Coy: U A C N PLC. (UACN)
Rating: Buy
Current Market Price: N5.40
Year High: N9.60
Year Low: N4.50
Fair Value: N9.12
By: Jeariogbe Tunde Segun (Equity Analyst)
Key Investment Ratios
- In this report on UACN Plc, we observed the half year financial statistics of the company for the period ended 30th June, 2019, compare same with figures released in the corresponding period of 2018, and establish growth status
- Valuation was done with full year financials for proper representations of the company performance and right projection.
- Key factor that worked against the company’s fair value is the negative performance posted at the end of the 2018 financials. Please note that the loss was incurred from Other operating losses with items such as Impairment of Receivables, Assets for disposal, Investment in warm spring waters, losses on property plant and equipment, loss on sale of investment properties amongst others
- Nevertheless, we are of the opinion that, if the management of UACN can achieve a better full year earnings two years running with improving dividend status, the valuation metrics will automatically improve
- Meanwhile, the half year figures were more encouraging and gives hope of better year end performances. Although we understand the tight economic platform were it operated and low purchasing power of Nigerians despite the just approved minimum wage.
| U A C N | |
| Bourse | Nigerian Stock Exchange |
| Code Name | UACN |
| Sector | CONGLOMERATES |
| Market Classification | MAIN BOARD |
| Nature of Business | Foods, Real Estate, Logistics and Paints |
| Date of Incorporation | April 22nd 1931 |
| Date Listed | |
| End of Accounting Year | 31st December |
| Website | www.uacnplc.com |
| Registrar | Africa Prudential Registrars Plc |
| Auditor | PricewaterhouseCoopers |
| Share Price@Relsd (N) | 5.80 |
| Earnings per Share | 0.84 |
| Intrinsic Value(N) | 9.12 |
| Share Outstanding | 2,881,296,580 |
| Market Capitalisation | 16,711,520,164 |
Company figures
- The turnover figure for the period improved by 12.40% to stand at N41.56 billion as against the previous N36.98 billion.
- Cost of Sales also increased by 11.96% from the previously reported N29.41 billion to N32.93 billion
- Operating Profit grew over comparable period by 9.30% to the current N2.97 billion from N2.71 billion achieved at the end of 2018 half year
- Operating Expenses inched up by 4.08% to stand at N4.88 billion as against the previously estimated N5.65 billion
- Finance Cost dipped appreciably by 24.61% to stand at N1.81 billion compared to N2.41 billion in 2018 half year business session
- Profit before Tax was estimated at N3.39 billion, this is same as 61.33% above the N2.10 billion estimate in 2018.
- Please understand that the Profit before Tax was helped by higher interest income, lower interest expenses and improved share of profit from associates and joint ventures
- Having considered the tax expenses, the management of UACN reported a half year earnings of N2.43 billion same as 60.82% above the N1.51 billion earned at the end of the first six months of 2018.
| U A C N | |||
| Statement of Comprehensive Income | |||
| 2019(000) | 2018(000) | %CHG | |
| Turnover | 41,568,913 | 36,982,103 | 12.40 |
| Cost of Sales | 32,935,095 | 29,417,347 | 11.96 |
| Operating Profit | 2,971,001 | 2,718,138 | 9.30 |
| OPEX | 5,885,201 | 5,654,409 | 4.08 |
| DEPRECIATION | 946,541 | 1,029,381 | 8.05 |
| AMORTISATION | 51,223 | 68,624 | 25.36 |
| FINANCE COST | 1,818,561 | 2,412,082 | 24.61 |
| NET FINANCE INCOME | (163,859) | (1,076,941) | 84.78 |
| PBT | 3,391,759 | 2,102,313 | 61.33 |
| TAX | 957,526 | 588,648 | 62.67 |
| PAT | 2,434,233 | 1,513,665 | 60.82 |
| TOTAL COMP INCOME | 2,434,233 | 1,513,665 | 60.82 |
| Statement of Financial Position | |||
| Current Assets | 63,769,890 | 69,592,978 | 8.37 |
| Non-Current Assets | 52,954,283 | 55,944,718 | 5.35 |
| Total Assets | 116,724,173 | 125,537,696 | 7.02 |
| Current Liabilities | 36,324,544 | 41,016,656 | 11.44 |
| Non-Current Liabilities | 14,049,036 | 9,901,904 | 41.88 |
| Total Liabilities | 50,373,580 | 50,918,560 | 1.07 |
| Net Assets | 73,830,794 | 86,711,013 | 14.85 |
| Retained Earnings | 38,064,849 | 45,959,140 | 17.18 |
| Shares Outstanding | 2,881,296,580 | 2,881,296,580 | |
- Current Assets at the end of the period was valued lower at N63.76 billion, same as 8.37% below the N69.59 billion in 2018
- Similarly, Non-Current Assets was equally valued lower at N52.95 billion, this is 5.35% down from the N55.94 billion posted in 2018 half year result
- Current Liabilities equally dropped by 11.44% to stand at N36.32 billion as against N41.01 billion. Key items that dropped the Current Liabilities figure is Bank overdrafts and current portion of borrowings
- On the other hand, due to increased borrowings and lease liabilities during the period, Non-Current Liabilities stood above the comparable period by 41.88% to stand at N14.04 billion as against N9.90 billion
- Net Assets dipped to N73.83 billion from N86.71 billion in 2018
- In the same trend, Retained Earnings dipped by 17.18% to stand at N38.06 billion compared to N45.95 billion posted in 2018 half year result
Financial Strength/Solvency Ratios
- Total Debt Ratio is currently estimated at 0.43x up from the previously estimated 0.41x, this confirm increasing Debt over Assets
- Total Debt to Equity ratio is estimated at 0.68x as against 0.59x, this also confirm increasing liability against equity
- Total Equity value at the end of the quarter had been estimated to be 63% of the Assets value, this is lower than the 69% estimated from 2018 half year earnings figures
- UACN can be said to be less liquid than the market since the estimated beta value is currently below the market beta and also below its industrial average
| Financial Strength/Solvency Ratio | |||
| TICKERS | 2019 | 2018 | %CHG |
| Debt Ratio | 0.43 | 0.41 | 6.40 |
| Total Debt to Equity Ratio (MRQ) | 0.68 | 0.59 | 16.19 |
| Equity Ratio | 0.63 | 0.69 | 8.43 |
| TICKERS | 2019 | Industrial Average | %CHG |
| Beta Value | 0.78 | 0.93 | 16.13 |
Profitability Ratios
- Pre Tax margin is currently estimated as 8.16% as against 5.68% last year
- Effective Tax Rate was stable through the period with a marginal upward adjustment of 1.15%
- Cost of Sales is equally controlled through the two quarters with a downward difference of 0.40%
- Return on Equity is currently estimated at 3.3% as against 1.75% last year
- Kindly see below for detailed analysis
| PROFITABILITY RATIOS | |||
| TICKERS | 2019 | 2018 | %CHG |
| PRE-TAX MARGIN | 8.16% | 5.68% | 43.53 |
| EFFECTIVE TAX RATE | 39.34% | 38.89% | 1.15 |
| CS TO TO | 79.23% | 79.54% | 0.40 |
| ROE | 3.30% | 1.75% | 88.87 |
| ROA | 2.09% | 1.21% | 72.96 |
Efficiency Ratios
- Operating Expenses to Turnover value is same as 14.16%, this is 7.40% drop in efficiency from the 15.29% estimated from 2018 half year financial indices
- Turnover to Total Assets Ratios stood at 35.61% against 29.46% when this is compared to ratio estimate in 2018 result, it is a 20.89% improvement in efficiency
- Working Capital Turnover a ratio that indicates a company’s effectiveness in using its working capital was estimated at 1.51x as against the 1.29x estimated in similar period of 2018
- We also tested the Working Capital Ratio, which confirmed that Current Assets is higher than current liabilities at the end of the period. Same as in 2018 half year result
| EFFICIENCY RATIOS | |||
| 2019 | 2018 | ||
| OPEX TO TO | 14.16% | 15.29% | 7.40 |
| TO TO TA | 35.61% | 29.46% | 20.89 |
| Working Capital Turnover | 1.51 | 1.29 | 17.03 |
| Working Capital Ratio | 1.76 | 1.70 | 3.47 |
Investment/Valuation Ratios
- The amount earned per unit of UACN shares at the end of the six months business session is estimated at N0.84, this is same as 60.82% above the N0.53 earned in 2018
- PE-Ratio adjusted lower to an attractive point at 6.87x compared to 25.13x in 2018 half year result
- The said Earnings is same as 14.57% of the unit price of UACN on the floor of the exchange as at the time the result was made available to the investing public this is a far better yield that the corresponding period
- The estimated Book Value of UACN is far above the current market price, please note that we have currently estimated the book value at N25.62 down from the previous estimate of N30.09
- See the below table for other investment ratios
| Investment/Valuation Ratios | |||
| Tickers | 2019 | 2018 | %Chg |
| Price at Released | 5.80 | 13.20 | 56.06 |
| EPS | 0.84 | 0.53 | 60.82 |
| TCIP/SHARE | 0.84 | 0.53 | 60.82 |
| P/E-Ratio | 6.87 | 25.13 | 72.68 |
| Earnings Yield | 14.57% | 3.98% | 266.00 |
| BV/Share | 25.62 | 30.09 | 14.85 |
| PBV | 0.23 | 0.44 | 48.40 |
| CAPEX/SHARE | 7.63 | 25.64 | 70.24 |
Valuation
As noted above, the major denting factor cutting down UACN fair value is the negative status of its last financials, although we have projected an improved performance at the end of the on-going year, we choose to be conservative in our valuation approach, hence we considered the average of Both Gordon Growth Model and 2-Stage H Model ( to feature improved future growth rate). This we arrived at N9.12 as our fair value, hence we Rated UACN a Buy.
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