UNITY BANK hits 50 kobo levels. A case for investors.
reporting for easykobo.com on Thursday, Sep 12 2013 from Lagos, Nigeria
://www.easykobo.com/News.aspx?id=1760



Sep 12 (Lagos) – Shares of Unity Bank Plc ( UNITYBNK ) hit 52 week low of 50 kobo per unit in intraday trading today at the Nigerian Stock Exchange in Lagos. For those not aware, UNITYBNK is the cheapest banking stocks available in Nigeria based on the price per stock. The stock declined to its lowest possible levels on heavy volumes of 28 million units which is almost 3 times its average daily 90 day volume.





So our in house analyst decided to take a bullish look at this company. The basis of this analysis is a basic assumption that no banking stock in Nigeria should trade at such a cheap level because it is a national level bank after all and although it may not have a brand presence anywhere close to the likes of GUARANTY , ZENITHBANK , UBA or FBNH it is still a national bank with presence across the nation. Also in this analysis there are some comparisons between UNITYBNK and some other banks. It is also worth noting that some points in this article were picked from a conversation between a potential buyer of this stock and a private analyst.





When looking at a stock, it’s important to find out the total outstanding shares number for the stock. So UNITYBNK has 38.4 billion shares outstanding. That is a lot of shares outstanding and will prove difficult to service in respect to dividend payouts or delivering a high earnings per share. But that argument does not really hold up when you compare with some other banks like GUARANTY (29 billion), ZENITHBANK (31 billion), FIDELITYBK (28.9 billion) although it’s a lot more than STANBIC which has little more than 16 billion shares outstanding.






In 2012, UNITYBNK posted PAT of N 6 billion. And in the first quarter of 2013, Unity posted PAT of N 2.12 billion on revenue of N 14.71 billion. Net interest income grew by 7% yoy and PAT grew by 8% yoy. Operating expenses also grew by 7% to N 7.3 billion during the first quarter. So Earnings per share for first quarter is about 5 kobo per share. So if we were to annualize it we can expect Unity to earn around 19 kobo per share this year. For 2012, Unity had EPS of 17.6 kobo per share.






The Book value per share for UNITYBNK is N 1.33 so it currently trades heavily under its book value. Unity is now trading at a P/E ratio of 2.84 times much below industry average and Price to Book (P/B) of 0.37 times. On these numbers the bank looks attractive.






On the flip side, Unity Bank is considered to be an inefficient bank by some analysts who think the bank is an underperformer because of its management. In 2012, the PAT increased by more than 126% so such analyst may have a point. If the bank can lower its operating expenses and management expenses then it will send a signal to such analysts that it was going through a change.






Also the loan to deposit ratio for Unity Bank stood at over 67% and that could lead to higher non performing loan portfolio for the bank. Analysts could be worried by that high ratio. An analyst who spoke with us pointed out that Unity is based in Abuja and is close to the government so it is possible that a lot of their loans are made to the government which could be good or bad based on which side you are on.





UNITYBNK has deposits of N 270 billion out of which N 99 billion are government deposits. So the bank could suffer at the hands of the recent raise of CRR on public deposits to 50% by the Central Bank of Nigeria. Also an analyst pointed out that "25% of their earnings come from bonds so they could take a hit as interest rates rise. And also that virtually all their loans are due in 12 months and this means they dont really have funds. "





The stock has not moved at all over the past one year and was at 50 kobo exactly one year from today. It did move up to N 1.20 in February but has gradually fallen back to the current level of 50 kobo per unit. While at the same time some other banks which can be argued to be like UNITYBNK in terms of size and numbers have increased by around 100%.





Therefore feel the market is punishing this stock unfairly. And we look at this as a buying opportunity at 50 kobo per unit. We basically see almost no risks to this investment at these levels apart from currency risk which applies to all stocks. However this should not be considered a recommendation to buy UNITYBNK stock because the stock cannot fall below this level according to the rules of the Nigerian Stock Exchange. Based on today's high volumes it seems some investors are already taking advantage of the low price today.

Should I invest?

Yes.... Long term.
They still have negative retained earning and won't be paying dividend for min of 2 years, but as u know, when the bulls come, even the snail will run.

Interesting analysis, Nice to meet an expert here, please what do you think about Wema bank? they have been low and quiet for some years now, last bonuses given was in 2005, present day share price is 0.97. Could there be an explanation to their present situation? Should one just leave the shares he has there or sell it all for whatever little he can get now or what?

Also of note- Unity bank is now a regional bank and not a national bank as reported by the analyst.

unity bank is actually worth about N1.40 in the long term
new venture capitalist are rumoured to the gearing up to come in, volume traded is increasing and price in still of good value. buying at any price below 70k and hold. the dividens is also of great value.

@mercy- unity bank its a national bank and not a regional bank- point of correction

My bad, its wema dt is regional.

Unity bank shares would be good for long term not for short time

@dahbutter- I believe if you have not sold your wema bank- u can hold unto it. @proshare: Wema Bank's special placing successfully raises N40bn Tier 1 Capital http:///M6WsjKv62f @wemabank @NSENigeria- so as it stands now wemabank has successfully moved from tier 2 banking to tier 1.

UD4040: @dahbutter- I believe if you have not sold your wema bank- u can hold unto it. @proshare: Wema Bank's special placing successfully raises N40bn Tier 1 Capital http:///M6WsjKv62f @wemabank @NSENigeria- so as it stands now wemabank has successfully moved from tier 2 banking to tier 1.

And what happens to the no of outstanding shares?

newleaf247: UNITY BANK hits 50 kobo levels. A case for investors.
reporting for easykobo.com on Thursday, Sep 12 2013 from Lagos, Nigeria
://www.easykobo.com/News.aspx?id=1760



Sep 12 (Lagos) – Shares of Unity Bank Plc ( UNITYBNK ) hit 52 week low of 50 kobo per unit in intraday trading today at the Nigerian Stock Exchange in Lagos. For those not aware, UNITYBNK is the cheapest banking stocks available in Nigeria based on the price per stock. The stock declined to its lowest possible levels on heavy volumes of 28 million units which is almost 3 times its average daily 90 day volume.





So our in house analyst decided to take a bullish look at this company. The basis of this analysis is a basic assumption that no banking stock in Nigeria should trade at such a cheap level because it is a national level bank after all and although it may not have a brand presence anywhere close to the likes of GUARANTY , ZENITHBANK , UBA or FBNH it is still a national bank with presence across the nation. Also in this analysis there are some comparisons between UNITYBNK and some other banks. It is also worth noting that some points in this article were picked from a conversation between a potential buyer of this stock and a private analyst.





When looking at a stock, it’s important to find out the total outstanding shares number for the stock. So UNITYBNK has 38.4 billion shares outstanding. That is a lot of shares outstanding and will prove difficult to service in respect to dividend payouts or delivering a high earnings per share. But that argument does not really hold up when you compare with some other banks like GUARANTY (29 billion), ZENITHBANK (31 billion), FIDELITYBK (28.9 billion) although it’s a lot more than STANBIC which has little more than 16 billion shares outstanding.






In 2012, UNITYBNK posted PAT of N 6 billion. And in the first quarter of 2013, Unity posted PAT of N 2.12 billion on revenue of N 14.71 billion. Net interest income grew by 7% yoy and PAT grew by 8% yoy. Operating expenses also grew by 7% to N 7.3 billion during the first quarter. So Earnings per share for first quarter is about 5 kobo per share. So if we were to annualize it we can expect Unity to earn around 19 kobo per share this year. For 2012, Unity had EPS of 17.6 kobo per share.






The Book value per share for UNITYBNK is N 1.33 so it currently trades heavily under its book value. Unity is now trading at a P/E ratio of 2.84 times much below industry average and Price to Book (P/B) of 0.37 times. On these numbers the bank looks attractive.






On the flip side, Unity Bank is considered to be an inefficient bank by some analysts who think the bank is an underperformer because of its management. In 2012, the PAT increased by more than 126% so such analyst may have a point. If the bank can lower its operating expenses and management expenses then it will send a signal to such analysts that it was going through a change.






Also the loan to deposit ratio for Unity Bank stood at over 67% and that could lead to higher non performing loan portfolio for the bank. Analysts could be worried by that high ratio. An analyst who spoke with us pointed out that Unity is based in Abuja and is close to the government so it is possible that a lot of their loans are made to the government which could be good or bad based on which side you are on.





UNITYBNK has deposits of N 270 billion out of which N 99 billion are government deposits. So the bank could suffer at the hands of the recent raise of CRR on public deposits to 50% by the Central Bank of Nigeria. Also an analyst pointed out that "25% of their earnings come from bonds so they could take a hit as interest rates rise. And also that virtually all their loans are due in 12 months and this means they dont really have funds. "





The stock has not moved at all over the past one year and was at 50 kobo exactly one year from today. It did move up to N 1.20 in February but has gradually fallen back to the current level of 50 kobo per unit. While at the same time some other banks which can be argued to be like UNITYBNK in terms of size and numbers have increased by around 100%.





Therefore feel the market is punishing this stock unfairly. And we look at this as a buying opportunity at 50 kobo per unit. We basically see almost no risks to this investment at these levels apart from currency risk which applies to all stocks. However this should not be considered a recommendation to buy UNITYBNK stock because the stock cannot fall below this level according to the rules of the Nigerian Stock Exchange. Based on today's high volumes it seems some investors are already taking advantage of the low price today.

Thanks for this post, learnt from it, i've being meaning to start investing but never had enough information on how to start but i got to learn a few things and from there i knew i needed a stock broker so how can i start working with a stock broker, which can you recommend and can we trade live online in Nigeria, thanks.

I wonder what the OP thinks of his post now.

passwelle:
I wonder what the OP thinks of his post now.

The OP wrote based on his knowledge BUT Mr market has a mind of its own, no one can fathom it!

jamace:
The OP wrote based on his knowledge BUT Mr market has a mind of its own, no one can fathom it!

My Oga, it just shows the futility of most of these analysis. Two years on, said Unity is now at about 14k, if the reconstruction is considered.