The Nigerian Stock Exchange (NSE) has had an impressive performance returning 35.1% year to date. Banking stocks have been at the forefront, with several of them doing returns of over 70%. But FCMB Holdings seems to be lagging price wise.
FCMB has had the least price appreciation among tier two banks on the Nigerian Stock Exchange. Year to date, the stock has gained just 2.73%. Stanbic Ibtc, another tier 2 bank has gained over 150% year to date. Skye bank, which has not released its 2016 financial statements, has gained 24%, while Diamond bank is up 35% year to date.
Using other metrics such as Price Earnings (PE) Ratio and Book Value Per Share (BVPS) the stock is also undervalued. FY 2016 results show the bank had an Earnings Per Share of 0.72 kobo, giving it a PE ratio of 1.5 which is quite low. Other tier 2 banks are currently trading at a relatively high PE ratio due to price appreciation. Diamond bank, is trading at a PE ratio of 7 times earnings at yesterday’s closing figures of Stanbic IBTC is currently trading at 16 times earnings, using yesterday’s closing figures of N40 per share. Using the HY 2017 figures, FCMB has a Price to Book value of 0.97.
Though the bank’s HY 2017 profit before tax show a massive decline from N18.4 billion in HY 2016 to , last year’s bumper profits were due to foreign exchange revaluation gains of N18 billion.
The low PE and Price to Book Value ratios makes this stock a BUY.
FCMB was established in 1982, as a merchant bank, but began operations in August 1983. The bank was given a universal banking licence in 2000 and changed its name from First City Merchant Bank to First City Monument Bank. In 2004, the bank was converted to a public limited liability company and listed on the Nigerian Stock Exchange (NSE) in December that year.
