United Capital 9M-2020: Huge Intrinsic Value, Prospect For Better Returns

Rating: BUY

Latest Dividend: N0.50
Current Market PriceN3.84
Year HighN4.00
Year LowN1.90
Fair ValueN6.12
Equity AnalystTunde Segun Jeariogbe


  • In this report, we carefully observe the nine-month financials of United Capital Plc, and compared same to numbers released in the corresponding period of 2019 to arriving at our valuations, while making use of full-year statistics, with projections and comparisons done accordingly.
  • Our main objective of looking into this report is to further support investors’ decision while taking position. We have therefore adopted a conservative valuation approach in our analysis
  • Generally, the nine-month numbers released are impressive with each financial index standing above that of the comparable period, although expenses grew over comparable periods.
  • See below for released numbers comparison/analysis and ratio estimations
BourseNigerian Stock Exchange
Code NameUCAP
SectorFinancial Services
Market ClassificationMAIN BOARD
Nature of BusinessInvestment Banking, Asset Management, Trustees, Securites, & Wealth Management
Date of Incorporation 
Date Listed 
End of Accounting Year31st December
RegistrarAfrican Prudential Registrars
AuditorDeloitte &Touche
Share Price@Relsd (N)                                                         3.55
Earnings per Share                                                         0.58
Intrinsic Value(N)6.12
Share Outstanding6,000,000,000
Market Capitalisation                                       21,300,000,000

Company figures

  • At the end of the nine-month period, the management of United Capital reported Total Revenue of N7.06 billion, 32.81% improvement over the N5.32 billion reported at the end of the corresponding period in 2019.
  • Net Operating Income was estimated at N6.76 billion, as against the N4.29 billion reported in the similar quarter of last year.
  • Personnel Expenses stood at N1.18billion, 5.17% better than the N1.12 billion used through the first nine months of 2019.
  • Other Operating Expenses was valued at N1.32 billion, which is 33.51% above the N993.09 million reported in the comparable period.
  • Thus, Total Operating Expenses stood at N2.51 billion, higher than the N2.12 billion used through the 2019 third quarter.
  • At the end of the period, the management achieved a Profit before Tax of N4.12 billion, 26.10% above the N3.26 billion in the corresponding period.
  • Tax Expenses allowance for the period is same as N659.73 million, versus N523.18 million in the comparable period.
  • In other words, Profit for the period stood at N3.46 billion, as against the N2.74 billion in the corresponding quarter.
Statement of Comprehensive Income
TOTAL REVENUE7,069,171,0005,322,666,00032.81
NET OPERATING INCOME6,760,351,0004,290,978,00057.55
PERSONEL EXPENSES1,186,744,0001,128,441,0005.17
OTHER OPERATING EXPENSES1,325,890,000993,096,00033.51
TOTAL OPERATING EXPENSES2,512,634,0002,121,537,00018.43
DEPRECIATION & AMORTISATION159,546,00091,974,00073.47
PROFIT BEFORE TAX4,123,312,0003,269,915,00026.10
TAX EXPENSES659,730,000523,187,00026.10
PROFIT AFTER TAX3,463,582,0002,746,728,00026.10
TOTAL COMPREHENSIVE INCOME3,492,747,0002,402,807,00045.36
Statement of Financial Position
TOTAL ASSETS211,525,338,000149,549,120,00041.44
TOTAL LIABILITIES191,447,532,000133,015,855,00043.93
CASH & CASH EQU.115,439,410,00032,369,275,000256.63
PROP PLANT & EQUIPMENTS318,403,000304,861,0004.44
NET ASSETS20,077,806,00016,533,266,00021.44
MANAGED FUNDS125,746,484,00074,114,894,00069.66
OTHER BORROWED FUNDS58,335,218,00051,466,470,00013.35
RETAINED EARNINGS17,253,424,00014,860,383,00016.10
SHARE OUTSTANDING6,000,000,0006,000,000,0000.00
  • Total Assets is valued at N211.52 billion, 41.44% above the N149.54 billion valued at the end of similar quarter in 2019.
  • Total Liabilities, on the other hand, stood at N191.44 billion against N133.01 billion in the corresponding quarter.
  • Cash & Cash Equivalents at the end of the quarter was N115.43 billion, far above the N32.36 billion in 2019 nine months.
  • Properties Plant and Equipment investments through the nine months stood at N318.40 million against N304.86 in 2019.
  • Net Assets is estimated at N20.07 billion, same as 21.44% above the N16.53 billion in the corresponding quarter.
  • Managed Funds at the end of the quarter was valued at N125.74 billion, versus N74.11 billion last year.
  • Other Borrowed Funds with the company at the end of the quarter was N58.33 billion, a 13.35% growth over the N51.46 in the comparable quarter.
  • Retained Earnings is same as N17.25 billion versus N14.86 billion in the similar quarter.

Financial Strength/Solvency Ratios

  • United Capital’s Debt Ratios is estimated at 91x at the end of the quarter. In other words, Total Liabilities for the period is as high as 90.51% of the Total Assets, which is typical of financial services operators. This is because a good portion of their liabilities are Managed Funds.
  • Total Debt to Equity is 9.54x, compared to 8.05x in the corresponding quarter, which means Debt during the period can replicate Equity in 9.54 times.
  • Equity Ratios stood at 0.09x as against the previously estimated 0.11x. in other words Equity Valuation at the end of the period is 9.49% of the Total Assets valuation
  • Going by the estimated beta value of UCap, one can easily conclude that the stock is not as liquid as its’ market beta.
Financial Strength/Solvency Ratio
Debt Ratio                                       0.91                                   0.891.76
Total Debt to Equity Ratio (MRQ)                                       9.54                                   8.0518.52
Equity Ratio0.09                                   0.1114.14
Beta Value                                       0.75                                   1.1534.78

Profitability Ratios

  • Pre-Tax Margin stood at 58.33% down from the last estimate of 61.43% at the end of 2019 nine-month period, a drop between both periods observed.
  • Effective Tax Rate was stable through the compared periods at 19.05%.
  • Return of Equity stood at 17.25%, same as 3.84% growth when compared to the 16.61% in the corresponding period of 2019.
  • Return of Assets on the other hand dropped to 1.64%, as against 1.84% in the corresponding quarter.
  • See the table below for detailed profitability ratios and comparison:
PRE-TAX MARGIN58.33%61.43%5.06
EFFECTIVE TAX RATE19.05%19.05%0.00

Efficiency Ratios

  • Operating Expenses is estimated to be 35.54% of the Gross Earnings Value estimates for the quarter, this is an improvementof 10.83% in efficiency when compared to the 39.86% estimated from 2019 third quarter financials.
  • Total Revenue through the period is same as 3.34% of United Capital’s Total Assets Valuation, which is a 6.10% drop in management efficiency during the observed period.
  • See below for other efficiency ratios:
OPEX TO TR35.54%39.86%10.83
TR TO TA3.34%3.56%6.10
Capex/Share                                       0.03                                   0.01216.33

Investment/Valuation Ratios

  • At the end of 2020 third-quarter, the management of United Capital earned N0.58 on each unit of its listed shares, which is 26.10% better than the N0.46 reported in the nine-month earnings in 2019.
  • Total Comprehensive Income per share equally improved by 45.36% from the corresponding period’s estimate, with the ratio improving to N0.58 from N0.40.
  • Price Earnings Ratio during the period also increased to 6.15x from 4.37x.
  • The said earnings produced an outstanding yield of 16.26% over the price of United Capital on the floor of the exchange when the result was released. Although this is a drop from numbers released in the corresponding period, we maintained that the yield is quite attractive.
  • The Book Value of United Capital is estimated at N3.35 at the end of the quarter, which is an improvement in valuation when compared to N2.76 at the end of 2019 nine-month.
  • Confirming the academic over-valued status of United Capital shares on the floor of the exchange is the estimated Price to Book Value ratio that stood above unity.
Investment/Valuation Ratios
Earnings Yield16.26%22.89%28.96


While valuing United Capital, we chose a highly conservative method, seeking to present a very secure price to our readers. Thus, we have valued each unit of United Capital shares for N6.12, this is clearly above both the Book Value and the current market price of United Capital on the exchange. Hence, we Rated United Capital a Buy.