Africa Prudential: Robust Earnings, Juicier Dividend Payout, Happier Shareholders

African Prudential Plc, the only listed company offering share registrar and related services in the country, recently presented its scorecards for the full-year ended December 31, 2018 to the Nigerian Stock Exchange (NSE), exactly same date it laid that of 2017 before the market. This has stood the company out among the early filers that enable investors make proper investment decision and projections in good time.
A major highlight of the report was the impressive dividend payout on the strength of its strong performance, despite an unstable financial market environment and economic situation as reflected by the mixed economic data released in recent times.

It must be noted that the company’s decision to diversify its operations and ensure achieve long term sustainability and viability that would support its price on the exchange, thereby creating value for all stakeholders continues to reflect in the numbers. The strategic rolling plan and projection of Afriprud should guide long term investors, given management’s efforts to meet and surpass forecasts, which have started manifesting in the 2018 quarterlies and full year figures. The company was able to consolidate its solid performance, regardless of the challenging business environment.

Its robust technology driven product innovation and marketing helps deliver satisfactory services in an efficient manner, while ensuring improved cost and risk management as reflected in the profitability ratios.
In the period under review, revenue gained 35.24% from N3.32bn in 2017 to N4.49bn, driven by the diversification efforts, as well as transactions from the core service area as a leading and proactive registrar in the nation capital market.
Within the period also, profit after tax was up by 14.04% to N1.95bn, from N1.72bn in 2017, which produced Earnings Per Share (EPS) of 98 kobo from the previous year 86 kobo, notwithstanding the high credit loss, as finance cost and operating expenses which resulting from continued expansion and new product development that impacted profitability level.
The uptrending earnings and fundamentals supported its price between the February 26, 2018 released date for the 2017 financials and this year, despite the down market in 2018.

The stock is currently selling at discount below its book value of N4.30and Price to Earnings (P/E) ratio of 4.96x against 6.05x in 2017 to reduce investors’ waiting period on improved earnings recorded by the company. Retained earnings for the period also improved by 21.27% from N4.89bn in 2017 to N5.93bn.

Valuation/Recommendations
The company’s impressive and improving numbers remain points of attraction, despite the unstable global and domestic financial markets.
The 2018 scorecard indicates where the company is headed, especially by the time the new businesses are further consolidated upon in the course of ongoing financial year.
The current Book Value at N4.30 and profit margin of 43.54%, is the highest so far in the market at the moment, and signifies that the stock is undervalued at the current market price on the strength of its P/E ratio of 4.96x. This is okay, just as the current Dividend Yield of 13.16% is attractive and above the nation’s inflation rate.

The consistency of dividend payment by the company over the last five years is another point of attraction, given that it reveals the potential in the company, in relation to economic and business development.
Based on this reality, we recommend BUY for medium and long-term investors.
Also important to note is the company’s relatively small outstanding numbers of share, a plus judging by the fact that 70.12% of the shares are in the hands of corporate bodies and institutional investors.

Technical View
Africa Prudential’s price action reveals a pullback as it was adjusted for dividend recommended by the directors in the 2018 financials, breaking down the lower line of the rising channel that was uptrending late last year. This was until the recent markdown that created buy opportunities within the strong support level of N3.50 to N3.68 per unit ahead of its 2019Q1 results.
Traders should be on the lookout for support price that would offer new entrance as reversal is imminent at the second support price of N3.58 per share. The strength of the trend is strong as ADX is above 20 reading 21.18

History
Africa Prudential Plc was established in 2006 and listed on the exchange in 2013 to provide share registration service. The company is a technology–driven Capital Market Investment Mediator (CMIM). It was fully owned by United Bank for Africa Plc before being quoted on the NSE, thereby becoming a publicly owned company with many shareholders. Its standard-delivery service for corporate organisations in the primary and secondary sectors of the capital market has always been its strong performance.
Its 31 years of share registration experience in the Nigerian Capital Market has afforded the company opportunities to participate in various offers, including Initial Public Offerings, Right Issues, Debentures, as well as corporate and government bonds. But recently diversify its business to generate more income.

Performance Analysis
A look at the company’s five-year performance shows oscillating trend that reflects the changing economic situation which slowed down in 2016, before rebounding marginally in the following year, before the ongoing back and forth movement supporting the company numbers that supported the 42.86% dividend growth for the period.
Financials for the period under consideration reveals that the management has surpassed its forecast and projections four times in the last five years.

Within the period, for example, Afriprud has consistently grown gross earnings and other performance indices, just as revenue for the period grew by 112.17% to N4.49bn, from N2.11bn in 2014.
Profit for the period was up from N1.22bn in 2014 to N1.95bn, representing 59.84% increase, after recording the lowest net profit of N1.02bn in 2016. The commitment of management to grow earnings and manage cost as reflected in its profit margin for the review period is above standard, both international and domestic environment.

Net assets on the other hand, currently stand at N8.6bn, from N4.53bn in 2014, revealing a five-year uptrend. The company’s dividend payout has been a function of its improving earnings for a period, bringing total dividend payment to N2.15, which is above the company’s listing price in 2013. This means that investors that took position in the stock at the time have recouped their entire investment from dividend paid alone, not considering capital gain. What better way to eat your cake and still have?

Estimated Performance Ratios
The company investment and efficiency ratios during the period under review have been unstable, while revealing its positive position as the amount earned by investors and management were higher at 98 kobo from 61 kobo in 2014. It however slowed down to 51 kobo in 2016 as shown in the table below. This is a reflection of the company’s strong earning power in an unstable risk business environment.

Its price earnings ratio is still good at the current estimate of 4.96x from a high of 6.05x in 2017. The last full year EPS is a yield of just 20.17% of the market price as of the release date after recording a steady Earnings Yield growth from 19.34% in 2014 to the highest in 2015 at 27.95%. With the recent Dividend Yield of 10.33% as at the price on released date, Book Value for same period ranged from N2.26, N2.29, N2.28, N3.47 to a high of N4.30 in 2018, which supported higher retained earnings.
Putting this ratio and the market price of the stock side-by-side signals an opportunity for short investors, no matter whether they are short or long-term players.
Profit margin over the years have improved as management effectively controlled cost to boost profit, suggesting that in every one naira income generated 44 kobo is a net income.

https://investdata.com.ng/2019/03/africa-prudential-robust-earnings-juicier-dividend-payout-happier-shareholders/