By Chioma Obinagwam
Investors’ appetite for the shares of FBN Holdings Plc seem to be growing by the day, reflective in the increase in its share price on the floor of the Nigerian Stock Exchange (NSE) largely attributed to its consistency in dividend payout, among other reasons.
An analysis of the share price movement, since April 27, 2017, when the company published its full year result for the period ended December 31, 2016 as well as its first quarter (Q1) unaudited result for the period ended March 31, 2017 on the website of the NSE, indicated that the share price has recorded 14.94 per cent growth from its N3.48 opening price on April 27, 2017 to N4.00 as at May 18, 2017; gradually approaching its highest traded price year to date of N4.69.
This rally on the shares is coming at a time when most investors are leaving the equities market for the fixed income market, mostly due to a perceived higher return on investment in that window.
Analysts, however, strongly believe that the renewed appetite for the stock is dependent mostly on the company’s ability to declare a 20 kobo dividend amidst harsh macro-economic environment and regulatory headwinds.
Analysts are also of the view that the new Investor-Exporter window introduced by the Central Bank of Nigeria(CBN), where investors are allowed to come in and trade their Foreign Exchange (Forex) at a price they consider appropriate is another contributory factor which has created some levels of certainty in the equities market.
Chief Relationship Officer (CRO) of Foresight Securities, Charles Fakrogha said: “First, for First Bank, people expected a worst from them but at the end of the day they were able to pay their investors 20 kobo. That impressed some of the industry watchers and participants, particularly, some operators like us.”
“Most importantly, the Forex window that was created by CBN for investors. So, the average investor that is coming in has an idea of the amount that he is going to change to in naira. At the same time, when they are being paid in naira, their dividend, they also have an idea of how much they’re going to change it in dollars and vis-à-vis. So, that level of certainty is now attracting more investors,” he continued.
Share price analysis:
FBN Holdings has an Earnings Per Share(EPS) of 21 kobo.
Just as the name implies, EPS is the amount of earning or net income that can be allocated to each outstanding common stock share.
Further analysis of the share price show that the company’s Price to Earnings(P/E) ratio closed at 19, which is pretty high compared to its peers in the industry.
A P/E ratio is a market prospect ratio that calculates the market value of a stock relative to its earnings by comparing the market price per share by the earnings per share.
In other words, the P/E ratio shows what the market is willing to pay for a stock based on its current earnings or a reflection of how many times earnings investors are ready to pay for a share.
For FBN Holdings, having a P/E of 19 shows that investors are willing to pay N19 for every 21 kobo earnings per share and indicative that the stock is trading at a multiple of 19.
Thus, investors are willing to pay more, beyond the current price of N4.00 for the stock.
This also reflects greater expected future gains because of perceived growth opportunities and some competitive advantage or lesser risk, but at the same time it indicates that the share price is relatively more expensive, hence, analysts advise proactive investors to take position in stock at this time.
Extracts from the result:
FBN Holdings recorded a Profit Before Tax(PBT) of N22.95 billion in the financial year ended December 31, 2016 up from N21.58 billion in the corresponding period of 2015.
Total Assets increased to N4.74 trillion from the 4.17 trillion it recorded in the erstwhile year of 2015.
Also, Total Liabilities for the group increased alongside Total Assets to N4.15 trillion from the N3.59 trillion in the same period in 2015.
The increase in the liabilities is not unconnected to the effects of Forex rate fluctuations on the business as the result showed that the effects of Exchange Rate Fluctuation on cash held rose to N4.26 million from the N106.94 million it recorded in the preceding year.
Nevertheless, the group maintained its dividend policy stance by declaring a 20 kobo dividend per share, subject to approval by its shareholders at its 5th Annual General Meeting (AGM) slated for tomorrow, May 19, 2017.