Earnings ReportFeatured

Low Purchasing Power, Harsh Business Regime Threatened UACN Performance-H1-2019

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.

Comment here

Earnings ReportFeatured

Low Purchasing Power, Harsh Business Regime Threatened UACN Performance-H1-2019

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.

Comment here