Company Overview
JOHNHOLT which began the business of distribution and exporting produce in Lagos in 1897 has grown to a conglomerate distributing a wide range of consumer and industrial products such as high capacity generators, air conditioners, fire-fighting equipment, boats, transformers, hybrid generators, gas generators and pre-paid meters. The company is also engaged in oil and gas, inventory management, construction and non-oil exports.
Investment Thesis
JOHNHOLT has increased gross earnings at a three-year compound annual growth rate of 3.31% while Profit After Tax (PAT) declined by 186.6%. Sale of finished goods which amounted to NGN2.1 billion increased by 43.9% year-on-year while property rent and warehousing added 5.4% from NGN223 million to NGN235 million within a year. However, revenue from services and repairs lost 34.9% from NGN567 million in 2017 to NGN369 million in 2018.
Though earnings growth has been unstable, we believe that the property, warehousing and central business unit is promising. With assets of NGN9.3 billion, this unit accounts for 90.3% of total assets. Despite producing 8.8% of total revenue or NGN235 million in 2018, it was responsible for 31.3% of total gross profit. Gross profit margin is 69.4% unlike 19.5% for the whole company.
Though JOHNHOLT trades below our estimated fair value, we would like to maintain a hold recommendation. We would like to keep a watch on the company's effort at turning around the business.
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