A sharp rise in administrative and general expenses have led to a sharp fall in profit before tax of NPF Microfinance Bank. NPF is Nairametrics stock pick for the week.

About the bank 

NPF Microfinance Bank Plc (Formerly NPF Community Bank Ltd) was incorporated on 19th May, 1993.

Bua group

The bank provides banking services to both serving and retired officers and men of Nigeria Police Force, its ancillary institutions and the general banking public.

NPF Microfinance Bank was listed on the Nigerian Stock Exchange on the 1st of December, 2010.

Recent results

Results for the nine months ended September 30, 2018, show that gross earnings increased from N2.5 billion in 2017 to N2.7 billion in 2018. Profit before tax, however, dipped from N747 million in 2017 to N487 million in 2018.

Pricing

Current Share Price: N1.53
Year High: N2.12
Year Low: N1.25
Year to Date: 22.40%
One Year Return: 24.34%

Valuation

NPF Microfinance Bank is currently trading at a price earnings ratio of 9.45 times earnings. This is slightly higher than the 9.3 times earnings which is the average PE ratio on the Nigerian Stock Exchange.

Price Outlook

Possibilities of the stock going up at this time are quite low. The stock is highly illiquid, and most often trades in a narrow band. The stock is currently trading 22.4% above its year low of N1.25.

Outlook 

Q3 2018 results showed a marked decline due to a spike in administrative and general expenses which rose from N603 million in 2017 to N847 million in 2018.

Coronation Research

The rise in costs was driven largely by marketing expenses which went up from N63 million in 2017 to N144 million in 2018. Directors’ remuneration also rose from N65 million in 2017 to N106 million in 2018.

The firm will most likely retain its N0.17 dividend, as 9M 2018 earnings per share is N0.21 as against N0.33 recorded in 2017. Full year results would provide more clarity concerning whether the elevated costs were a one-time occurrence or a new norm.

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