UACN: STRONG FUTURE FOR INVESTORS IN DIVERSIFICATION

Company Profile & History

UAC of Nigeria Plc is a company with long rich history,transforming from a trading company to a force to reckon with in many industries and sectors of the economy today. This is due to its equally rich history of mergers, acquisitions and restructuring of its business models to create value and boost its bottom line always.The company was first incorporated in Lagos, Nigeria under the name Nigerian Motors Limited on April 22, 1931 as a wholly-owned subsidiary of the United Africa Company Limited (a subsidiary of Unilever), which later became UAC International. The company's name was changed to United Africa Company (Nigeria) Limited on July 23 1943. 

It became The United Africa Company of Nigeria Limited on February 1, 1955 and started a string of acquisitions over a five-year period- a large part of the businesses of UACI. In 1960 C.W.A. Holdings Limited, England, also a subsidiary of Unilever, acquired UACI's interest in the company.
The name was changed to UAC of Nigeria Limited on March 1, 1973. In compliance with the Nigerian Enterprises Promotion Act 1972, 40 percent of the company's share capital was acquired in 1974 by Nigerian citizens and associations and in accordance with the provisions of the Nigerian Enterprises Promotion Act 1977, an additional 20 percent of the UAC's share capital was publicly offered in 1977, increasing Nigerian equity participation to 60 percent. The name UAC of Nigeria Plc was adopted in 1991. 

In 1994, following the divestment of 40 per cent interest in the company by Unilever Plc, the company became a wholly-owned Nigerian company. The transformation of UAC from a trading behemoth into a leading manufacturing concern, even though it took root in the 1980s, was given serious impetus in 1990s, following the exit of the company from its trading businesses. 

In early 2000, UAC further embarked on a series of business restructuring with a thorough portfolio review and switch of focus to value-adding operations. This has led to an era of focused growth on the foods, real estate, logistics and automobile sectors. The company recently entered into strategic partnership with Tiger Brands Limited for UAC Foods Limited and Famous Brands’ UAC Restaurants Limited and Imperial Logistics for MDS Logistics Plc

Today, UAC of Nigeria Plc isa holding company for UACN Property, Livestock Feeds, Portland Paints, Chemical and Allied Products. These diversified companies, operate in the food and beverages, real estate, paint, agriculture and logistics sectors of the economy. The Company has been active on the Nigerian economic landscape since 1879. UAC's portfolio includes leading brands such as: Gala Sausage Roll, Mr. Biggs, Village Kitchen, Snaps, Funtime Coconut Chips, Supreme Ice cream, Delite Fruit Juice, Swan Natural Spring Water, Gossy Warm Spring Water, Dulux, Grand Soya Oil, Grand Groundnut Oil, Vital Feeds and Livestock Feeds.

UAC of Nigeria PLC
Share Holding Structure
Stanbic Nominees Limited	17.83%
Other Nigerians & Associates	82.17%
Other Statistics
Shares Outstanding (MN)	1,920,864,387
Opening Price (2014)	67.00
Closing Price (2014)	34.00
Current Price	37.30
Date Listed	1974
Year End	December31

2014 Performance Analysis

The scorecards released during the year 2014 were mixed as the management of the company consistently tried tobuild on its top and bottom line on quarterly basis to post a strong full-year at the end of financial year. The share price of UACN declined steadily during the year, regardless of the N1.75 dividend payment and seemingly fair numbers posted by the company. The sharp drop in price was attributed to market sentiments and fear associated with the pre-election year. Despite its market value nose-driving, the company’s Book Value was stable through the year while earnings grew marginally due to increasing cost over the quarters.

Five-Year Financial Performance Analysis

Looking at the financialindices, UACN reveals growth in turnover figure from N52.31 billion in 2010 to N85.65 billion in 2014, representing a 63.74 per cent increase. Similarly, Profit After Interest and Tax roseyear-on-year from the N5.45 billion reported in 2010 to N10.73 billion in 2014 recording almost 100 percent growth for the period under consideration. 

Please note, there was a drop in the company’s profit level in 2011. This notwithstanding, there was an increase in dividend payout for that year. Shareholders’ Fund now stands tall, above other comparable year, at N74.45 billion from N45.59 billion in 2010. This has continued to boost its book value year to year.

In the last five years, the company has rewarded investors with a total dividend of N7.70 and a bonus share in 2012 valued at N23.20 as at released date. In other words, investors who positioned as far back as 2010 and are still maintaining their holding have lost N7.7/17.11 per cent of invested capital till date, which has also been recouped through the dividend paid, not including the value of the script issue. The stock has become more attractive at the current price, going by its diversified portfolios with most of its investments in the various brands have started yielding results. 

U A C N FIVE YEARS FINANCIAL POSITIONS
	2014	2013	2012	2011	2010
Date Released	April, 2, 2015	March 31, 2014	May 03, 2013	March 30, 2012	April 05, 2011
Price @ Released	36.20	54.00	58.01	29.00	45.00
Turnover	85,654,346,000	78,714,437,000	69,632,321,000	59,637,821,001	52,313,000,000
Profit After Tax	10,726,769,000	9,948,987,000	7,041,459,000	3,407,685,000	5,450,000,000
Total Equity	74,451,415,000	71,603,416,000	60,601,258,001	57,065,092,001	45,587,000,000
Dividend	1.75	1.75	1.60	1.50	1.10
Bonus	NIL	NIL	1;5	NIL	NIL

Estimated Ratios

UACN earnings power had grown over the years to support its share price, except for 2011 when its profitability level drop. Itsshare price grew geometrically over the years but recorded a declined in 2014. The Earnings PerShare ratio currently stands at N5.58/share. Please note that the said Price-Earnings trades at 6.48x of the market price as at release date and yielded 15.43x of the market price.The amount reported by the management of the company as profit margin is estimated at 12.52 percent of the turnover figure; the trend in this ratio especially the earnings and book value are trending up in the past five financial years indicating strength and value for the company.

Comparison between the outstanding share capital and total equity resulted in the book value of N38.76. Meanwhile, returns realised on shareholder’s fund stands at 14percent, reflecting a marginal growth over the period under review. On the strength of the numbers posted, the stock is fairly priced at N55 each, considering investors’ preference, constant dividend payout, management, estimated ratios and products diversification.

U A C N- ESTIAMATED RATIOS
	2014	2013	2012	2011	2010
Earnings Per Share	5.58	5.18	4.40	2.13	3.40
PE Ratio	6.48	10.43	13.19	13.62	13.22
Earnings Yield	15.43	9.59	7.58	7.34	7.57
Book Value	38.76	37.28	37.86	35.65	28.48
ROE	0.14	0.14	0.12	0.06	0.12
Profit Margin	12.52	12.64	10.11	5.71	10.42
Year End	Dec	Dec	Dec	Dec	Dec

Technical View

As at early 2013, the share price of UACN resumed an uptrend and sustained same till early 2014 before giving way to downward trend that lasted through 2014 as it was making lower lows and recently forming a double bottom pattern in an uptrend move. Meanwhile, the short to medium trending pattern holds strong support around N26 and N32 respectively. At this point, the stock is attractive for positioning.

Bollinger Bands are 23.59 percent narrower than normal and UACN closed below the upper band by 17.5 percent.  At the same time other indicators like CCI are signaling entrance of funds in the stock.

Recommendations

The stock is very strong and looks attractive, especially when considered for short and long-term positions.Traders taking short trades on UACN should position right away and target between N45 to N50. Looking at the trading ratio of 6.48 times of it earnings and book value of N38.76 which is above the market price, shows that the stock is undervalued.