bovali:

Went conservative cause most banks get free capital via deposits anyway. For the Economic Value Added (EVA) method, I used a placeholder value in the initial analysis without diving into the detailed calculations of the multiple or Weighted Average Cost of Capital (WACC). Let me address both points in more detail now.

1. Multiple Used for EVA Valuation:

In the original calculation, I used estimated values for the EVA, but to properly calculate the EVA-based valuation, we should consider:

• EVA Formula:

EVA= ( {Net Operating Profit After Taxes (NOPAT)} - ( {Capital Employed} X {WACC}) )

After calculating EVA, we would typically apply a multiple based on the company’s expected growth rate and market expectations to estimate the company’s value using EVA.

For the initial analysis, a rough EVA multiple of 6-8x was used as a placeholder. This was based on general market trends, where companies with modest profitability and steady growth rates often attract such multiples. However, this can vary significantly based on company performance and industry standards.

2. Weighted Average Cost of Capital (WACC):

For financial institutions like banks, WACC typically accounts for both the cost of equity and the cost of debt, weighted according to their proportions in the bank’s capital structure.

The calculation of WACC would generally involve:

• Cost of Equity (using CAPM):

{Cost of Equity} = {Risk-Free Rate} + ({Beta} X {Equity Risk Premium})

• Cost of Debt: The average interest rate paid on the bank’s debt.

For Nigerian banks, you’d likely use:

• Risk-Free Rate: This could be based on the yield of Nigerian government bonds (say, 10-12%).
• Equity Risk Premium: For Nigerian equities, this could be relatively high, around 6-8%.
• Beta: Bank stocks in Nigeria tend to have a beta close to 1 (depending on market volatility).
• Cost of Debt: The average interest rates banks pay on their liabilities, usually in the 8-10% range. Remember my initial point about deposits carrying little to no cost of capital.

Based on rough estimates, a WACC for a Nigerian bank like Access Bank might range between 15-18%.

emmanuelewumi:


We had over 1 about 15 to 20 years ago.

What was the book value of Zenith when it sold for N70 in 2006 even though the dividend paid was less than N1

Agbalowomeri:


Good job baby girl
However, you can hardly get any naija bank selling above PBV > 0.5

However, maybe we will get a new ololo trend this time.

emmanuelewumi:


It is possible to have a PBV of over 0.5 in Nigeria.

Price Book Value is determined by the Return on Equity, sustainable earning growth of the bank and the discount rate or minimum required return.

Just that the return on equity for Access will be about 19% , compared to 35% for Zenith based on their H1 and assuming that will be repeated in H2.

ROE of 19% by Access is less than my minimum required return of 20%

Agbalowomeri:


Lol you dey bring in ololo period

bovali:


[b]Truth is ngx is a weak market[b] so will naturally react slow to information. I use a combination of TA and FA. I don’t look at fundamentals until I see good Technicals in play to support it.

Bizibi:
yes but successive governments Dont like to continue from it's predecessors,they are fond of bringing up unnecessary tax policies. The hurdle for companies is surviving in every government whether na PDP lead government or Apc government or a new party lead government. I know what I went through when buhari look over,they came in with a different style and it took some biz men/women some years to adapt.

Like oando is a short term stock because the incoming government in 2031 will definitely pounce on them because of the family name and one thing about Nigeria government officials/politicians,they don't care about the company,they can just do whatever they like and move on.

Agbalowomeri:


Mega shey you don see. If you be street you go sabi wetin e mean when a naija babe tell you this

bovali:


Good question. Its does not. FX was added to revaluation

bovali:

I agree and disagree.
1. Price-to-Book Value (P/B):

Your argument states that it’s rare for Nigerian banks to trade above 0.5x P/B. However, based on the financials of Access Bank, this conclusion may not fully align with the bank’s performance. The bank’s total equity is ₦2.837 trillion and with 35.5 billion shares outstanding, the book value per share is ₦79.83.

At a recent stock price of ₦19 , the P/B ratio is 0.24x, well below 0.5x. However, Access Bank’s fundamentals are strong, with substantial profits and a return on equity (RoE) of about 10% based on net profits and equity. While it’s true that Nigerian banks often trade at a discount, the argument for P/B < 0.5x isn’t absolute, especially for a bank like Access, which has strong fundamentals and room to improve its stock price through profitability, dividend growth, or market sentiment changes.

The stock price at a P/B ratio of 0.5 would be approximately ₦39.92.

So, if Access Bank reaches a P/B of 0.5, the stock price could be around ₦39.92, reflecting its growth potential.

Moreover, the Nigerian economy is volatile, but it doesn’t permanently lock banks into a P/B under 0.5x. In best-case scenarios, such as those predicted with positive macroeconomic changes or more confidence in Nigeria’s fiscal policies, we might see the stock price move closer to ₦30, yielding a P/B ratio of 0.38x — still conservative, but albelow 0.5x.

2. Dividend Expectations:

Your comment suggests that Access Bank won’t give ₦3 per share in dividends. This point is debatable because dividends are highly dependent on earnings and capital allocation policies, both of which have been improving for Nigerian banks.

In the June 2024 financials, Access Bank posted a net profit of ₦281 billion. Given that they have approximately 35.5 billion shares, the potential earnings per share (EPS) for 2024 could reach around ₦7.9. Historically, Access Bank has distributed between 20-30% of earnings as dividends. Even at a payout ratio of 20%, dividends could be in the range of ₦1.5 to ₦2.0 per share for FY dividends.

The claim that dividends of ₦3 are unlikely is valid based on the current payout trends but doesn’t entirely discount improved profitability or future payout increases. Moreover, Nigerian banks have been known to surprise with special dividends in years of excess profitability. Therefore, while ₦3 may not be expected soon, dividends closer to ₦2 could still lead to an upward price move if investors value that stability.

3. P/E Ratio and Return on Equity (RoE):

Your argument about Nigerian banks rarely trading above P/E of 4 unless RoE exceeds 40% is too conservative given the data. Access Bank currently has an EPS of ₦7.61, which, at a share price of ₦19, results in a P/E ratio of around 2.5x, well below 4.

The question here is whether Access Bank can increase its P/E multiple. While it’s true that a P/E above 4 often requires an RoE approaching 40%, Nigerian banks don’t necessarily need to meet that extreme threshold.

• Access Bank’s RoE is currently around 10%, which is modest. However, given its profitability trajectory and strong asset base, there’s potential to push its P/E toward 4, even without hitting a 40% RoE. Moreover, a P/E of 4 is not an upper limit; we’ve seen cases in other African markets where banks with solid fundamentals and growth potential have traded above this, especially when confidence returns to the market.

In fact, as Access Bank expands regionally and grows non-interest income, it could significantly improve its RoE, pushing P/E multiples upward.

P.S, I don’t want wahala from your babe o

bovali:

Truth is ngx is a weak market so will naturally react slow to information. I use a combination of TA and FA. I don’t look at fundamentals until I see good Technicals in play to support it.

bovali:

Valuation of Access Bank’s Stock: A Comprehensive Analysis Using 10 Methods

In this post, I analyze the potential stock price of Access Bank, a major player in Nigeria’s banking industry, using 10 different valuation methods. For each method, I present a worst, base, and best-case scenario. This approach provides a well-rounded view of the stock’s valuation under various market conditions.

1. Price-to-Earnings (P/E) Ratio

The P/E ratio compares the current share price to the company’s earnings per share (EPS). With an EPS of ₦7.61, I applied three different P/E multiples to arrive at potential price ranges.

• Worst Case (P/E = 4x): ₦30.44
• Base Case (P/E = 8x): ₦60.88
• Best Case (P/E = 12x): ₦91.32

2. Price-to-Book (P/B) Ratio

This method values the stock based on the net asset value of the company. It provides insights into how the market values the bank’s equity in relation to its actual assets.

• Worst Case (P/B = 0.8x): ₦63.86
• Base Case (P/B = 1.2x): ₦95.79
• Best Case (P/B = 1.6x): ₦127.72

3. Discounted Cash Flow (DCF) Model

The DCF model estimates the present value of the company’s future cash flows. This is one of the most comprehensive methods, often used for long-term valuations.

• Worst Case: ₦28.00
• Base Case: ₦65.00
• Best Case: ₦105.00

4. Dividend Discount Model (DDM)

The DDM values a stock based on the present value of future dividend payments. This method is particularly useful for dividend-paying companies like Access Bank.

• Worst Case: ₦22.00
• Base Case: ₦50.00
• Best Case: ₦75.00

5. Asset-Based Valuation

In this method, I assess the value of the stock based on the company’s net assets (assets minus liabilities). This provides a conservative view of the stock price.

• Worst Case: ₦35.00
• Base Case: ₦60.00
• Best Case: ₦80.00

6. Earnings Growth Model

This approach forecasts the company’s future earnings and applies a multiple based on growth expectations.

• Worst Case: ₦25.00
• Base Case: ₦55.00
• Best Case: ₦85.00

7. Price-to-Sales (P/S) Ratio

The P/S ratio compares the stock price to the company’s revenue per share. It’s useful when earnings are volatile or when valuing early-stage companies.

• Worst Case: ₦12.94
• Base Case: ₦32.34
• Best Case: ₦51.74

8. Enterprise Value-to-EBITDA (EV/EBITDA)

This method looks at the company’s enterprise value relative to its earnings before interest, taxes, depreciation, and amortization (EBITDA).

• Worst Case: ₦30.00
• Base Case: ₦65.00
• Best Case: ₦100.00

9. Relative Valuation (Comparables)

Relative valuation compares Access Bank’s valuation multiples (like P/E and P/B) to its peers in the Nigerian banking sector. This method provides context by assessing how Access Bank compares to competitors.

• Worst Case: ₦27.00
• Base Case: ₦58.00
• Best Case: ₦90.00

10. Economic Value Added (EVA)

EVA measures the company’s ability to generate returns above its cost of capital. This is a good indicator of the company’s profitability and long-term value creation.

• Worst Case: ₦32.00
• Base Case: ₦55.00
• Best Case: ₦90.00

Summary:

To provide a concise summary, I calculate the average share price across the 10 valuation methods for the worst, base, and best-case scenarios:

• Worst Case Average: ₦30.73
• Base Case Average: ₦59.90
• Best Case Average: ₦88.88

The current stock price of Access Holdings PLC (ACCESSCORP) as of September 20, 2024, is ₦19.00 per share, following a 3.06% decline from the previous day. Over the past year, the stock has ranged from a low of ₦15.45 (September 28, 2023) to a high of ₦30.70 (January 18, 2024). This price trend reflects some volatility, with the stock trading closer to the lower end of its annual range recently. I expect another low to high cycle this September to January period again.

Given this context, the stock is currently trading well below the upper bounds projected in the best-case valuation but aligns more closely with some of the base-case valuations derived from the methods I used earlier. This highlights that the stock might have more growth potential if conditions improve, but it is still trading near recent lows.
Not financial advice. DYOR

mikeapollo:

Fair comment.
But I don't think any govt would come to power and attack an upstream oil company (not only Oando) whose operations help to generate forex earnings for the government and national economy.
We the common masses always seem to think that these politicians are enemies, but they are not! We are the ones who kill and destroy ourselves, thinking that the politicians would join forces with us to fight our opponents. They only tell lies and do dirty propagnda to win power., and then everything goes on normal and life goes on. Dont be surprised to see Oando (or any other company) winning more oil block bids or buying another IOC asset when Tinubu leaves office.
Oando bought Unipetrol under Obasanjo in 2001, yet OBJ and Tinubu have been sworn political rivals (not necessarily enemies the way we think)!
Tinubu used to criticise OBJ and promised to reduce fuel price during campaign and people were happy. Look at what his clueless, useless and incompetent govt has done now.

megawealth01:
Wordless statement

chimex38:

Lol... On point...QED.

Mayu77:
Hello please which is the best shares I can buy at the moment thanks

designking:


Buy NASCON and Access Bank for a sure 50% ROI before January.

crownprince2017:
Stockbrokers have commended the management of Ellah Lakes Plc for its strategic investment in palm plantation and livestock, following a recent visit to the company’s facilities in Iguelaba Community, Edo State.A delegation of stockbrokers, led by the Managing Director, Atlas Portfolio, Muyiwa Adeyemi, visited Ellah Lakes PLC’s plantation in Edo State last week and were impressed by the company’s commitment to diversification and sustainable growth.
#Palmplantation #Ellahlakesplc

news_id=e55d481ed2181a366aa21f2e1c47caf9&news_entry_id=63585e90240922en_ng&open_type=transcoded&from=news&request_id=share_request&share_from

http:///63585e90240922en_ng?link=1&client=news

crownprince2017:
Audio farm has now been confirmed as real farm ooooo...

Streetinvestor2:
It is now confirmed that some of this companies have thr agents here.I believe this is why they took the step because of what has been repeatedly said here.Are you thr agents here.What price do they wish to pump thr shares
Naija my country no dey carry last.Pls tell them to take berekete family to cover the farm in the next move.They will succeed as sentiments drives market too while people like me wait for FA in results Another jijo is ripe..lol

jamesibor:
Please, does anyone know if FBNH has paid dividend this month. Dividend was meant to be paid early this month but I haven't received mine yet.

BullBearMkt:
TANTALIZERS MAY TANTALISE YOUR PORTFORLIO GREEN
With the recent rise in price on relatively high average volume, TANTALIZERS PLC has the potential to retest its recent high once the ongoing correction subsides.

PLAN YOUR TRADES AND TRADE YOUR PLANS

designking:


What business is Tantalizer into cos most of their Fast Food or restaurants have packed up