Access Bank PLC: Attractive at 106% discount

Brief History

Access Bank Plc is a full service commercial Bank operating through a network of over 310 branches and service outlets located in major centres across Nigeria, Sub Saharan Africa and the United Kingdom. Listed on the Nigerian Stock Exchange in 1998, the bank serves its various markets through five business segments: Institutional, Commercial, Retail Banking, Transaction Services and Financial Markets.It has,overtime, built its strength and success in corporate banking and is now taking that expertise and applying it to the personal and business banking platformitacquired from Nigeria’s Intercontinental Bank in 2012. This position has placed the financial institution among the top five in its sector in terms of assets, loans, deposits and branch network; a feat which has been achieved through strong long-term approach to client solutions – providing committed and innovative advice.

The bank has spent the last two years integrating the business, investing in the infrastructure and strengthening the product offer. As part of its continued growth strategy, it has focused on mainstreaming supportable business practices into its operations as it strives to deliver sustainable economic growth that is profitable, environmentally responsible and socially relevant.

ACCESS
Share Holding Structure
Stanbic Nominees Nigeria Limited	18.92%
Access Bank Staff Investment Trust Scheme	5.76%
Other Nigerian Citizens & Association.	75.32%
Other Statistics
Shares Outstanding	22,882,918,908
Opening Price (2014)	9.05
Current	9.60
Date Listed	18/11/1998
Year End	31st December

2014 Performance Analysis

The new management team has created a transformational agenda for the bank, which represented a departure from all that characterized the bank in the past and became the road map for the conversion of the bank into a world-class financial institution with its five-year rolling plan. The bank’s immense effort was clearly revealed in the released financials for 2013 and 2014. Its activities received a boost as all figures were green and tall as against comparable periods. Investors, on the other hand, were not blind to the outstanding performances hitting the market from the bank as they took strategic positions,which saw the price up through the years before the current season. Similarly, the book value has grown in the same direction to N12.12 from N9.70 achieved in 2010. Investors’ confidence complimented its price as valuation tools placed the bank's stock at N13, representing a 106 per cent discount to its market value of N6.29.

Five Years Financial Figures of Access Bank Plc
Company Figures
	2014		2013		2012		2011		2010
Gross Income	245,218,000,000		206,786,000,000		206,498,000,000		135,635,000,000		91,142,000,000
Profit After Tax	42,976,000,000		36,298,000,000		39,328,000,000		15,378,000,000		11,086,000,000
Net Assets	277,411,000,000		244,482,000,000		241,285,000,000		192,065,000,000		175,370,000,000
Full Dividend	0.60		0.60		0.85		0.60		0.20
Estimated Ratios
EPS	1.88	1.59		1.72		0.86		0.61
Pay Out Ratio	31.90	37.74		49.41		69.79		32.62
PE/RATIO	3.25	4.62		6.01		7.60		14.66
E/YIELD	30.79	21.64		16.65		13.16		6.82
Price to Sales	0.57	0.81		1.14		0.86		1.78
BOOK VALUE	12.12	10.68		10.54		10.74		9.70
ROCE	0.15	0.15		0.16		0.08		0.06
PROFIT MARGIN	17.53	17.55		19.05		11.34		12.16
YEAR END	December	December		December		December		December

Five-Year Financial Performance Analysis

Looking at the scorecard of Access Bank forthe past five years, the bank grewits gross income on year-on-yearbasis from N91.14 billion in 2010 to N245.22 billion in 2014. Within the opening and end of the period under review the bank had grown its income on the average by 33.81 per cent. The smart jump seen in 2012 could be linked to the acquisition of Intercontinental Bank, which has been sustained in 2013 and 2014.Regardless of improvement in the bank’s gross earnings it is glaring that its profit margin for the two financial years were down to reflect high cost of operation.

The acquisition may not have removed the financial institution’s profit line trend. Rather, it has boosted its performance since then. This could be seen in the impressive numbers recorded within the full year financials post-acquisition. This is impact of change in management approach and improved service product capable. Although noteworthy is the several unfavorable regulations every bank in the sector went through in the last two years, but the similarities in the chart pattern is a pointer that regulations shape performance and calls for attention at any time.

The over 31.9 per cent dividend payout is a laudable achievement, considering the high Cash Reserve Ratio (CRR) of 75 percent for public sector and 20 percent for private sector funds for almost two years. The ratio was harmonized to 31 per cent by the Monetary Policy Committee of the Central Bank of Nigeria (CBN) for both sectors at its third bi-monthly meeting for the year on Tuesday. The earnings accounts for 30.79 per cent of the market price as at the released date. Thus the period for return on investment was flat as shown in the table above.

As in other key financial indices, Net Assets builds up on year-on-year before and after the acquisition process. This is correspondingly responded to by the estimated Book Value that grew to currently stand at N12.12, which is above the market value of N6.29.

Estimated Performance Ratios

 The bank’s earnings per share for the five-year period increased, reflecting its earnings power despite the additional shares from the acquisition of Intercontinental Bank, which did not weaken the EPS for the period under review. The amount earned per share increased from 61 kobo in 2010 to 188 kobo in 2015. The improved earnings within the period has reduced investors waiting period to 3.25x at the market value as released date, from high of 14.66 times in 2010.

Book value for the period has grown from N9.70 to N12.12, which gives investors high safety of margin considering the market price.  Other performance ratios are looking up and becoming interest especially the yield and profit margin, price to sales and others.
On the strength of the figures posted and consistent dividend for past five years, the stock is fairly priced at N13.

CURRENT 2015 RESULT

Meanwhile, the bank’s first quarter result for the period ended March 31, 2015 was made available to the market recently, consistent and earlier than release date of 2014. The numbers revealed impressive performance as its top and bottom lines were northward. Gross earnings remained robust, compared with that of the corresponding period by 34 per cent from N57.27 billion in 2014 to N76.78 billion. Profitability level for the period was up by 18 percent to N13.67 billion from N11.63 billion in 2014.  The bank's cost of operation for the period hampered its profit as reflected in the profit margin for the quarter, with provision for non-performing loan rising and tax increasing by 156 percent and 24 percent respectively. Net assets bounced up to N293.21 billion from N255.53 billion last year. Its earnings per share for the period went up to 60 kobo from 51 kobo in 2014.

The 60 kobo EPS for first quarter is a replica of the price in 2.78x, which is lower than the 4.23x recorded last year. The first quarter book value for the period stood at N12.81. The drop in profit margincompared to last year’s is evidence of increase in cost centres, just as results for the quarter indicates high cost of operation that calls for management’s attention. The injection of additional funds by way of rights issue that was concluded recently and the harmonisation of the CRR to 31 percent by the CBN are expected to boost the bank’s liquidity position to create more money which will lead to high earnings at the end of the day.

ACCESS BANK PLC
FIRST  QUARTER
COY	2015	2014
	(N)	(N)	% Chg
Date Released	April 15, 2015	April 26, 2014
Gross Earnings	76,781,000,000	57,267,000,000	34.07
Profit After Tax	13,668,000,000	11,626,000,000	17.56
Shareholders' Fund	293,205,000,000	255,527,000,000	14.75
ESTIMATED RATIOS
Earnings Per Share	0.60	0.51	18.00
PE Ratio	2.78	4.23	-34.28
Earnings Yield	9.00	5.91	52.28
Book Value	12.81	11.16	14.78
ROE	4.66	4.66
Profit Margin	17.80	20.30	-12.32
Year End	Dec	Dec

Technical View

The pullback in Access Bank is a buy opportunity, as reversal is imminent. Traders and Investors are to position right away as the stock is currently trading at a discount and the expected improvement in liquidity for the sector will further boost its performance in the near future.  The stock has formed a bullish channel, while at the same time a symmetrical triangle waiting for a breakout. 

Valuation

The equity looks very attractive at the market value, as the Price to Sales Ratio for full-year 2014 and first quarter 2015 stands at 0.57x and 0.51x respectively. Meanwhile, the Book Value reveal an underpriced situation. Thus, each unit of Access Bank is fairly priced at N13.00.

Analysts Opinion/Recommendations

The stock looks good for traders especially from the low price of N 6.29 from where it is expected to grow and build first tradable resistance at N6.99 and support level at N6.00. On the other hand, the management needs to concentrate efforts on strategies capable of building performance indices to post better figures in subsequent quarters and years. This will definitely increase investors’ patronage and thereby increase market judgment of its price.