Obong Idiong, Africa Prudential Plc

Bumper gains from treasury bills are absent this year and may lead to a largely flat result for Africa Prudential Plc. Africa Prudential is our stock pick for the week.

About the company

Africa Prudential Plc was originally incorporated as UBA Registrars Limited on the 23rd of March 2006. The company subsequently changed its name to Africa Prudential Registrars Plc in August 2011 and was listed on the NSE in January 2013. To expand its business portfolio, the firm acquired UAC Registrars Limited in June 2013.

The company changed its name to Africa Prudential Plc, following a special resolution passed by shareholders to reflect the firm’s expansion beyond registrar services.

Recent results

Results for the half year ended June 2018 show that gross earnings increased from N1.4 billion in 2017 to N2.1 billion in 2018. Profit before tax rose marginally from N950 million in 2017 to N1.1 billion in 2018. Profit after tax also increased from N864 million in 2017 to N985 million in 2018.

Pricing

Current Share Price: N3.99

Year High: N5.2

Year Low: N3.7

Year to date: -5.45%

 One year return: 31.58%

Price outlook

Possibilities of the stock rising sharply are quite low. Africa Prudential is currently trading 23.1% below its year high of N5.20. The Nigerian Stock Exchange has been in a bearish mode, with the year to date returns at -13.41%.

Valuation

The stock is trading at a price to earnings ratio of 4.6 times earnings, much lower than the average PE ratio on the NSE.

Outlook

Africa Prudential is on track to having a relatively flat year on year performance. Last year’s gains were largely due to a sharp increase in earnings on treasury bills.Yields have been on a downward drop this year, in tandem with falling inflation figures.

However, in the unlikely but possible event of a rate hike, this year the move could be positive for the company.

Unclaimed dividends, which have served as a moat of some kind to the company and its peers, may remain so in the medium term, as they have stayed stubbornly high despite the mandatory e dividend registration stipulated by the Securities and Exchange Commission (SEC).

Coronation Research

Data from the SEC’s statistical bulletin show that the number rose from N84.3 billion in December 2012 to N129 billion in December 2017.

In the unlikely but slim possibility of a rate hike before the end of the year, the impact could have a positive effect on the company’s investment income.

The company in March last year indicated interest in expanding beyond its traditional registrar services, but not much progress has been made in this regard. The next few quarters will provide more clarity as to the new MD’s strategies for growth.

 

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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