Coy: Access Bank Plc
Rating: Buy
Current Market Price: N7.80
NPL RATIIO: 4.70%
Year High: N13.80
Year Low: N7.50
Fair Value: N18.20
By: Jeariogbe Tunde Segun (Equity Analyst)
Key Financial Ratios
• This report takes into account the financial performance of Access Bank Plc for the 9-month ended September 30, 2018, and compares same with figures for similar period of 2017.
• The Non performing loan ratio for the period is 4.70%.
• Comparing the released statistics with the corresponding quarter of 2017, it was established that key performance ratios marginally improved over those of 2017.
• Please note that ordinarily the current profit should be lower than that of the previous 9-month, but for the lower taxable temporary difference and absence of education tax, two items that enhance tax deductions from Profit before Tax, leaving a higher profit compared to 2017.
• Another factor that dragged the quarter’s profitability down is the net foreign exchange loss of N29.57 billion loss, as against the N116.45 billion profit posted on same item in 2017 third quarter financials.
Company Figures
• Gross earnings for the period only improved by 10.89% above the N404.81 billion reported for the nine months as against N365.05 billion in the 2017 Q3.
• Interest Income stood at 11.64% above 2017. Current Interest Income is N274.49 billion, lower than the N245.87 billion posted in 2017 nine months result
• Meanwhile, Interest Expenses grew by 21.82%, moving from the previous N124.40 billion to N151.54 billion.
• Profit before Tax currently reported is N70.26 billion, this is 3.62% below the N70.91 billion of 2017.
• As noted above, due to a lower tax expense, the current profit rose, as against that of 2017. The current profit for the year is N62.91 billion as against N56.39 billion, in the corresponding period of 2017.
• Total comprehensive income dipped by 28.79% to N54.94 billion, as against N77.16 billion in the previous third quarter
• Total Assets was estimated at N4.555 trillion, same as 28.64% above the N3.540 trillion estimate of the previous third quarter.
• Total Liabilities is currently estimated at N4.082 trillion, that is 34.48% above the N3.035 trillion reported in corresponding quarter of 2017
• Total Deposit through the nine months currently reported is estimated at N3.059 trillion, this is 36.11% above the N2.247 trillion achieved in the first nine months of 2017
• Meanwhile, due to the significant improvement in Deposit at the end of the period, Loans and Advances improved over comparable period in 2017 by 12.79%. According to the report a total of N2.085 trillion was granted as loans and advances through the period, which more than the N1.849 trillion of 2017.
• Nevertheless, Net Assets dropped by 6.44% when compared to the reported figure in similar period of 2017.
• See the table below for details.
Volatility Ratios
• Although the estimated beta value for Access Bank shares stood below the industry average, it is well above the market beta, which signifies its liquidity and patronage by the investing public.
• Although almost irrelevant since we are analyzing a financial institution whose major business is deposit mobilization (mostly reported under liability), we estimate Debt to Equity ratio as 182.16%, well above the 62.52% industry average
Profitability Ratios
• Interest Expense to Gross Earnings is estimated at 37.44%, 9.86% higher than the 34.08% of the 2017 half year result.
• PBT margin stood at 17.36% as against 19.97% last year, this is 13.09% lower to 2017 estimate.
• Similarly, Profit margin looks fairly up as against last year. We have estimated 15.54% margin from Gross Earnings as against the previous estimate of 15.45%.
• Return on Average Equity is now 13.31%, compared to the 11.16% returns achieved in the first nine months of 2017
• Return on Average Assets only dipped against comparable period by 13.29%, moving from 1.59% to 1.59%.
Efficiency Ratio
• Gross Earnings to Total Assets is estimated at 8.89% this is 13.80% below the estimate in 2017
• Similarly, Gross Earnings to Equity is now 85.64% from 72.25% estimated from the 2017 nine-month financial statistics.
• Financial Leverage is 9.64x as against the previous 7.01x, this is an estimate of the number of times the total assets replicates the equity, in other words the ratio gets better
• It was also established that 68.18% of the Total Deposit was given out as Loan and Advances during the period under estimate, which is 17.14% lower than the 82.27% of the first nine months of 2017.
• Meanwhile, Loan and Advances is same as 45.79% of the Total Assets, this is 12.33% lower than the 52.22% of last half year. This shows a controlled/reduced risk compared to 2017
Investment Ratios
• Just as in the company report above, since shares outstanding remained constant during the two periods under consideration, the estimated amount earned per units of Access Bank shares is N2.17, this is 11.55% above the N1.95 earned last year
• The Total Comprehensive Income per share for the period is N1.90 below the N2.67posted in 2017 nine months financials, this is 28.79% difference
• The said earnings per share yielded 27.18% of the current market price on the day the result was made available to the investing public. This is a better yield, when compared to the 19.69% achieved last Q3
• PE/Ratio for the period is 1.23x as against 1.69x estimated last year.
• At the moment, the Book Value of Access Bank is N16.34 per share, fairly same as N17.47 of last year. Should we choose to value this equity with this indices, we shall conclude a grossly undervalued position of each units of its shares on the floor of the exchange
• Opex Margin equally dipped by a marginal 17.35%, having moved to 32.68% from 39.53%.
Valuation
After carefully utilizing our blend of valuation models, we have valued each units of Access Bank Plc at N18.20. Considering the current market price of N7.80 (as at the time this report was concluded) therefore, we Rate Access Bank shares a Buy.
Please note that we do not expect very strong improvements in its full year financials. Nevertheless, we foresee better returns from this financial institution, should the management close up on few key ratios.
We have observed better performance in its Deposits and Loans and advances to customers as against few giant operators in its industry. In other words, we are of the opinion that long positions in this equity, stands a better chance of improvement.
