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JULIUS BERGER NIGERIA PLC - Anticipating an impressive 2020

Impressive Q4 buoys FY’19 results

In line with the recent rash of unexpected announcements, JBERGER released an unaudited copy of its FY’19 results, reporting an impressive 70% y/y jump in Net profit to ₦10.3 billion, beating our ₦7.2 billion expectation. The positive earnings surprise for FY’19 was driven by an impressive Q4’19 result, which showcased a 121% y/y jump in Net profit to ₦5.2 billion (c.50% of FY’19 profit). While the unaudited results contain no dividend announcements, we expect a dividend payout of c.38%, amounting to a ₦3.03/share dividend (FY’18: ₦2.00) and a c.14% dividend yield

 A more optimistic outlook

Building on our improved outlook for public spending in 2020 – following a largely uninspired capex rollout in 2019 – we maintain a positive outlook for the construction sector this year. We are also optimistic about JBERGER’s operations given its strong contract portfolio as well as close relationships with the FG and several state governments. We note that after five years of scaling down operations (PPE dropped 40% between 2014 and 2018), the construction giant resumed investing in PPE (FY’18: ₦41.3 billion, FY’19: ₦58.1 billion) in 2019, signaling improved confidence in the market. To that end, we forecast a 15% y/y growth in topline to ₦304.2 billion (Previous: ₦274 billion). With no significant change expected in the operating environment, we maintain our operating margin expectations.