walcolm:



[size=18pt]are these post your original analysis or you're copying and pasting from another site?[/size]

lol. They are mine and they also appear on my blog. Tnx

ugodre: Some have requested that I review Transcorp Results. I will do that once they release it officially on the NSE. But for now here is a flash back comment I posted following their 2012 Q3 earnings report.

TRANSCORP 2012 Q3 EARNINGS REVIEW

Transcorp Plc posted a revenue of N1.13b down 39.5% from the N1.87b posted in the same period last year. This followed the 36% drop posted at the end of the first half of the year compared to last year as well.

The result also fails to beat the company’s forecast of N2.6b in income for the period. Operating profit dropped 32% to N753m for the period. However, the company has continued to reign in on cost churning an operating profit margin of 66% compared to 58% posted same period last year. Being a Holding company, much of Transcorp’s revenue come from dividend and investment income in companies and securities respectively.

They continued to rely on net interest income to boost pre-tax earnings posting N1.6b at the end of the period.

ON PLANS FOR NEW ISSUE


The Transnational Corporation of Nigeria, Transcorp, announced today that it plans to increase its authorized share capital from N18billion to N22.5billion. It also plans to approve for its directors to issue 13billion ordinary new shares of 50kobo each by way of a rights issue. Transcorp shares price as at the day of announcement (25/2/2013) was N1.65.

If they were to announce a rights issue today, the company will be raising about N21.4billion ($138.3million). Transcorp currently has a negative working capital of about N20b which I believe they plan to crash against their share premium. The new equity they plan to raise will help the company fund its major expansion programs especially in the area of Power, where they just won one a bid to acquire a stake in the Power Generation Companies.

The proportion for which the rights issue will be made has yet to be announced, however my bet is that it may be one new share for every four held in the company.

Some have requested that I review Transcorp Results. I will do that once they release it officially on the NSE. But for now here is a flash back comment I posted following their 2012 Q3 earnings report.

TRANSCORP 2012 Q3 EARNINGS REVIEW

Transcorp Plc posted a revenue of N1.13b down 39.5% from the N1.87b posted in the same period last year. This followed the 36% drop posted at the end of the first half of the year compared to last year as well.

The result also fails to beat the company’s forecast of N2.6b in income for the period. Operating profit dropped 32% to N753m for the period. However, the company has continued to reign in on cost churning an operating profit margin of 66% compared to 58% posted same period last year. Being a Holding company, much of Transcorp’s revenue come from dividend and investment income in companies and securities respectively.

They continued to rely on net interest income to boost pre-tax earnings posting N1.6b at the end of the period.

DIAMOND BANK Q1 2012 - FOLLOW UP REVIEW

I reviewed Diamond Bank 2012 results already on this thread and had identified my concerns. They have now released their 2013 first quarter results which gives us an insight into their outlook going forward. Remember their share price was panned upon release of their 2012 Audited accounts but in typical bullish fashion has increased on the back of their 2013 Q1 earnings report.

So what has changed?

Net Interest Income rose 21% to N24.5billion (2013: N20billion) for the first quarter of 2013. Whilst this looked good on the surface, Net interest margins dropped to 72.4% (2012: 81%) as it cost more to lend. Operating profits increased also from N7.8billion in 2012Q1 to N8.7billion in 2013 Q1 but as mentioned earlier operating expenses sliced of 68% of Operating income this quarter compared to 65% in the prior period. At the end of the period pre-tax profits rose 11.3% to N6.2billion. Good to know the bank is still making profit and far more comforting that its lost loans was just 13.3% of Net Interest Income compared to 23% in the prior year.

What next?

There indeed is progress in the underlying results even though efficiency continues to posse a threat. The bank is also at cross roads as it continues to lend more (1.25% higher than lending in December 2012 already) making it vulnerable to structural defaults. Expectedly, the banks still needs to shore up its capital adequacy ratio as Net Assets is just 19% of its loans to customers, not much change from December 2012. As such, its impressive 5.6% return on equity is expected to drop in the coming quarters as the introduction of new equity will surely reduce earnings per share at least in the short term.

Should I then buy?

I could understand the bullish sentiments out there as their share price is intrinsically low trading at 84% its book value. It rose 2.7% to N6.31 today. Their ability to demonstrate that they can indeed raise badly needed funds is a metric for me to invest. But for now, I'd pass.

TANTALIZERS PLC 2012 AUDITED ACCOUNTS- LOSS MAKING, LOST GLORY?

At their peak in 2008, Tantalizers was one of the foremost fast food company in Nigeria known for rapid branch expansion all over Lagos. They were a perfect competition for Mr Biggs who back then (and till now) had a larger share of the market. Things were so good back then, Tantalizers launched an IPO and went on to declare a profit after tax of about N305.4million at the end of its financial year in 2008. What will ensue afterwards was a stock market crash that coincided with a drop in profits for the company from its peak in 2008.

Tantalizers released its 2012 audited account with Revenue dropping slightly by 8.8% to N4.19billion. The drop in cost of sale was not able to provide improved efficiency as Gross Profit fell 11.5% year on year to N1.9billion. The company for the first time in its operation as a publicly quoted one will go on to post a loss after tax of N303million.



Why are they loosing money?

Tantalizers ironically have consistently maintained a steady stream of revenue over the last five years averaging N4.7billion per year. But as revenue has remained pretty much flat (at a CAGR of -2%) earnings have gone south and Net Assets have hit a bumpy ride. In the current year under review Tantalizers spiraling cost that over the years finally caught up with the revenues as SG&A was 12% higher than gross profits and other income. So despite being able to post revenues in excess of N4billion, the 8% drop in revenue this year to N4.19billion was weak enough to throw the company into a loss. By the way total cost and operational expenses was N4.5billion in 2012 less than N4.6billion in 2011. The result is a loss in operational profit and by the time interest takes its share of cost a loss of N303million was posted.

I always wondered why fast food restaurants find it hard to deal with rising operational expenses. A look at their expense profile probably throws more light into this. After deducting cost of sale and amount paid to suppliers the resultant value added, a sum of N1.1billion was left in 2011. Out of that amount salaries and wages chalked off 47% and depreciation and asset replacement sliced another 43.66%. These figures will rise to 61.56% and 63% for salaries and depreciation respectively in 2012 as value added declined to N918million from N1.1billion in 2011. In a previous blogpost about fast food companies I noted that Tantalizers had over 2300 staff on their payroll taking staff cost per head to about N282,000 per annum. Sure this has dropped from prior years (assuming the staff count is the same), these are still high expense numbers for a company this size.

Tantalizers also has long term debts of about N1.1billion or 33% its equity. Whilst that is not too much debt my surprise however is how low their interest payments have been over the last two years, N16million in 2011 and N35million in 2012 (averaging 3% interest rate in 2012). This seem unrealistic in this economic environment so I am hoping a breakdown will explain why.



Take the risk and buy or just scamper?

In 2011, Tantalizers forfeited N330.8billion of its revenue reserves earned between 2004-2009 to the Federal Inland Revenue following the outcome of back duty investigation (back dated tax investigations). This reduced their Revenue reserve to N91million in 2011 and with the current loss of N303million, dividend payments and additional tax adjustments, revenue reserves are now a negative N328million. Dividend payment for this company is years away from occurring. The market recognizes this and so the company's share price has been sitting at a rock bottom price of 50kobo with no inkling that it will rise. The 30day average trade volume is 2,510 an inconsequential amount for intending buyers or sellers.

I must add though that its Net Assets Per share of N1.04 makes the company a candidate for a take over someday. The company has consistently increased its investments on property plants and equipments (PP&E), Investing about N1.4billon between 2011 and 2012 alone. A change of business model, drastic cut down in expenses is what a revamped management could bring to the table if they are to stall the rise and expansion of the likes of KFC. For now, this is wishful thinking, so I might as well just keep my money in pocket.





Tantalizers 2012 Audited Accounts is posted on the website of the NSE

Aseye: hi guys, don't know if anyone here can help me. I've got some stocks managed my stock broker. sometimes i get to peep on cashcraft.com to check the market prices and how the stocks are doing but recently, i noticed the segment of that website where you get to see the list as been removed and they have a pop up that says they apologize, that its a new policy from NSE, really don't know why...but just want to know if there is any other means online i can get daily prices of stocks so i can still continue to monitor my stocks. thanks.

Bloomberg is the best. See link http://www.bloomberg.com/quote/FBNH:NL Once youre there just go to the search bar and type any stock you wish

I wrote this article on my blog about a year ago and is a prelude to my next review of Tantalizers Plc.

IS IT TIME TO DUMP MY INVESTMENT IN FAST FOOD COMPANIES?

In almost every street corner in Lagos and major cities in Nigeria, there is fast food restaurant. From Mr Biggs to Sweet Sensation to KFC to Chicken Republic etc they are everywhere. Just walk into any of them at peak periods between 12noon to 2pm and you may not get a sit. Go back a few hours later at 8pm and you may not get food to eat because the shelves are empty. Certainly, this guys are getting a lot of patronage which ultimately result to cash. But does this cash transcend to Profit??

The only way one can know if these guys make profit for their shareholders is to look at their financial statements. Unfortunately, only a handful of them are quoted companies making it difficult to analyse them in their entirety. The quoted ones should however serve as a guide as to whether they are making money or not at least theoretically. Like a opined in an earlier blog post, the food business in Nigeria is highly competitive as the barrier to new entrants is quite low. The Fastfood business also face this same problem.

A look at Tantalizers Annual Report for 2008-2011 reveal a startling idea of just how unprofitable these businesses are. Tantalizers for example have made revenues of not less that N4.5b over the years. However, most of it is eaten up by huge cost of sales and admin expenses both taking an average 54% and 45% from revenue respectively . This leave’s the company with little or no operational profit before interest and tax making the business model a cyclical drag on profits. Bigtreat also share a similar trait with an even worse result. In 2009, cost of sale of N2.5b took a huge chunk out of their Revenue of N4.2b with operation cost and interest eating up the rest, leaving a loss position of N441m. Even UAC the owners of Mr Biggs show very low profit margins. Their 2010 revenue of N34b only yielded profit before tax of about N2b (less than 10%).

Could it just be competition ripping into their profits or is just the inability of their management to reign down on cost? Tantalizers for example have a staff strength of over 2000 with salaries and wages taken up about N693m and N648m for 2009 and 2010 respectively. Another cause may also be the huge depreciation cost that these companies incur year after year. With some of them owning Fixed Assets with book values of over N6b its not inconceivable to understand why their depreciation cost can go as high as N400m every year alone, a whopping 10% of their revenue. Thats probably why interest on loans isn’t so much of an issue as these cost are only accounting profit so do not represent cash payments. A look at their operating cashflows buttresses just that. Tantalizers in 2010 had Operating Cashflows of N654m alone in that year. However, it purchased fixed assets of over N700m in that same year. As such they will have to write off huge depreciation cost year after year from their profits before paying dividends.

Ironically, the little money these fast food companies make come mostly from business not directly associated with the selling food. For example, Big Treat made N34m from rental of its properties in 2008 and another N16m from other sources. UAC made a profit of N4b on its Real Estate business in 2010 alone. Tantalizers, the only one of them with a currently released financials has mostly relied on other income to remain profitable. it made N159m and N140m in 2009 and 2010 respectively on other income with rent making up N130m and N114m of that revenue in 2009 and 2010 respectively. 2011 is also not any difference as they made N113m in other income.

This sadly, doesn’t offer comfort to any serious shareholder as increased returns on shareholders funds is no more than a pipe dream. Tantalizers have in the last couple of years declared a paltry 2kobo only on a nominal share price of 50kobo only, a meagre 4% compared to other sectors that yield over 100% of nominal price. Would I hold on to the shares if I had one? My answer surely is anything but in the affirmative as I do not see any trend suggesting a concrete plan to reduce cost.

shigidi:

@ugodre, my question to you is...what P/E ratio is considered expensive and what is considered cheap? Please do you have an idea of the historical AP/E ratios in the NSE? Afterall, Nestle continues to be steady at 28, whereas Diamond struggles to even maintain a P/E of 4.

P.E ratios to me just reveals what kind of premium you are willing to pay for a stock. It is just one of those metrics you look at when you want to buy a stock. A stock could have a very low P.E ratio but may still be unattractive. In your example Diamond has a low p.e ratio because its fundamentals are currently weak. Nestle has a high p.e ratio today because the fundamentals,are high and so people are willing to pay high premium to own the stock.

If a company has good fundamentals and a low P.E ratio that is below 10 then it certainly is a cheap stock by any standards. I could make a case to purchase a stock with a high p.e because the stock has a very high growth potential. That is not the case for Nestle

ETRANZACT INT. PLC POST N128MILLION PAT: NEED TO DO MORE


Businessday headline yesterday (10/4/2013) read "Mobile money struggles despite N1.1trillion market potential". Etranzact International Plc is a major player in the mobile money market in Nigeria owning products such as 'Pocket Moni" the e payment platform. They released their 2012 audited results with revenues rising 36% year on year to N3billion. Gross Profit also rose during the year to N939million (2011: N756million). The company will proceed to post a profit after tax of N128million up from 57% from last year's result.

Is the Result flattering?

Despite over 100million Nigerians GSM subscribers Mobile money in Nigeria have so far failed to gain traction. As such Etranzact result can either be viewed as half empty or half full. I will examine their results as half empty to help put into perspective the relative lack of growth in their bottom line. This year they very well grew PAT by 57% to N128billion. In fact PAT has grown at a CAGR (compounding growth rate) of about 20% in the last five years whilst revenue also grew on a CAGR of 38%. But these impressive growth rate is flattery and meaningless if it doesn't translate to value accretion. For example, the company in the last five years have posted profits and losses which if set off against each other will result in a net gain of only N18.7million (without factoring in inflation) !! Meaning only N18.7million has been added to bottom line in the last five years despite posting revenues of about N7.7billion.

The company's achilles heel obviously lies in its inability to cut down operating expenses. Just imagine, Selling General and Admin Expenses (S,G&A) was a whopping 95% of Gross Profit in 2012 and was 90% the year before. Operating profit margin was just 1.5% even lower than 3.6% posted in 2011 meaning that the increase in PAT had little to do with its operational efficiency. It basically made profitability this year because of the N132million in other income.



Will I invest at the moment?

When Etranzact was listed on the NSE at an entry price of N4.80. It traded today (11/4/2013) at N3.47 and has lost over 22% of its value in the last one year. Its share price has remained flat in the last month with neither an increase or decrease. Currently it trades at a high price to book value of 5.5x making the current share price unattractive. A stock with an earnings per share of 3kobo should be trading at 50kobo tops (which by the way is a P.E of 16.6X). The company is very well positioned to benefit from the mobile payment revolution that is bound to happen in Nigeria. Whilst that is not a flattery assertion, management has not demonstrated a consistent ability to grow organically. Till I see a sign of that happening, its a no for me.





Etranzact 2012 Audited Accounts was posted on the website of the NSE

MOBIL OIL PLC POST N2.8BILLION PAT: PROFIT DECLINE CONTINUES FOR THE SECOND YEAR RUNNING

Oil marketing companies have had a turbulent 2012. From the subsidy strikes to the house of rep public hearing to the partial removal of subsidy. So don't be surprised when you see quoted companies in the sector report declining revenues and profits. Mobil Oil Pls released its 2012 audited accounts with revenues rising 30% year on year to N80.8billion. However, cost of sales increased sharply thus reducing Gross Profit year on year by 19% to N8.2billion. Pre-tax profit at the end of the period was N4billion (2011: N5.99billion).



So what's with the result?

Oil marketing companies typically have very low profit margins as most of they incur very high direct cost of sale. Therefore, when margins shrink despite increase in revenues, the worrying signs are that products are just getting too expensive to secure. Mobil oil apparently spend N90 of every N100 in revenues on paying making products available for sale. On a flip side, this actually makes the increase in revenue a whole lot important because if it were just 10% lower the company may have been starring at losses. The rise in revenue can be seen in their ability to turnover inventory 13 times annually a figure that is higher than industry average.

Stock Worth Buying?

Mobil Oil is currently priced at N123 and has declined in value by 12% over the past one year. Their 52% drop in earnings per share surely hurts their market value more even more. At N123 the price is 15x its earnings making expensive in my opinion. It's current and future outlook for increased profitability does not justify this high premium on its earnings. Profit decline began in 2011 after their PAT dropped 3% when compared to the prior year and this year it has gone worse dropping nearly 30%. But its Mobil and lets hope a turn around will emerge this year. For now I await first quarter earnings report to decide whether to buy.



Mobil Oil Plc result was posted on the website of the NSE

shigidi: @ugodre, do you see a similar fate for FCMB? Particularly with regards to low net asset to loan ratios?

I won't be surprised if that were to be the case too.

DIAMOND BANK POST N22BILLION PAT...BUT NEEDS HELP

Sometime in early 2011 I found myself in the middle of an argument between two friends. The argument was about local Nigerian banks preferring to issue debit cards rather than credit cards. To my surprise, I learnt that Diamond Bank indeed issued credit cards provided you can prove to having a steady source of income. That in my view was evident of large scale retail banking on the back of aggressive lending that should increase risk and off course rewards. Diamond Bank released its 2012 Audited Accounts with Gross Earnings rising 34% year on year to N144.1billion. Net Operating Income at the end of the period was N96billion better than the N38billion posted same period last year. The bank will go on to post a profit after tax of N22.1billion coming back to profitability after declaring a loss last year of about N14billion.



How did the turnaround happen?

Diamond Bank's success had more to do with lesser loan losses than it had with revenue. Yes Gross Earnings increased and customer deposits soared but the key factor here was the loan loss suffered in 2011. In fact if you deduct loan losses from both side then last year they may have made a profit of N41billion and this year N39billion. This simply shows how vulnerable bank incomes are are when loans go bad. Diamond bank has lent aggressively over the last twelve months increasing their loans to borrowers by almost 51%. This is at a time when the likes of Zenith and GTB are doing 10%. This trend in aggrieve lending seem to be prevalent with medium sized banks. As at ed of 2012, Sterling Bank had loans that was 5 times its Net Assets just like Diamond.



Any need to be worried?

Much of its loan losses last year arouse from overdrafts or loans which have fallen due but unpaid. It lost about N25billion in impaired overdraft loans compared to N8billion this year. N361billion (67%) of the banks loans are secured by real estate whilst the rest are either unsecured or "otherwise secured". Is there a risk of write offs in the coming years? Surely, as defaults are part of banking anyway. It will not be unwise to look deeper into the quality of their loans in the coming months. Their seemingly low net asset to loans ratio is an obvious sign that things don't look good for the bank. Currently it has a negative of about N15billion from cash generated from operations....a worrying sign.



Do I buy the shares

Diamond Bank currently trades at N6.30 and the shares has rise 148% in the last year. The share price dropped today (9/4/2013) by 10% its biggest one day drop in 8 years. Analyst attribute that to expansion plans that the bank announced will cost $750million to finance expansion and meet CBN capital adequacy ratio. The latter may perhaps have triggered the sell off. It currently trades at less than book value (0.97) making it a candidate for a take over or acquisition. If you wish to buy this stock I suggest you hold on for now as a sell off is currently the order of the day.






Diamond Bank 2012 Audited Accounts was posted on the website of the NSE

Millionjeff: Dear my follow nairalanders,i stumble on one website today.and the name of the company sovereign wealth funds.i want to know if is it good company to invest in.is 30% profit return every month.they are into oil and gas. The minimum deposit is $1000 dollars.the company is based in switzerland.please anybody who has knowledge about them should share it with me.i need your help.

sounds dubious to me. Pls be careful

AFROMEDIA PLC....IN URGENT NEED OF A LIFELINE TO AVOID GOING UNDER

When a company suddenly drops into steep losses after years of profitability it becomes imperative to read the chairman's statement and see if there is a logical explanation from the arrowhead of the board. The Chairman's report for its 2011 financial year ended up covering about 7 pages of the 71 page annual report with just one full page explaining the reason for the poor results. Back then Afromedia posted a revenues of N3.2billion and Pre-tax loss of N409million. Things have seen gone from bad to worse as it. The company posted a revenue of N1.6billion for the year ended September 2012 and pre-tax loss of N4.4billion. Third quarter 2013 earnings forecast projects a revenue of just N400million not enough to show a sign of an imminent recovery.

Why the decline?

At last year's chairman's report the company blamed declining profitability on the rising cost of concessioning outdoor advertising space from the likes of FAAN and LASAA as well as the drop in price due to budgets cuts from its major customers particularly in the telecoms industry. That surely may have been a reason at the time but the drastic reduction in revenues is one to send shudders down the spine of shareholders and wonder what had happened. Revenues dropped by 50% year on year whilst gross profit margins also dropped to 31.4% from 44% the year before. To add salt to injury, operating expenses rose sharply by 181% to N4.5billion (2011:N1.6billion). It will be interesting to know why they incurred this huge rise in opex even though I might guess they may have written off prepayments and trade debtors which otherwise may no longer materialize.

The company will go on to declare a loss after tax of a whopping N4.4billion nearly wiping put its entire equity. This makes me now postulate in retrospect that the reason for the dividend payout last year and bonus issues may just be a premonition that major losses was to be expected in 2012, a situation that may have created a moral deficit and inability to declare dividends.



Whats the way forward

Afromedia has been in operations since 1928 when it was called West African Publicity Company. It obviously has survived the pre and post colonial era and rode through wars, coups and counter coups. The current result is probably the stiffest test the company faces to remain solvent. The company's external debts of N300million as well as overdrafts of over N1billion is a definite pathway to bankruptcy if its equity raising plans are not pursued with increased urgency. Recent increase in the activity in the stock market may well be the best sign yet that it is time to consider a public offering. It will be foolhardy to suggest a recapitalization alone will solve their problems.



They need to renegotiate advertising concessions with owners to align with the realities of the advertising markets. Companies have since realized fancy billboards and branded bus stops do not necessarily promote brand awareness as well as TV and Radio commercials. Don't be surprised if commuters spend more time glancing at ads in social network sites than they do on the backdrop of billboards on bus stops as they await to board. The company claims to have invested over N133million in exploring potential markets that may provide a source for revenue growth. Well, that investment had better start yielding fruit in 2013. Unfortunately, the first quarter 2013 results suggest that is not the case as revenues have declined further by 44% to N313m (2011:N704million). They forecasted a revenue of over N400million in the third quarter ending June 2013 pitting them at profit of about N5million. Is the loss hemorrhaging receding?



Buy or dump the shares?

The shares has been flat over the last year trading at a rock bottom price of 50kobo. No point looking at the price earnings ratio as as losses make those irrelevant making me look at their price to book ratio. At 50kobo per share their share price is almost 5x its book value!!! By the way, Okomu Oil's's share price is just 1.7x its book value. In other words, Afromedia's share price of 50kobo makes the current price eve flattering and making a "buy" order quite ambitious. For those who own the shares and looking to sell, best of luck.




Afromedia Plc 2012 Audited Accounts is posted on the website of the NSE

STERLING BANK POST N7.5 BILLION PRE-TAX PROFITS - RESULT IS ANYTHING BUT STERLING

"Need a loan? Care to see if you qualify now"? 'You want to own a Kia? Skoda? Pajero? with just 20% deposit your bound to get a finance to help you achieve your desired and you only have to pay in 36months'. These are some of the pronouncements your here from Sterling Bank as it aggressively increases it lending with the hope that bottom line will improve. Has this worked so far? Sterling Bank released its 2012 Audited Accounts with Gross Earnings rising 44% to N68.8billion. Net Interest Income also rose 32% to N23.89billion and other income from commissions and investments adding a nicely N15billion. The bank will go on to post a pre-tax profit of N7.5billion up 33% from N5.6billion posted last year.



Result Overview

Sterling Bank avoided making a loss last year despite having to write off over N6billion in loans impaired. This year they face no such threat, writing back about N243million in recovered loans. Net Interest Margin came out at 44% as the bank earned N44 for every N100 in interest income derived from its lending activities. It will be interesting to know what the break down of the banks interest income was during the period considering that most Nigerian Banks continued to see strong net interest margins on the back of risk free lending. For example, the likes of Zenith and GTB both posted margins in excess of 70%. At 44% the bank must be paying a higher amount on its deposits a factor that limits the spread they can get from their lending. At N23.8billion this year the bank can boast of a 43% rise over the prior year, expected of a bank that is hustling to catch up with the big five.



Operating Expenses for the bank also rose 31.9% at a period when banks have been aggressive at cutting down on expenses. Even though as a percentage of Operating Income expenses faired better than last year one would expect the bank to achieve a opex margin of at-least 20% if it is to stay relevant and competitive. Almost every cost centers increased this year with personnel expenses accounting for N9.3billion (23% of operating income). Depreciation cost rose to N2.5billion (2011: N1.5billion) and Other operating expenses N19.9billion (2011:N12.4billion). Had it posted an operating profit margin of 20%, its pre-tax profits may have been N13.7billion instead of the N7.5billion actually earned.



What should a shareholder be worried or excited about?

As per excitement, one would be happy that the bank is at least still able to post profits which is higher than last year's. One particular aspect that should be looked at is the operating profit which as risen 100% to N7.5billion. It shows that the banks operation has at least improved over the last year despite rising operational cost. My worry however lies with its ability to compete in the coming months as banks consolidate on their improved balance sheets and begin risk lending. The FG is about to double down on borrowing which will surely see banks reallocate assets to lending to businesses. With the big five leveraging on their huge balance sheets to lend to better quality assets, the likes of Sterling may have to be exposed to riskier and rapidly growing retail businesses. For example, whilst the likes of Zenith, GTB and Access bank increased lending 10.4, 10.8 & 4% respectively, Sterling increased theirs by 41%. Thus their loans is about 5x its Net Assets.



A share worth buying?

Sterling Bank share price has risen 197% over the last year and currently trades (April 7,2013) at about N3.05 per share. It also proposed a dividend of 20kobo per share resulting in a yield of about 6.5% based on current share price. Based on this result its share price is about 6.93X its earnings per share and just 1.02x its book value. The share price on the back of its fundamentals is about where it should be even if I wouldn't consider it cheap. Those who rely on its growth potentials may consider buying at this price as a mere 50% rise of its P.E ratio will immediately put the price at N4.55. I won't be surprised if this happens in the next two months going by recent trends in the market and its impressive dividend yield. However, its ability to grow revenues and profit without taking in poor risk assets may determine its trajectory in the coming years.

The Bank MD, Mr Yemi Adeola has been at the helm since 2005 and has guided the bank past the very turbulent years of 2008-2009. However, the remaining 2 years of his reign may well shape the way he is perceived long after he is gone.





Sterling Bank posted its 2012 Audited Accounts on the website of the NSE

shigidi:

This is where i srruggle with the fact that nestle and nigerian breweries are selling at p/e's of 28. As their growth rate is barely 20%. Whereas the banks have growth rates of more than 50%. Surely there has to be a price correction for the nestle, cadbury and the likes. Or am i too pessimistic??

no you are not. Price correction will come but it depends on demand and supply. Nestle stock is one most institutional investors want to own but its not very liquid making it scarce

rossi49ja: Ugodre, please clarify me on how PE ratio and EPS affects share price and its profitability.

EPS: Earnings Per Share. Imagine that you have a business you co own with some friends. You own 500shares or 50% of the company and your friend owns another 50% 500 shares. That means you both own a combined 1000shares. If at the end of the year your business makes a profit of N100k, then your earnings per share for the business will be N100,000 divided by the 1000shares which is N100.

Price Earnings. Now if your friend decides he no longer wants the business and ask you buy his 50%(500shares) for N250,000. It means,you pay N500 for each share he owns.

P.E ratio helps you determine if his share price is expensive or not.it simply is the price per share divided by the earnings per share. In this example, N500/N100 = 5x. In other words you are paying a price equivalent to 5 times the profit the business makes.

Whilst this may seem,unreasonable at first investors look at the future earnings potential of the company. Now imagine that in five years that company makes a profit of N500k or earnings per share of N500. Your N500 share price divided by the earnings per share of N500 is just 1 meaning the premium you paid five years earlier has been justified. Meanwhile whilst you bought that share from him at N500, the value may also rise more than that as people now want to pay a premium for the new earnings of N500k.At the same 5x that shares you paid N500 may now be worth N2,500 assuming everything remains the same.

So,basically p.e ratio is used to determine the value of a share to see whether it is expensive. A higher p.e ratio may also been that investors place a higher growth potential in the earnings of the company. News businesses typically have high p.e's whilst large and older ones do not.

Hope you get the drift.

cheers

jacobs123: Why is Zenith Bank TAX so low compared with GTB. They had comparable PBT of over 100Bn but the PAT is just worlds apart. Any explanation please?

Their respective annual report when published will help explain. Taxation is a function of how much expenses the tax man allows you to write off before they tax you. That is where tax efficiency comes in. It appears for now that Zenith Bank was more tax efficient in this case.

samguru: good job ugodre,i so much like ur analysis but i would advise you demystify the stock investment terminology so as to make your analysis more comprehendable

thanks,its very insightful

Let me know where you need explanation and I can help. Using some of those terms are almost impossible but I will try to simplify in subsequent post. Cheers

occam:

Warren Buffet is absolutely right, where there is transparency in the market. The corruption and opaqueness in the Nigerian market is still a huge problem. Have they cleaned up the whole mess of 2007? Were any companies/individuals prosecuted for the massive frauds? Remember fraudulent malpractices was the main reason the Nigerian market collapsed

Institutional investors with deep pockets can risk investing in the Nigerian market. Individuals have to pause before committing funds.

I'll say for now, in Nigeria people should invest in tangible businesses or assets. Things you can see. Real estate, food processing etc Even eCommerce businesses has a huge growth potential

Good reminder. That is why I started this thread. No matter how much lies they embed in their financials, by analysing them we shall expose the lies one by one. That is why we must all strive to understand the fundamentals...even in Real Estate!

Born 2be Rich:

Wonderful....simply epic..Although i expected the price of CCNN to fall but it didnt..


Bros no vex but am still waiting for sterling bank analysis and other banking stocks....One down one more to go

Thanks bro

Will try to analyse that this weekend.

OKOMU OIL POST FLAT PAT: YET, STOCK LOOKS LIKE A MUST HAVE!!!

Okomu Oil Plc is currently the toast of the market and the reason for that is not far fetched. They have proposed a dividend per share of N7 and a bonus issue of one for one. People like these sort of freebies and would die to be part of it. But is this justified? Okomu Oil released their 2012 Audited Accounts (IFRS) with revenues dipping 8.8% to N10.1billion. Gross Profit was however better rising slightly by 3% to N8.2billion. Profit After Tax however, dropped slightly to N3.59billion (2011:N3.9billion).

So what's with this result?

First a little about Okomu Oil. They are a leading oil palm producing company in Nigeria and have been in operation since 1979. They were privatized sometime in 1990 and have consistently delivered on profits over the last 10years. This year too saw robust profit of N3.6billion 8.5% lower than what was achieved in 2011. The reason for this is explainable . Firstly, the company saw a slight dip in revenues from N11billion to N10billion even though in the last five years revenues have grown with a CAGR (Compounded Annual Growth Rate) of 19% growing from N4.7billion in 2008 to N10.1billion in 2012. In fact it jumped from N6billion to N11.1billion in 2011 alone, the highest jump in its history, mainly due to a 144% jump in export earnings from Rubber. So 2012, may just be a slight blip or some correction in revenue expectability. Another reason could be the drop in inventory turnovers, as they only turned inventories1.7X in 2012 compared to 2.85x in 2011. Thus, it took them an estimated 207days to clear inventories as against 127days in 2011.



Secondly, profitability however failed to beat 2011's record of N3.9billion due to rising operational cost. Employee cost rose sharply by 25% to N1.97billion probably as a reward to employees after the magical 2011. Other expenses also jumped to N1.6billion (2011: N1.35billion). So whilst revenue dipped slightly, operating cost rose. Luckily, PAT was still N3.5billion thanks and in no small measure to a huge drop in cost of sale. It could be that they have finally found a way to reduce direct export cost maybe due to various incentives available to export oriented business in the last year or so. Their annual report when published will help explain this.



Should Shareholders be worried about this performance?

Despite the drop in revenue and rising cost, this result probably represents the reality of the current business environment they will be operating in. Investors also, should not see this as a bad result but should view the result in a larger context and ask if shareholder value was impaired. So far, that didn't seem to have happened. Operating profit margins are high and so is profit margin. In fact, for every N100 in revenue they make a profit after tax of N35.4 (2011: N35.3). Return on Average Equity (ROAE) was 16% and if you deduct accounting entries brought about by IFRS, it rises to 23.6%. The company is also debt free with Equity making up 81% of total assets. The company also sits on a cash machine, generating N5billion in operating cash in 2012 (2011: N4.5billion). It currently sits on N3.9billion of cash enough to pay dividends estimated at about N3.3billion (almost all of the earnings made this year). On the back of this, Investors should be ecstatic. They could have still made shareholders happy without even giving out bonus shares. The Bonus payment may just be a trio objective to rewarding existing shareholders by distributing part of its revenue reserves of about N17.6billion whilst also increasing the liquidity of their stock. This will also boost return on equity in the coming years.



Is it worth buying?

Now this may depend on your appetite. The share price has risen over 216% in the last year and currently trades at N95. In terms of whether it is expensive it sure isn't considering the fundamentals I just put out!!! At N95 (April 5 price) the share price is only 12x its current earnings per share and with the planned bonus and dividend payments people who buy now will cherish the stock. Unfortunately though, only about 476million of their shares is outstanding making it seem illiquid. Out of its average N45billion market cap, only N872million of it was traded in the last month in terms of value.

Nevertheless, if I had the cash, I'd be on the sidelines waiting to buy....NOW!!



Okomu Oil Plc posted its audited accounts on the website of the NSE

*NOTE: I WILL BE REVIEWING THE COMPANY RESULTS MORE OFTEN IN THE COMING WEEKS AS THEIR ANNUAL REPORTS ARE PUBLISHED AND 2012 FIRST & SECOND QUARTER RESULT IS ANNOUNCED

Born 2be Rich: @ugodre, nice analysis but am waiting for your analysis on sterling bank and CCNN

Just posted that of CCNN. Let me know what you think? Tnx

CCNN PLC POST N1.19BILLION PAT: RISING COST, SLUGGISH REVENUE GROWTH

Cement Company of Northern Nigeria Plc AKA CCNN is one of the foremost Cement Companies in Nigeria competing with the likes of Dangote Cement and Wapco Lafarge. The company reported an 8.7% rise in revenue to N15.1billion for the period ended December 2012. Gross Profit however dropped from N5.5billion in 2011 to N4.24billion in 2012. Operating profit also dropped by half year on year to about N1.8billion. The company also disappointed as profit after tax dropped 48% from the prior year to N1.19billion.



So what happened?

Going by the numbers, one might conclude the company have failed to generate enough growth in revenue to cover expenses. However, CCNN has actually performed averagely in terms of growing revenues over the last 5years as revenues has grown from about N9.8billion in 2008 to the N15.1billion posted in 2012 resulting in a CAGR of about 9%. But compare that to pre-tax profits which have dropped by a CAGR of 9% over the last five years too. The problem is that expenses have grown much higher and pre-tax profits has had a zigzag revenue growth over the last 5 years. In fact the best year was in 2009 where they made a pre-tax profit in excess of N3billion, other results have been sea saw like.



Zeroing in to 2012, the companies cost of sale appears to be their achilles heel rising from N8.2billion to N10.8billion. They therefore earned N28 from every N100 of revenue made after deducting cost of sales. SG&A increased slightly by just 9% helping further dent profitability during the period. I am even more worried that about the percentage of SG&A that is sliced out of gross profits, 80%!!!! Surely, the company is in a highly competitive sector.



Any Silver Lining?

On a flip side though, the company has zero long term borrowings a marked difference from its competitors. Much of the company's assets are financed with trade creditors (24%) while as Equity covers 53%. In terms of their ability to sell their inventories quickly enough, the company had an inventory turnover of 2X which when compared to Wapco's 4.7X may explain why revenues haven't quite grown enough to match rising cost. Nevertheless the revenue was still able to provide a ROE of 14% and ROA of 13% and example of how little or no debt can help a company make good profits despite declining revenue growth. The company has clearly used its assets to generate very good sales earning over N1 in sales for every N1 in assets invested.



Is it worth Investing?

CCNN has been around for years playing in the northern market. The emergence of Dangote Cement as a nationwide giant will surely impede on their market share forcing them to loose more and more business. A radical approach is needed to survive in the competitive cement industry. Currently, the industry is having to cope with a glut in the market as more and more cement gets imported whilst production capacity locally also increases amidst high operating cost. The share price is currently N10.55 and has risen about 125% year on year. The price represents a P.E ratio of just 11x making it appear cheap when compared to Wapco 16x and Dangote 23X.



In a today's bullish market this looks like an attractive price but don't be fooled, the premium appears high considering the latest result and outlook for the company. A company that spends 92% of its income on operating and direct expenses despite still posting double digit ROE is a company on the decline. Hopefully, management will act quickly.




CCNN 2012 Audited Accounts is posted on the website of the NSE

excellentmomma: @OP nice job, is Forte oil formerly Agip or AP(African Petroleum)

Thanks a lot for the observation. I have corrected it.

FORTE OIL PLC, FINALLY FINDS PROFIT BUT....

Forte Oil Plc (formerly African Petroleum) has announced profitability for the year ended December 2012. The company posted a profit after tax of N1billion reversing its last year loss of N10.8billion. This is despite a drop in revenue from N117billion in 2011 to N90.9billion at the end of December 2012. Operating profit also turned positive during the year reversing the N9.8billion loss in 2011 to N2.8billion in 2012. So how was this possible despite a dip in revenue?



Opinion about the result

The company was able to achieve profitably despite a dip in revenue growth year on year by simply reducing overheads and direct cost. They were able to save an amazing N39billion in cost over last years expenditure helping them turn into profitability. That is a remarkable feat in under one year and it will be interesting to see how this was achieved when they release their annual report. But the result, however impressive still leaves loads of concern for me especially on the balance sheet side. Total loans have increased from about N9.3billion to about N13billion in just one year!! Overdrafts make up a huge chunk of this rising 55% year on year.

The company is also not generating enough organic cash from operations to cater for investments and repayment of loans. For example, whilst it generated N1.9billion in operating cash flow, it spent N3.3billion in investments and another N1.8billion in net loan repayments. It is easy to infer that the company currently cannot repay it loans as it stands. Negative working capital was also N9.8billion (2011:N8.2billion negative) as they grapple with huge trade creditors.

Whilst they have done well with cutting cost drastically, SG&A slicing off 77% of Gross Profit is still a put off for me for any business. At the end of the first half of 2012 the industry average was about 76.5% with the likes of OANDO posting 63% and total 67%. More can be done here I believe.



Is the stock worth buying

Currently the company has a negative retained earnings of about N53.8billion. This means for them to be able to pay dividends some day, they will have to make enough profits in excess of N54billion. They could also seek SEC approval to set of their share premium of about N62billion to pay this off thus wiping out almost N55billion in share capital. For me this option will be logical if current fundamentals justify their path to financial integrity. One year's result is not enough for me to believe that is happening anytime soon.

In typical Nigerian fashion though, their share prices has traded positively over the last year rising 28% year on year to about N13.65. This will give it a premium of 15.6 over its current earnings per share. Expensive in my view! Book Value per share is currently N7 meaning the share price has a N6.6 premium over its net assets. Now this in most cases is an indication of a cheap stock, however, their negative reserves and poor debt to equity ratio is enough to send shivers down my spine. Clearly one could make a case for a share price of about N17 as its ideal value (based on Ebita multiples) but that would be on the assumption that profitability will continue amidst declining revenue and more cost cutting.

I am no optimist when it comes to valuing stocks making me pit a price of about N8 as a buy proposition.





Forte Oil 2012 Audited Accounts can be found on the website of the NSE

NAHCO PLC POST N593MILLION PAT DOWN 25.7%: HUGE OPERATING COST

Nigerian Aviation Handling Company (NAHCO) released its earnings report with revenues rising modestly by 4% to N7.3billion. Operating profit at the end of the year was N905million compared to N1.2billion posted in 2011.Profit after tax also dropped 25% to N593million at the end of the year. The company has proposed to pay dividends of 25kobo per share based on this result down from the 40kobo per share paid a year earlier.

Opinion on the result?

From the initial results posted one is quick to point out to increase in operating cost as well as cost of sales as both rose marginally higher than the increase in revenue during the period. The aviation industry took a big hit last year following the plane crash and several controversies surrounding the sector which affected growth industry wide. Passenger traffic is expected to fall in 2012 when compared to 2011 stemming from the crisis in the industry which may be a reason for the minimal revenue growth. NAHCO face little competition in the industry and should actually do better despite the crisis in the industry. A silver lining in this result may perhaps be their ability to reduce debtors by half over the last year to N1.1billion. However, working capital for the period was negative as current liabilities over shot current assets.



The company also has a good cash pile of about N819million and generated a whopping N4billion in operating cash flow. But with their planned dividend payout of 25kobo per share and outstanding shares of over 1.4billion they will have to look for cash to pay out over N370million in dividends (almost half their december cash balance)


Is the stock worth buying?

Results like this should be viewed in a larger context . Whilst revenue have been increasing over the years, profits have declined from about N1.1billion in 2010 to the N593million they posted this year. Return on Earnings this year also dropped to 11.2% compared to 15% last year indicating a decline in optimizing shareholder value over the prior year. Also for a business with spends up to 74% (2011:63.7%) of its Gross Profit on operating expenses and likely growing the company looks to lack competitive advantage in an industry it solely dominates.

Investors have also not taken likeness to this stock as it has declined about 2% year on year to N6.40. In fact it has been on a slide over the last month dropping from N7.90 on the 4th of March. Year to date it has gained 93kobo having opened at N5.47 and peaking at N8.8 at the end of the January 2013. The current share price represents a premium of 15.6x over its earnings per share. I expect the intrinsic price to be about N4 per share or 1.1x its Net Asset Per share (Book value per share) which is just N3.6. Holders of the stock may consider selling as the fundamentals don't justify the current price especially if their results continue to decline. Watch out for their first quarter results as this will give a clear direction of things to come this year.

Note Pls: Corrected the Net Asset Per share, it is N3.6 not 61kobo as previously stated. This resulted in my adjusting its intrinsic value to N4 from N2 earlier posted





NAHCO Plc 2012 Audited Accounts is published on the website of the NSE

PRESCO PLC INCREASES PAT BY 377% TO N8.6BILLION: IS IT A CASE OF CREATIVE ACCOUNTING

If you have been following my blog then you'd be familiar with my likeness for Presco Plc. As an indigenous Oil Palm company the company is in the forefront of those leading non-oil exports for Nigeria. I have blogged about them twice in the past and at that time I recommended a buy and hoped it will drop to a price of N10 (even though it was N14 at the time) for value hunters like me to buy. Today their share price is N22.5 and has risen 125% Year on Year. Why the alarming headline then



Presco released its 2012 full year earnings with revenues rising 31.8% to N11.2billion. Gross profit also increased 106.5% to N8.3billion as the company reduced its direct cost from N4.4billion to N2.8billion in just one year!!!. Operating profit increased from N3billion in 20111 to N9.2billion in 2012 following a massive 89% drop in overheads to N182million. This company must be some draconian cost cutting spree!! Expectedly, profit after tax increased in tandem from N1.7billion to N8.5billion at the end of the year. Now this is a remarkable feat by no small measure and it is important one knows why and how it happened.



How did they get here?

Since I obviously do not have answers to why I can attempt to understand how they got here. Looking at the result, it is easy to conclude the 377% rise in profit after tax is as a result of a huge cost cutting drive as the company reduced operating expenses and cost of sales by about 130% and 35% respectively when compared to the prior year. Yet they increased revenue by 31.8%. Digging deep one wonders how they were able to reduce cost of sale to N2.8billion while yet growing revenue. Also, the company reported zero selling and general expenses for the year only accounting for N182million as distribution expenses only. That was a red flag for me and so I had to dig into their nine months results which I reviewed in the past. At the end of september 2012, the company reported that it incurred about N1billion on SG&A and distribution expenses and another N3.3billion on cost of sales. How did a combined N4.4billion in direct cost and expenses (in 9months) get reduced to just under N3billion in the remainder three months??



One could say even if you estimated a cost and expenses of about N5.5billion (going in line with the 9 months result) profit will still be an impressive N6billion or so why the alarm. However, a slight indication of unclear financial reporting is enough for any serious investors to dump the shares of a company. I hope they come up with a logical explanation soon enough or probably just tell us there was a typo in there somehow.



How good is this result

Without being prejudiced I will decline to give an opinion on the results as it fails to give any reasonable explanation. Too many questions to be answered to enable one make an informed investment decision. Hopefully, there will be some clarification soon.



Is the stock worth buying?

As mentioned above, Presco on the back of its past year is a buy and hold stock. The current price of N22.5 representing about1 2.6x of trailing earnings (2011 PAT) price to book ratio is 1.3x for the most recent quarter. This current result if it stands will further reduce P.E ratio to about 2.6X making the stock look like a candidate for a rally. The company on the back of this result also declared a dividend per share of N1 same as what it declared in 2011. At N22.5 the stock is appears cheap making my desire for a N10 price a pipe dream. Ironically the stock lost N2.5 in value after announcing this result yesterday!!





Presco 2012 Audited Accounts Appeared on the website of the NSE

ZENITH BANK BREAKS THE BANK, MAKES A RECORD N100BILLION PAT FOR 2012

Zenith Bank has released its 2012 Full year financial statements and in typical fashion broke records. They have now made headlines as the first local bank to hit N100billion in Profit After Tax. Zenith Bank finished the year with a Gross Earnings of N307billion up 25.8% from the N243billion they posted a year earlier. Interest Income a major part of the gross earnings was a whopping N221billion (2011:N163billion) for the period under review. Net Interest Income (which is interest income after deducting interest expense) was N156billion meaning that they incurred N29 for every N100 of Interest they earned. Zenith Bank also earned an extra N50.4billion in commission and fees for the period and an extra N20billion from other sources bringing the total Net Operating Income to N218billion. Zenith Bank will go on to post a record N102billion in pre-tax profits and N100.6billion in profit after tax for the year ended December 2012.



How did they get here?

This is where it gets interesting! So from the N307billion the bank earned as gross income N218billion will be left after deducting interest it pays to depositors and other direct expenses. Zenith has thus efficiently retained 71% of its gross earnings. Surely, the bank also incurs other operating cost such as personnel cost, depreciation, admin expenses etc. The total of this for the year came to about N119billion (2011:N116billion) leaving the bank with an operating profit of N98billion. They now earned an extra N3.5billion from discontinued operations (winding down of businesses they no longer need) which helped took them past the magical N100billion (actual was N102billion) in pre-tax profits.

How good is this result?

Zenith unlike its peers has been bogged down with huge operating cost over the years and I always figured if they are able to keep operating expenses growing below 5% they will pass the likes of GTB in terms of profitability. This they have done this year as operating expenses only sliced 55% of Net operating income. For shareholders of the company who love to hold longterm, Zenith bank also had an impressive return on average equity of 23.5% (2o11:12.4%). The implication of this is that the bank has been able to earn an extra N23.5 for every N100 shareholders own which is on industry average in quite high. Zenith Bank also ended the year with a good customer deposit base of about N1.9trillion, about N700billion more than GTB. Loans and advances also grew 10.7% to N989billion. I expect the bank to lend well over N1.1trillion by the end of this year (2013) as it cautiously looks for quality assets (borrowers).



Is the stock worth buying?

As mentioned in my past blogs, most banking stocks are cheap trading well below 10x their earnings. Compare that to Nestle trading at 28x or Cadbury 24x. As at 3rd of April 2013, Zenith Bank cost N22.28 per share representing about 7x its earnings. That in my view is cheap stock considering he impressive ROE of 23% and non performing loan ratio of 3.15% (maximum to be worried about it over 5%). It is worth nothing that banks have a way of wiping out past profits in just one year of bad loan making. Zenith Bank on the back of this result is a buy for me!!!





Zenith Bank Published its 2012 Audited Accounts on the website of the NSE

ACCESS BANK POST N42BILLION PAT FOR 2012..SHARE PRICE IS A CHEAP P.E OF 6.2X

The headlines you'd hear following Access Bank release of its 2012 full year audited accounts will surely sound like this "Access Bank Increases Profits after tax by 151%!!!". Well, that is quite true going by the results published today on the website of the NSE. The bank increased Gross Earnings by 53% to N208billion for the year. A huge portion of its gross earnings came from Interest Income which garnered about 77% of earnings or N161.4billion. Net Interest Income, an important metric in determining how efficient a bank is at making money from its core function as a lender also saw some marked improvement. The bank posted a Net Income of N96billion (2011:N69billion) for the year a margin of about 60% (2011:65.7%)



The bank spent more on operating expenses in the year under review as expenses rose 33% year on year to N87.5billion. In terms of efficiency, the bank is spending N67 of every N100 in Net operating income on paying salaries and running admin cost. Personnel Expenses grew a whopping 53% to N33.6billion during the year. The Bank is spending N25 on employees for every N100 of Net Operating Income it earns (GTB spent an equivalent of N14). It will be interesting to exactly know the reason for this which will be possible when they publish their annual report.



In what might seem like a blip to their results the bank generated negative operating cash flows of about N13billion surviving mainly on cash received from sale of investments and cash brought forward from prior year. It 2011 it generated a whopping N120billion as cash flow from operations



Access Bank will go on to post a Profit After Tax of N42.8billion a 150% rise from the N17billion posted earlier. Pre-Tax profit which is probably a better industry measure grew about 86% to N44.8billion. On the deposit side, the bank grew its deposits by an impressive 9% to N1.2billion putting them higher than GTB at the end of the year. Loans during the year also grew by about 5% to N600billion (2.5x its Net Assets).



Investors reacted cautiously to this result as its share price rose mildly to by N0.01 to N10.5. The share price has a current PE ratio of about 6.2x and has a trailing price to book ratio of 1.03 making it one of the cheapest stocks in the market. They plan to pay a total dividend of 85kobo per share in two tranches of 25koko and 60kobo. Total dividend yield amount to an impressive 8% (even though you might have to adjust it lower since dividend will be paid twice) and a payout ratio of about 50% of earnings.







Access Bank Results was posted on the Website of the NSE

GTB 2012 FULL YEAR RESULTS: INCREASE PAT BY 81% TO N86.6BILLION

GT Bank released its 2012 audited accounts with Gross Earnings rising 21% to N221.9billion. Net Interest Income also rose 32% to N130.6billion representing an interest margin of 76.7% (77.9% 2011) and further highlighting the cheap direct cost of funds available to the banks for the period. Interestingly the bank reduced its loan losses from N20.6billion in 2011 to just about N836million this year indicating either a write back or a spill over effect of the transfer of bad loans to AMCON.



Operational Profit for the period was also N103billion (2011: N62billion) and represents about 46.4% of Gross Earnings (2011: 34%) taking in the positive impact of the reduction in loan losses. The bank known for managing operating expenses, spent N43 (2011: N53) for every N100 of Net Operating Income generated (that is after deducting interest expense and loan losses) on overheads. Personnel Cost increased 16% to N25.billion but represented just about 14% (2011:17%) of Net Operating Income.



Profit after tax was N86.6billion an 81% increase from the N47.8 billion posted in 2011.The bank ended the year with an impressive Return on average equity of 33.7% . GTB has proposed a dividend per share of N1.3 representing a yield of about 4.7% (based on todays share price of N27.45). Investors reacting to the results with share price rising 5.17%. The current share price of N27.45 gives the share price a 9.15x premium on earnings per share, a relatively cheap proposition. Expect this share price to double by year end. It currently has a 101% return over the last one year





GTB 2012 Audited Accounts was posted on the website of the NSE

JULIUS BERGER PLC 2012 RESULTS – REVENUE UP, PROFITS UP

Julius Berger Plc released its 2012 year ended audited results posting a revenue of N201.5billion for the year. The revenue beats estimates of N175billion which the company projected for the year ended. The revenue is also higher than the N169billion posted in the corresponding year. Operating profit was N12.9billion, 21% higher than recorded a year earlier. Profit after tax rose 87% to N8.2billion higher than the N4.4billion posted the same period last year.



This is by no small measure a fantastic result for the company and the shareholders who now expect to approve a proposed dividend of N2.5 per share. Their share price currently sits at N53 and has a year to date capital appreciation of about 89%. A N1million investment a year ago costing N31 per share will today be worth about N1.7million today (March 29,2013) at todays share price. Dividend yield is also 5% inline with average market expectations. Return on Average equity of 66.4% is also a massive improvement on the 45% posted last year. The company is basically using clients money to make money…what else is as sweet as that?



Enough of the highlights and here comes some bad news. JB’s business model is a profitable one quite alright even though profit margins are just under 5% at 4.4%. That is typical with construction companies and for the type of equity capital they have, that probably isn’t too much of a worry. The worry however, is the huge pile up of amount due to customers under contracts mean to the operations of the company. That figure currently stands at N105billion compared to the equivalent in receivables of just N5.5billion. So the company will have to rely on money from new contracts and probably hope that other debtors pay up. Admin cost is also a worry eating up about 71% of Gross Profit compared to 68% the year before.



All this might be a worry but JB has over the years consistently delivered profits. They are also the foremost construction company in Nigeria with very heavy patronage from the Federal Government. These are all economic boons the company can and has always leveraged on. Current holders of the stock will mostly hold for the longterm as the stock good for a value portfolio. For intending owners of the stock, the current share price is about 7.7x its earnings while the price to book ratio 4.1x. This in value terms is a buy proposition as the stock currently appears cheap. Unfortunately, intending buyers may have to wait a little more as the shares are hardly available in the market.