WPP Scangroup PLC, formerly Scangroup Limited, is engaged in the provision of marketing communication services; the company offers services in over six disciplines, including advertising, medical investment management, advertising research public relations, digital advertising and specialty communication.

Its advertising services are offered through Ogilvy Kenya Ltd. and MEC Africa Ltd. among others.

Its media investment management services are offered through Milward Brown West Africa Ltd. and Milward Brown East Africa Ltd. among others.

The public relations services are offered through Ogilvy public Relations Ltd. and Hill and Knowlton Strategies Nigeria Ltd. among others.

The Digital advertising is offered through Squad Digital Ltd. and Squad Digital Nigeria Ltd.

The specialty communication is offered through Roundtable ltd.

NSE Ticker symbolSCAN
IndustryAdvertising
SectorServices
Last price 6/09/201815.50
Shares Outstanding378,865,102
52 week range 15.50-25.50
P/E Ratio12.96
P/B Ratio0.66
Dividend Yield4.82
Performance YTD-23%
FV Estimate23.25
Financial Year EndDecember 31
Semi AnnualJune 30
Average 3 Month Trading Volume 83,592
Earnings Per Share (EPS)1.20
Dividend Per Share (DPS)0.75
Net Asset Value (NAV)23.66

 

Key Highlights;

  1. Good Management; Chief Executive Officer (Bharat Kumar Thakrar) owns 11.96% of the company which roughly means your investment in WPP Scangroup is secure. Moreover global communications firm WPP currently owns 46.69% of WPP Scangroup which gives the surety that they will do everything to protect their investments since they are heavily invested there.
  2. On 27 April 2018, global marketing giant WPP sought to increase its ownership from the current 46.69% to 56.25% by acquiring an additional 53.2 million shares in WPP Scangroup at a price of KES 17 with this transaction set to be complete in July. This is a vote of confidence in WPP Scangroup Kenya and the acquisition price of KES 17 is at a premium as compared to the current price of KES 15.50
  3. WPP Scangroup has made profit for the last 12 years and also paid dividends for each of those last twelve years which is a mark of a superior business. To help measure the profits (money that came to the business and the payments made) made by the business we computed different ratios whose meaning is as explained;
    –    WPP Scangroup gross profit margin has averaged 28.12% over the last 10 years. The implication of this is that for every KES 100 in sales, gross profit is KES 28.12.
    –   Operating margin has averaged 5.02% over the last 10 years; for every KES 100 of sales, KES 5.02 is operating profit.
    –   EBT Margin has averaged 7.04% over the last 10 years; for every KES 100, profit before tax is KES 7.04.

    –   Net margin has averaged 4.67% over the last 10 years; for every KES100, KES 4.67 is Profit After Tax.

    –   Return on assets has averaged 6.78% over the last ten years; for every KES 100 invested in total assets in the business, shareholders get KES 6.78 as Profit After Tax.

    –  Return on Equity has averaged 12.71% over the last 10 years; for every KES 100 of equity invested in WPP Scangroup, shareholders get KES 12.71 as Profit After Tax.

  4. Capital Expenditure (money spent to buy motor vehicles, computers and other things) for WPP Scangroup as a percentage of profit after tax has always been below 50% of Profit After Tax, which shows the company is not capital intensive and thus a lot of cash is left to cater for dividend payment and to fund further expansions for retained funds. This means that an investment in Scangroup will sure an investor more dividends with the passage of time.
  5. Operating expenses (amount spent to run the business like workers salaries) as percentage of gross profit has averaged 80.91% over the last 10 years. It’s advisable to keep these expenses as low as possible so as to increase the profits made in the business.
  6. WPP Scangroup has zero long term debts (loans to be paid over one year) which is surely a mark of a superior business. Most good companies use the least amount of long term debt or none at all. This helps a business to reduce interest payments which means it will make more profits at the end of the year.

    Looking at the books of WPP Scangroup, we value the company at KES 23.25 which ideally means that if you buy at current price of KES 15.50 you are likely to see your investment increase by 50%.

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