UBA Capital out of the blues topped gainers list with a 9% pop as investors continued with profit seeking. The stock that was N1.29 just under a month ago closed trading today at N1.73 gaining 34% within the period. Today’s gain was however more remarkable as the 9% gain was perhaps its biggest one day gain this month if not this year. The volume was also high topping the list of most traded stock with over 64million units exchanging hands today. So what exactly is going on? We have a thesis

Domino Effect

Recent results released by Zenith Bank and GTB has impressed the market providing a morale booster for equities. Most investors now believe things may not be as bad as previously thought. They also realise how undervalued some of these stocks currently are and so are taking positions in anticipation of another good result. Ironically, UBA Capital’s most recent results (9months) showed EPS dropped 34.8% to 28kobo.

Family effect

UBA Capital, Africa Prudential, UBA and Transcorp all have common majority ownership in Hiers Holdings and Tony Elumelu. The quartet of stocks have all been posting gains in the last one week as investors take position in anticipation of any major announcements. Africa Prudential for example announced results yesterday followed by dividend announcement today. This must have sweetened the taste buds of investors, creating an appetite for other sister stocks.

Dividend announcement

Business day

UBA Capital last year declared dividend of 25kobo per share. That amount at yesterdays price represents an indicative gross dividend yield of 15.8%!! That is an astonishing return by dividend standards. So if by any means it repeats the same dividend then the current price of N1.73 still represents a 10% Gross yield. Rumors circulating suggest the company may pay between 20 kobo and 25 kobo which probably is what is driving the share price higher.

Buy, sell or hold?

In terms of Fundamentals, UBA Capital doesn’t just cut it for this writer. However, the dividend proposition being rumored makes the stock difficult to resist. Any entry below N1.9 probably has a short term upside of 15% as we do not see this stock rising above N2.2 in the next one month.

Deal book 300 x 250

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