Investors and financial analysts have responded positively to the impressive audited half year results of United Bank for Africa (UBA) Plc released last week.
The bank’s shares consecutively led the price gainers’ chart, gaining 27.3% within three trading sessions to close at N4.20 on Monday, September 7, 2015. The appreciation of the bank’s share price is well above the 4.25% appreciation in the All Share Index (ASI) in the same period. This is an indication of the strong demand for UBA shares, after the positive results announcement. UBA shares also ranked among the top three most traded stocks on the Nigerian Stock Exchange (NSE) within the period, thus reinforcing the liquidity of the stock.
More importantly, most analysts believe that UBA is trading at significant undervaluation to its intrinsic value, as both foreign and local analysts believe the stock should trade between N6.59 and N8.50 over the next 12 months. According to Bloomberg, Analysts like Rencap value the stock at N8.00, whilst their colleagues at CSL Stockbrokers value UBA at N7.20/share. One notable consensus is that all analysts believe that the stock is grossly undervalued and investors may soon realize the true intrinsic value of the stock, as the Bank consistent delivers superior return to shareholders.
UBA on 3 September released its audited half year results showing earnings grew strongly by 21% to N166.9 billion during the period, compared to N138.2 billion in the same period of June 2014. The Bank’s profit before tax (PBT) also rose 35.1% to N39.0 billion, while profit after tax (PAT) was up a significant 40% to N32 billion within the same period. As a reward to shareholders, the Bank announced the payment of an interim dividend of 20 kobo per share.
Further analysis of the UBA 2015 half year results showed significant improvement in operational efficiencies. The Bank’s net operating income rose 21% to N108.7 billion in June 2015, compared to N90 billion in the comparable period of 2014. The Bank has continued to focus on operational efficiency, with a cost to income ratio of 64%; as against 68% in the same period in 2014.
UBA maintained a healthy loan book, a tribute to both its risk management and prudent approach to lending, with non-performing ratio at just 1.8% of total loans granted, one of the lowest in the banking industry.
Speaking on the results, Phillips Oduoza, Group Managing Director/CEO said the result has been achieved “In spite of a challenging operating environment.” He said the bank’s business strategy “has proved to be resilient, balancing prudence, with an ability to significantly grow bottom line and continue to focus on operating effectiveness.”
He assured that UBA will continue to support “our customers and working with them to achieve financial success for them and the wider Nigerian and African economies”.
Analysts at CSL stockbrokers while reaffirming their “Buy” rating on UBA stocks and a target price of N7.20, almost twice the bank’s last week closing price, noted that based on the half year results, UBA is likely to surpass the current profit and earnings forecasts.
Also in their submission, analysts from Chapel Hill Denham said some key strategic decisions taken by UBA in the last few months had brought impressive results, adding that this was evident from increased earnings reported by the bank.
In their words, “UBA’s H1-15 results came in better than our expectations as Earnings per Share (EPS) grew by 40.8% year-on-year relative to our full year forecast growth of 13.6% year on year. We like the aggressive stance UBA took on expanding its loan book, which appreciated by 8.5% since the beginning of the year.”
Also analysts at Renaissance Capital said; “UBA’s numbers read well versus our estimates. We note that profit before tax growth in the second quarter of 2015 was supported by a decent top-line growth, and a decline in impairment charges, down by 51%.” The investment banking firm reaffirmed their “Buy” rating on UBA stock with a target price of N8 per share.
The UBA Group is one of Africa’s leading financial institutions, operating in 19 African countries, as well as New York, London and Paris. The Group provides a sophisticated suite of banking services to over 8 million personnel and corporate clients across Africa, priding itself on bringing financial inclusion to the Continent and supporting Africa’s next generation of entrepreneurs