcement of N0.07 cash dividend, this is 75.00% improvement over the N0.04 paid in the corresponding year
  • Estimate showed that the said dividend is 49.31% of the total earnings achieved through the year. This is slightly above the 48.76% of its earnings paid to investors in the corresponding year
  • In the same trend, the said dividend is a yield of 5.93% over the share price of Honeywell Flour Mills on the exchange floor as at the time this report was released to the investing public. Understand that, the low yield is due to the large difference in share price within the two compared years
  • Thus, Sustainable Growth Rate estimate stood at 0.98% far above the 0.58% estimated at the end of 2020 full year announcement
Tickers 2021 2020 %Chg
Total Dividend                                        0.07                                    0.04 75.00
Payout Ratio 49.31% 48.76% 1.11
Dividend Yield 5.93% 4.00% 48.31
Sustainable Growth Rate 0.98% 0.58% 68.86

Company figures

  • The stated full year Turnover value improved by 36.23% above the corresponding year, as it stand at N109.59 billion compared to N80.45 billion in the corresponding year
  • Cost of Sales grew in the same trend as it improved by 41.13% to stand at N93.97 billion compared to the N66.58 billion posted in its 2020 full year earnings report
  • Operating Profit achieved is estimated at N7.64 billion, this is also an improvement over the N5.49 billion posted in its 2020 result
  • Conversely, Operating expenses dropped by marginal 4.30% over the comparable period as the figure now stood at N8.11 billion against N8.48 billion in the corresponding year
  • Finance cost was jumped high, as it moved by 43.57% to stand at N6.06 billion compared to N4.22 billion in the corresponding year
  • After considering all expenses and incomes, Profit before Tax for the year was valued at N1.57 billion as against N1.27 billion stated in its 2020 financials.
  • Thus, having consider Taxation Cost for the period, the management of Honeywell Flour Mills posted a full year Profit of N1.12 billion as against N650.49 million in the corresponding year
Statement of Comprehensive Income
  2021 2020 %CHG
Turnover 109,594,730,000 80,450,397,000 36.23
Cost of Sales 93,973,456,000 66,588,559,000 41.13
Operating Profit 7,646,049,000 5,497,633,000 39.08
OPEX 8,115,937,000 8,480,414,000 -4.30
DEPRECIATION 4,663,976,000 3,884,048,000 20.08
FINANCE COST 6,069,303,000 4,227,396,000 43.57
PBT 1,576,746,000 1,270,237,000 24.13
TAX 450,826,000 619,712,000 -27.25
PAT 1,125,864,000 650,492,000 73.08
TOTAL COMP INCOME 1,125,864,000 650,492,000 73.08
Statement of Financial Position
Current Assets                  45,936,677,000               36,891,364,000 24.52
Non Current Assets                101,457,979,000            105,369,928,000 -3.71
Total Assets                147,394,656,000            142,261,292,000 3.61
Current Liabilities                  61,940,563,000               53,639,919,000 15.47
Non Current Liabilities                  27,485,415,000               31,461,351,000 -12.64
Total Liabilities                  89,425,978,000               85,101,270,000 5.08
Net Assets                  57,968,678,000               57,160,022,000 1.41
Retained Earnings                  15,425,942,000               13,827,705,000 11.56
Shares Outstanding                     7,930,199,658                 7,930,199,658  
  • Current Assets is currently valued at N45.93 billion, this is same as 24.52% above the N36.89 billion estimated at the end of the 2020 business session
  • Non-Current Assets held by Honeywell Flour Mills is currently valued at N101.45 billion as against N105.36 billion posted at the end of 2020 business session
  • Current-Liabilities stood at N61.94 billion same as 15.47% above the N53.69 billion stated in its 2020 full year result
  • Non-Current Liabilities dropped by 12.64% to stand at N27.48 billion as against N31.46 billion in 2020
  • Net Assets posted for the year therefore, is valued for N57.96 billion slightly above the N57.16 billion in 2020
  • Retained Earnings on the other hand improved by 11.56% to stand at N15.42 billion versus N13.82 billion in 2020.

Financial Strength/Solvency Ratios

  • Debt Ratio is currently estimated at 60.67%, same as 1.42% above the 59.82% estimated in 2020. This implies that, Total Liabilities is same as 60.67% of Total Assets.
  • Total Debt to Equity was equally estimated at 154.27% as against 148.88% estimated in the comparable year. This implies that more debt were used in servicing the company’s assets through the period
  • It was also established that Equity is same as 39.33% of Honeywell Flour Mills Assets Value, estimate from 2020 full year numbers yielded 40.18%
  • Nevertheless, we can conclude that Honeywell Flour Mills shares is fairly liquid and averagely patronised, although the estimated Beta stood slightly below our estimated industrial average, and below market beta
Financial Strength/Solvency Ratio
TICKERS 2021 2020 %CHG
Debt Ratio 60.67% 59.82% 1.42
Total Debt to Equity Ratio (MRQ) 154.27% 148.88% 3.62
Equity Ratio 39.33% 40.18% -2.12
TICKERS 2021 Industrial Average %CHG
Beta Value                                        0.89                                    0.96 -7.29

Profitability Ratios

  • EBITDA margin estimated for the period stood at 6.98%, slightly above the 6.83% estimated from 2020 full year earnings numbers
  • Pre-Tax Margin on the other hand dropped by 8.88% to 1.44% against the 1.48% estimated at the end of 2020 business session
  • Cost of Sales is 85.75% of the Turnover figure, this is only 3.60% slightly above the 82.77% estimated in 2020. This is a confirmation of the management effort in controlling the direct cost of running the business
  • Return on Equity stood at 1.94% against 1.14% of 2020
TICKERS 2021 2020 %CHG
EBITDA MARGIN 6.98% 6.83% 2.09
PRE-TAX MARGIN 1.44% 1.58% -8.88
EFFECTIVE TAX RATE 40.04% 95.27% -57.97
CS TO TO 85.75% 82.77% 3.60
ROE 1.94% 1.14% 70.66
ROA 0.76% 0.46% 67.05

Efficiency Ratios

  • Operating Expenses to Turnover value is same as 7.41%, this is 29.75% improvement in efficiency during the year
  • Turnover to Total Assets Ratios stood at 74.35% against 56.55%, this is 31.48% improvement in management efficiency when compared to estimate from 2020 full year performance.
  • See below for details
  2021 2020 %Chg
OPEX TO TO 7.41% 10.54% -29.75
TO TO TA 74.35% 56.55% 31.48
Working Capital Turnover                                     (6.85)                                  (4.80) 42.57
Working Capital Ratio                                        0.74                                    0.69 7.83

Investment/Valuation Ratios

  • When compared with 2020 full earnings numbers, the amount earned per unit shares improved outstandingly to N0.14 from the previous estimate of N0.08.
  • P/E-Ratio dropped by 31.82% having moved to 8.31x from 12.19x in the corresponding year
  • The said Earnings per Share yielded 12.03% of the current market price of Honeywell Flour Mills shares on the floor of the exchange as at the time the result was made available to the investing public
  • The Book Value of Honeywell Flour Mill shares is currently estimated at N7.31 this is far above the market value of its shares on the floor of the exchange, and our Intrinsic Value for Honeywell Flour Mills
  • Confirming and under-priced status of Honeywell Flour Mills shares on the floor of the exchange is the Price to Book Value which stood below unity (0.16x)
Investment/Valuation Ratios
Tickers 2021 2020 %Chg
Price at Released 1.18 1.00 18.00
EPS 0.14 0.08 73.08
TCIP/SHARE 0.14 0.08 73.08
P/E-Ratio 8.31 12.19 -31.82
Earnings Yield 12.03% 8.20% 46.68
BV/Share 7.31 7.21 1.41
PBV 0.16 0.14 16.35


Having considered the financial stand of Honeywell Flour Mills, we maintained our very conservative valuation approach; it was observed that, although the improvement in dividend payment was high when compared to the previous year payment, the sustainable growth rate is below unity (1). We therefore valued each unit of Flour Mills at N87 and have rated it a Hold.

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