Access Bank: Enjoying Long Positive Valuation From Investors, Maintains Uptrend

Rating: Hold
Current Market Price: N13.00
Fair Value: N11.16
By: Jeariogbe Segun (Independent Analyst-Tradelines DotBiz Inv. Ltd)

Key Financial Tickers
• Our analysis is based on Access Bank’s most recent financial report which is the nine months statistics
• The report was a mild growth against corresponding period of 2016 and slightly below 50% growth above the half year result
• We have rated earnings quality of Access bank high, as reasonable level of consistency was noticed in the release date.
• Based on record, the next financial report (4th quarter) should hit the market any time between the second and third week of March.

Corporate Summary

Access commenced operations in Nigeria over 26 years ago as a privately owned commercial bank, which later became a public limited company in 1998. Through a combination of both organic and inorganic growth strategies over the years, the bank now ranks among the five largest banks in the country, and as such was classified as one of the systemically important banks (SIBs) by the Central Bank of Nigeria (CBN) in 2014. Currently, Access operates as a commercial bank with an international focus. It operates in Nigeria, Sub-Saharan Africa and the United Kingdom (UK).

Company’s Figures
• Against comparable period of 2016, Gross Earnings grew by 26.16% from N603.59 billion to N761.51 billion
• Profit Before Tax (PBT) increased by 5.68% over similar period of 2016, standing at N72.91 billion as against the N68.98 billion in 2016
• Similarly, Profit for the period appreciated marginally by 4.28% over the N54.08 billion reported in 2016 nine months financial performance
• Total deposit declined slightly by 1.03% against previous nine months financials. The figure dropped from N2.270 trillion in Q3-2016 to N2.247 trillion.
• In conclusion, indices in the income statement revealed a mixed performance against corresponding period of 2016.

Debt Profile
The Eurobond Security profile in the table below refers to the US$400,000,000 subordinated notes of 9.25% resettable interest issued on 24 December 2014 with a maturity date of 24 December 2021 and US$300,000,000 notes of 10.5% interest issued on 19 October 2016 with a maturity date of 19 October 2021. These represent an amortized cost of N218.56bn. The principal amount on both notes are payable at maturity, whilst interest is payable on a semi-annual basis at their respective interest rates.
Also find in the table below, details of the interest bearing borrowings by the financial institution. In our opinion, the loans are not in any way a threat to the bank’s operations as the interest are at most 3%. Meanwhile, our estimates show that the interest bearing borrowings is 57.95% of the Net Assets (as at Q3-2017). And Debt Securities is 57.18% of the Net Assets.
As revealed in the estimates above, Total Debt to Equity is 115.14%, implying that the total debt is 116.25% of the shareholders’ equity. In our opinion, this is quite on the high side. Beta value is fairly below the industrial average, but good enough at 1.10x.

Profitability Ratios
Interest expense margin increased from 22.81% estimated in 2016 to 34.08%, meanwhile both PBT and PAT Margin inched below comparable period of 2016. Return on Average Equity is currently 11.16% while Return on average Assets is 1.59%. See the below table for details.

Efficiency Ratios
Nine months 2017 Gross Earnings is same as 10.31% of the Total Assess of Access Bank Plc, this is marginally above the 9.68% estimated last year. Meanwhile Gross Earnings to Equity stemmed lightly below last year’s at 72.25% against 74.10% (Q3-2016). In all, although rhe management of Access Bank has not outstandingly built its efficiency ratios, it has been able to defend same from surging.

Investment Ratios/Dividend
As noted in the income statement above, earnings only grew marginally above the comparable period’s statistics, nevertheless, the Total Comprehensive Income per share declined from N3.07 of Q3-2016 to N2.67. Since the share price of Access Bank have increased from the N5.70 (as at the release date of result in 2016) to N9.90 on the day the current result was released, the earnings yield declined from 32.80% to 19.69%. Book Value of Access Bank is currently estimated at N17.47, this is 14.09% above the N15.31 estimated in Q3-2016.
We expect at most a 50k dividend for the full year ended 2017.

QoQ Comparison

Between the first quarter of 2017 and the second quarter, the income statement of Access bank grew outstandingly. Meanwhile, the growth momentum reduced between the second and third quarter of the year. Looking back into the bank’s books, we understand that this trend had been before now. On the strength of this dwindling growth pattern, we have projected few income statement elements as shown in the below table.

While trying to arrive at an intrinsic value for Access Bank, we have settled for constant perpetual dividend discount model. Our growth rate was 8%, while the discount rate used was 14%. Although this value was slightly below the bank’s book value, we settled for the value in consideration of the high Debt to Equity ratio. The rate is subject to revaluation as the debt profile is adjusted.

Technical View

Outstandingly, the share price of Access Bank has enjoyed long positive valuation from investors as the stock has maintained uptrend from December, 2017 till date. It seems to be battling a cracked resistance situated at N13.12 per share, and may have found support at N12.35, although proper support for this stock is at N11.71 each. In our opinion, any slight fundamental boost will dust the said resistance, especially now that it is attempting support close to the said resistance.
Technically, we therefore recommend a HOLD on the share price of Access Bank.