Last week, UAC of Nigeria Plc, one of Nigeria’s oldest conglomerates, hit a five year low. The stock closed at N11 on Friday’s trading session. It began trading this year at N16.90 and is down 34.91%. It is also one of the worst performing stocks in the conglomerate space (just behind AG Leventis Plc which is down 37.14%).
Why the slump?
The drop in share price can be partly attributed to the bearish sentiments in the market as a whole, and the struggles that the company’s subsidiaries have had over the last few years.
Year to date, the stock market is down 11% and could dip further, as crisis in some emerging markets has led to investors pulling out their funds in a domino effect.
UAC has been weighed down by poor performances of its subsidiaries, especially UAC Property Development Company Limited and Livestock Feeds Plc.
Bright days ahead
The company may have taken major steps to stem their struggles as Fola Aiyesimoju, has been appointed as Chief Executive Officer (CEO) of UPDC. Aiyesimoju is a partner with Themis Capital which took up a significant stake in UAC in April this year.
Immediate past Group Managing Director (GMD), Larry Ettah, has also stepped down from the boards of Portland Paints, CAP Plc and Products Plc, and UPDC.
While the stock is trading at a low, possibilities of it falling much lower are quite high. At a PE ratio of nearly 20 times earnings, the stock is also relatively expensive compared to other stocks in the conglomerate space such as Transcorp which is trading at 6 times earnings.
H1 2018 results show full-year results may improve marginally compared to prior year.
Results for the half year ended June 2018 show revenue dropped from N47.3 billion in 2017 to N36.9 billion in 2018. Profit before tax rose from N1.8 billion in 2017 to N2.1 billion in 2018, profit after tax rose marginally from N1.1 billion in 2017 to N1.3 billion in 2018.
Investors desirous of taking a position would be better off waiting for further downside before entering.
About UAC of Nigeria Plc
UAC of Nigeria Plc (UACN) was established in 1943, but has been active in the Nigerian space since 1879. The company operates in the Food and Beverage, Real Estate, Paint and Logistics sectors of the economy.