Ucap Sustains Positive Q2 Performance, Amid Stock Market Rally, Economic Concerns

United Capital Plc, on 13 July 2023, released its unaudited financial statements for the six months period-ended 30 June (6M-23) 2023 to the market. By this act, it became the first quoted company to have done so, especially, companies that have their calendar year running from 1st January to 31st December. This has been done ahead of the 30-day deadline after the due date.

Top and bottom-lines rises by 20.9% y/y and 5.7% y/y apiece
A quick analysis of the results showed that both Gross Earnings (GE) and Profit After Tax (PAT) expanded by 20.9% and 5.7% to settle at ₦11.01 billion and ₦4.69 billion respectively, compared to the numbers achieved in 6M-2022. The growth in revenue was bolstered by improved returns in the following line items – investment income, and other income – which grew by 24.4% and 51.4% to settle at ₦4.96bn (45.1% of GE), and ₦1.13bn (10.3% of GE) respectively. This feat is highly commendable and continued to show management deftness in allocation of investment funds on profitable assets class in the Nigerian financial market. Note that growth recorded by the investment income was significantly bolstered by returns on managed funds, loans, and dividend from investment securities, amid depressed yields from Fixed Income space.

Sturdy GE helps subdue the effect of cost line items
Operating expenses (OPEX) and impairment for credit losses rose by 49.0% y/y and 18.7% y/y to settle at ₦4.55bn and ₦1.20bn respectively. Notably, general admin expenses (65.1% y/y), AGM processing expenses (177.4% y/y), business development expenses (+3,287.7% y/y), and advertisement expenses (5,137% y/y) heightened. Note also that the Group’s cost-to-income ratio rose by 7.76% points y/y to 41.3%, largely subdued by 20.9% growth in GE compared to 49.0% growth on OPEX.

Bottom-line continues to look up as it grows by 5.7% y/y
Owing to the upside recorded in GE, subduing the impact of cost line expenses, pre-tax profit rose by 5.7% to settle ₦5.54bn. Notwithstanding the increase in tax liabilities (inclusive of income, education, and information tech taxes), up by 5.73% y/y, profit after tax (PAT) rose by 5.7% to settle at ₦4.69bn. At this income level, earnings per share (EPS) of 78kobo was achieved, 5.4% higher than 74kobo achieved in comparable 6M-2022.

Total asset continues the upward trend
The Group’s total assets rose by 33.8% to settle at ₦805.77bn compared to figure reported in FY-2022. Growth here was chiefly supported by 43.3% increase in cash and cash equivalent, indicating a good liquidity state. Total liabilities also rose by 33.1% to ₦757.23bn. This increase was substantially bolstered by 15.7% rise in managed funds (short term investments, trust funds and sinking funds). With the faster increased in total assets compared to total liabilities, Shareholders’ fund rose firmly by 47.1% to ₦48.54bn when compared to ₦32.99bn reported in FY-2022.

We have a HOLD rating on UCAP
We have an existing price target of ₦15.00 per share on UCAP. That gives an upside potential of 7.14% relative to market price of ₦14.00 as at the close of business on Thursday, 13 July 2023.

Technical View

As such, we place the stock on a HOLD rating.

About United Capital Plc
United Capital Securities Limited is a dealing member of the Nigerian Exchange Group (NGX) and registered by the Securities and Exchange Commission (SEC) as a Broker/Dealer. It is also a registered dealing member of NASD OTC Plc and FMDQ OTC Plc. This enables the Company to deal in over-the-counter Equity and Fixed Income Securities. The Company provides services such as securities dealing, receiving agents to new issues, stockbrokers to primary issues, designated adviser to SME’s and equity portfolio management services.