GTI Securities Picks Heirs Holdings Group as Bargain Stocks
Leading investment firm, GTI Securities Limited, has picked United Bank for Africa (UBA) Plc and Transnational Corporation of Nigeria (Transcorp) Plc, as the two topmost stocks for consideration by investors. Tony Elumelu’s Heirs Holdings is a major investor in both UBA and Transcorp.
In its latest top-five stock picks, GTI Securities listed three other stocks as bargain stocks including Dangote Flour Mills, Zenith Bank and Dangote Sugar Refinery.
Analysts at GTI Securities noted that UBA has emerged as one of the most reputable banks in Nigerian business landscape as its improved branch networks within the country and developed presence in prominent African countries has positioned the Pan-African bank with improved income sources.
“The bank has a good Capital Adequacy Ratio (CAR) in the sector and continues to leverage on its stringent risk assessment framework to mitigate capital erosion,” GTI Securities stated.
Analysts noted that UBA has a current book value of N13.99 and Price to Book Value of 0.66 times, pointing out that the bank “has a higher capacity of meeting short-term obligations with acid test ratio at 0.75 per cent”.
The analysts’ report also noted that Transcorp-a diversified conglomerate with interests in four major business sectors of power, oil and gas, hospitality and agriculture, recorded impressive results in the third quarter of 2017.
“The effort of the Federal Government to stabilise the power sector will boost the company’s performance going forward and sustain the current earnings momentum. We place a buy rating on Transcorp as a result of its long-term prospects which may crystallise in the short to medium term due to the market resurgence.
Our target price is 86.6 per cent above current market price,” GTI Securities stated.
UBA had recorded well-rounded performance in the third quarter as growing market share and improving efficiency led to significant improvements in gross earnings and profitability.
Key extracts of the interim report and accounts of UBA for the nine-month period ended September 30, 2017 showed that gross earnings rose by 26 per cent while pre and post tax profits grew by 33.2 per cent and 23 per cent respectively.
UBA’s gross earnings rose to N333.9 billion in third quarter 2017 as against N265.5 billion reported in the corresponding period of 2016. Group’s operating income stood at N236.9 billion in 2017 compared with N183.3 billion recorded in the corresponding period of 2016, representing a 29.3 percent growth. Profit before tax jumped to N78.3 billion in 2017 as against N58.8 billion recorded in the similar period of 2016. Profit after tax grew from N49.5 billion in 2016 to N60.9 billion in 2017.
The balance sheet showed that while the group closed the third quarter with total assets of N3.77 trillion, a year-to-date growth of 7.6 per cent, the bank prudently grew net loans to N1.6 trillion, a 6.0 per cent year-to-date growth in the loan book. Group’s shareholders’ fund grew by 13.3 per cent to N507.6 billion in 2017 while the annualized return on average equity stood at 18 per cent.
Key extracts of the interim report and accounts of Transcorp for the nine-month period ended September 30, 2017 showed that group turnover rose by 35 per cent from N41.92 billion in third quarter 2016 to N56.76 billion in third quarter 2017. Gross profit rose by 45 per cent from N19.84 billion in 2016 to N25.62 billion in 2017. Operating profit stood at N16.81 billion compared with N11.58 billion in the comparable period of 2016.
With better finance cost management, net finance cost declined considerably to N7.77 billion in 2017 as against N24.37 billion in 2016. Profit before tax thus improved to N9.04 billion in third quarter 2017 as against pre-tax loss of N12.7 billion recorded in third quarter 2016. After taxes, net profit recovered to N8.2 billion in 2017 as against net loss of N14.21 billion in the corresponding period of 2016.