UACN: Lower Efficiency Mitigated By Fresh Capital Injection
Company: UACN Plc
Rating: Buy
Current Market Price at Earnings Release:N13.20
Intrinsic Value: N25.26
Latest Full Yr Cash Div: N 0.65
By: Jeariogbe Tunde Segun (Equity Analyst)
Rating: Buy
Current Market Price at Earnings Release:N13.20
Intrinsic Value: N25.26
Latest Full Yr Cash Div: N 0.65
By: Jeariogbe Tunde Segun (Equity Analyst)
Financial Highlights
• The company’s share outstanding increased from 2.881 billion from N1.92 billion within the reported period. This was due to the 960,432,193 ordinary shares of 50 Kobo each at the rights issue price of N16 per share on the basis of one new ordinary share for every two ordinary shares held as at 19th October, 2017. Please note that the said offer was closed on 22nd December, 2017.
• At its Annual General Meeting held 20th June, 2018, it was reported by the management that N1.872 billion (N0.65/share) was approved by the shareholders as dividend for the year ended 31st December, 2017.
• This report considered the recently released half year financial performance statistics as released by the management of UACN, in the report.
• We observed a lower performance in efficiency, though the damage was mitigated by the recent fund raised through the above-mentioned rights issue.
• We have therefore considered all these in our valuation approach, though we hope to see a better improvement during the two remaining quarters of the year.
• The company’s share outstanding increased from 2.881 billion from N1.92 billion within the reported period. This was due to the 960,432,193 ordinary shares of 50 Kobo each at the rights issue price of N16 per share on the basis of one new ordinary share for every two ordinary shares held as at 19th October, 2017. Please note that the said offer was closed on 22nd December, 2017.
• At its Annual General Meeting held 20th June, 2018, it was reported by the management that N1.872 billion (N0.65/share) was approved by the shareholders as dividend for the year ended 31st December, 2017.
• This report considered the recently released half year financial performance statistics as released by the management of UACN, in the report.
• We observed a lower performance in efficiency, though the damage was mitigated by the recent fund raised through the above-mentioned rights issue.
• We have therefore considered all these in our valuation approach, though we hope to see a better improvement during the two remaining quarters of the year.
Corporate Figures
• The Turnover reported for the half year ended 30th June, 2018 stood 21.88% below that of 2017. Current estimate was N36.982 billion as against the previous N47.337 billion.
• Cost of Sales for the period was N29.417 billion as against N39.563 billion in the corresponding period of 2017.
• Thus, Gross profit came to N7.564 billion slightly below the N7.773 billion achieved in the comparable period of last year.
• Having considered operating expenses and adding operating incomes, Operating Profit for the period was estimated at N2.718 billion compared to the N3.910 billion reported in H1-2017.
• With lower Finance Cost of N2.412 billion (H1-2017-N3.507 billion) and higher Finance Income of N1.335 billion (H1-2017-998.012 million), the company achieved a lower Net Finance Cost of N1.076 billion as against N2.509 billion in the past year.
• Further boosting performance was the Share of profit of associates and joint venture of N461.116 million (H1-2017-N429.678 million).
• Thus, Profit before Tax stood above last year’s at N2.102 billion as against N1.830 billion reported in the similar period of 2017.
• Profit for the period therefore stood at 14.33% above what was achieved in 2017 H1. In other words, the profit for the period was N1.365 billion as against N1.194 billion.
• Retained earnings improved by 13.26% as it is now valued at N45.959 billion compared to N40.578 billion.
• Due to the slight drop experienced on the Current Assets, Total Assets for the period stood at 8.79% below that of H1-2017. Currently, it is valued at N125.53 billion as against the N137.643 billion last year.
• Similarly, reduction in the Current Liabilities lowered the Total Liabilities reported for the period to N50.918 billion compared to N63,553 billion last year.
• Thus, netting both Total Liabilities for Total Assets for the period, a higher Net Assets of N86.711 billion was achieved as against the N74.090 billion last year. The difference between the two figures is 17.03%.
• The Turnover reported for the half year ended 30th June, 2018 stood 21.88% below that of 2017. Current estimate was N36.982 billion as against the previous N47.337 billion.
• Cost of Sales for the period was N29.417 billion as against N39.563 billion in the corresponding period of 2017.
• Thus, Gross profit came to N7.564 billion slightly below the N7.773 billion achieved in the comparable period of last year.
• Having considered operating expenses and adding operating incomes, Operating Profit for the period was estimated at N2.718 billion compared to the N3.910 billion reported in H1-2017.
• With lower Finance Cost of N2.412 billion (H1-2017-N3.507 billion) and higher Finance Income of N1.335 billion (H1-2017-998.012 million), the company achieved a lower Net Finance Cost of N1.076 billion as against N2.509 billion in the past year.
• Further boosting performance was the Share of profit of associates and joint venture of N461.116 million (H1-2017-N429.678 million).
• Thus, Profit before Tax stood above last year’s at N2.102 billion as against N1.830 billion reported in the similar period of 2017.
• Profit for the period therefore stood at 14.33% above what was achieved in 2017 H1. In other words, the profit for the period was N1.365 billion as against N1.194 billion.
• Retained earnings improved by 13.26% as it is now valued at N45.959 billion compared to N40.578 billion.
• Due to the slight drop experienced on the Current Assets, Total Assets for the period stood at 8.79% below that of H1-2017. Currently, it is valued at N125.53 billion as against the N137.643 billion last year.
• Similarly, reduction in the Current Liabilities lowered the Total Liabilities reported for the period to N50.918 billion compared to N63,553 billion last year.
• Thus, netting both Total Liabilities for Total Assets for the period, a higher Net Assets of N86.711 billion was achieved as against the N74.090 billion last year. The difference between the two figures is 17.03%.
Liquidity/Risk Ratios
• Debt to Equity Ratio stood at 1.50% as against the 22.17% industry average, this is 93.23% lower than the industrial average.
• Similarly, Current Ratio stood at 9.77% below the industry average of 1.74x. Please note that the ratio is well above unity which signifies the company’s effectiveness/ability to service its current liabilities as and when due.
• Nevertheless, the equity within the last six months seemed to have experienced low patronage from the investing public as the estimated Beta value stood below the market beta and industry average.
• Interest Coverage is equally appreciable at 6.71x, although below the industry average. The academic interpretation of this is that the company has enough muscle to service its interest yielding liabilities as and when due.
• Debt to Equity Ratio stood at 1.50% as against the 22.17% industry average, this is 93.23% lower than the industrial average.
• Similarly, Current Ratio stood at 9.77% below the industry average of 1.74x. Please note that the ratio is well above unity which signifies the company’s effectiveness/ability to service its current liabilities as and when due.
• Nevertheless, the equity within the last six months seemed to have experienced low patronage from the investing public as the estimated Beta value stood below the market beta and industry average.
• Interest Coverage is equally appreciable at 6.71x, although below the industry average. The academic interpretation of this is that the company has enough muscle to service its interest yielding liabilities as and when due.
Profitability Ratios
• Cost of Sales Margin mildly stemmed below the estimate of the similar period in 2017. The ratio is currently estimated at 79.54%, as against the previous 83.58%.
• Meanwhile, Profit before Tax Margin improved over that of 2017 H1. We have estimated 5.68% as the margin between the PBT and Turnover figure, this is a 46.99% improvement over the 3.87% of 2017.
• Similarly, PAT Margin improved by 46.35% at 3.69% as against 2.52% of last year.
• Cost of Sales Margin mildly stemmed below the estimate of the similar period in 2017. The ratio is currently estimated at 79.54%, as against the previous 83.58%.
• Meanwhile, Profit before Tax Margin improved over that of 2017 H1. We have estimated 5.68% as the margin between the PBT and Turnover figure, this is a 46.99% improvement over the 3.87% of 2017.
• Similarly, PAT Margin improved by 46.35% at 3.69% as against 2.52% of last year.
Efficiency Ratios
• Although fairly above average, the Efficiency Ratios dropped against the similar period of 2017.
• Total Assets Turnover dropped to 29.46% from the previous estimate of 34.39%.
• Equity Turnover equally dropped to 42.65%, as against the 63.89% of the corresponding period of 2017.
• Equity multiplier is currently 1.45x as against 1.86x.
• Nevertheless, Fixed Assets Turnover improved by 4.51% as it currently stood at 66.10% compared to 63.25% of last year.
• Although fairly above average, the Efficiency Ratios dropped against the similar period of 2017.
• Total Assets Turnover dropped to 29.46% from the previous estimate of 34.39%.
• Equity Turnover equally dropped to 42.65%, as against the 63.89% of the corresponding period of 2017.
• Equity multiplier is currently 1.45x as against 1.86x.
• Nevertheless, Fixed Assets Turnover improved by 4.51% as it currently stood at 66.10% compared to 63.25% of last year.
Investment Ratios
• Due to the growth in the shares outstanding between the two comparable period (NB: the company did a right of 960,432,193 ordinary shares of 50 Kobo each at the offer price of N16 per share on the basis of one new ordinary share for every two ordinary shares held) the estimated Earnings Per Share (EPS) stood below that of 2017.
• Currently, EPS is N0.47 as against N0.62 of last year, this is 23.78% drop.
• The said Earnings Per Share only yielded 3.59% of the current market price as at the time this report was released to the investing public.
• P/E-Ratio stood at 6.96x as against 6.66x estimated in the similar period of 2017.
• Estimated Book Value for the period stood at N30.09 per share, dropping from the previous estimate of N38.57. This is the result of the increase in shares outstanding, without corresponding improvement in shareholders’ funds.
• Operating Expenses Margin is currently 3.69% as against the previous 2.52%
• Due to the growth in the shares outstanding between the two comparable period (NB: the company did a right of 960,432,193 ordinary shares of 50 Kobo each at the offer price of N16 per share on the basis of one new ordinary share for every two ordinary shares held) the estimated Earnings Per Share (EPS) stood below that of 2017.
• Currently, EPS is N0.47 as against N0.62 of last year, this is 23.78% drop.
• The said Earnings Per Share only yielded 3.59% of the current market price as at the time this report was released to the investing public.
• P/E-Ratio stood at 6.96x as against 6.66x estimated in the similar period of 2017.
• Estimated Book Value for the period stood at N30.09 per share, dropping from the previous estimate of N38.57. This is the result of the increase in shares outstanding, without corresponding improvement in shareholders’ funds.
• Operating Expenses Margin is currently 3.69% as against the previous 2.52%
Valuation
• In our attempt to place a fair value on each unit of UACN Plc share price, we are sure to protect the investor’s more in putting up our valuation model, in other words, we opted for a conservative valuation approach. Although this equity controls a Book Value far higher than the market valuation of its shares, we considered the reduced in its efficiency and other financial ratios.
• Please understand that the company now runs a lower debt profile which is the effect of the fund raised through its right issue. Thus, our mixed valuation model fairly placed UACN share price at N25.26 each.
• In our attempt to place a fair value on each unit of UACN Plc share price, we are sure to protect the investor’s more in putting up our valuation model, in other words, we opted for a conservative valuation approach. Although this equity controls a Book Value far higher than the market valuation of its shares, we considered the reduced in its efficiency and other financial ratios.
• Please understand that the company now runs a lower debt profile which is the effect of the fund raised through its right issue. Thus, our mixed valuation model fairly placed UACN share price at N25.26 each.
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