The ongoing recapitalization initiatives of Access Holding ,no doubt, have continued to receive more endorsement and seal with the growing optimism from home and abroad. Simply Wall Street Pty Ltd, headquartered far away in Sydney ,Australia believed the offers have the potentials to score a home run .
Last week, its analysts ,with over 120,000 worldwide under its radar ,bluntly revealed that the Access Holdings ongoing offer are nothing but a reward-loaded opportunity for both the potential and existing investors that care to listen in one of its thousand stock analyses on stock investments ..
Access Bank’s Price to earnings ratio of 0.9x that is below the market figure of 6.9x , its earnings that grew by 953.8% over the past year , its ability to pay high and reliable dividend of 11.05% and its capability to trade at good value compared to peers and industry are its beauties that prepare the offers possibly for a home run. And that company believed they are enough to drive the offers successfully despite the inclement economic and highly competitive environment.
Access lower price volatility is another attraction that is expected to drive its ongoing offers . When selecting a security for investment, traders look at its historical volatility to help determine the relative risk of a potential trade. Numerous metrics measure volatility in differing contexts, and each trader has their favorites. A firm understanding of the concept of volatility and how it is determined is essential to successful investing; volatility is a reflection of the degree to which price moves. A stock with a price that fluctuates wildly—hits new highs and lows or moves erratically—is considered highly volatile.
ACCESSCORP has not had significant price volatility in the past 3 months and its weekly volatility (4%) has been stable over the past year. ACCESSCORP Average Weekly Movement at 4.2% is lower than the Industry Average Movement at 5.3%, Market Average Movement of 5.6%., 10% of most volatile stocks in NG Market and 9.3% least volatile stocks in NG Market .
Moreover , with no risks detected for by the analysts from its risk checks , the bank’s offers,they believed ,would surely to hit a run
Those views from the Simply Wall Street may not be misplaced , at least based on the credibility of its analysts. A financial company revolutionizes how individuals invest and helps them follow the principles of long term investing at every stage of their journey , this company has a flair for investors ‘ guide that rarely miss the target ; with its mission that is to empower every retail investor in the world to make the best decisions possible,it has made several rich investors worldwide .
At the home front , two credible stockbroking firms,Meristem and Afrivest , recently recommended this bank’s share for buying while another one ,Bancorp Securities,counseled the investors for hold .A “buy” rating, is another endorsement, it means analysts like the stock and think it’s worth purchasing because its value is likely to increase.
The above views are indeed confirmed by a valuation analysis on Access Holdings at home and abroad.
Access Bank ongoing rights issue and public offer initiated to raise capital and meet the recapitalization targets set by the central bank,without being disingenuous, is an opportunity for investors to multiply wealth without much risk .
A key point of interest is the share price at which the rights issue and public offers are offered to the investors .
At the close of trading on June 9, 2024, Access Holdings’ share price stood at N19.35, which is 2% lower than the N19.75 price set for the bank’s ongoing rights issue.
On July 8, the opening day of the rights issue, the share price opened at N19.20, then appreciated by 2% to close at N19.60. However, today, July 9, Access Bank declined by N0.25 to close at N19.35.
The fluctuations in Access Holdings’ share price raised significant concerns among shareholders, who voiced their apprehensions during the group’s “Facts Behind the Issue” presentation at the Nigerian Exchange (NGX).
Why it is an anomaly: Typically, in share offering programs, whether through a rights issue or a public offering, the offer price is set at a discount to the market price to attract investors.
In a rights issue, the discount on the issued shares is generally more substantial than in a public offering. For instance, Fidelity Bank priced its rights issue shares at N9.25, while its public offering shares were priced at N9.75.
Companies typically offer a larger discount on rights issues because they are exclusively available to existing shareholders, making the discount an additional incentive for these shareholders.
Reasons for the price disparity
In Access Holdings’ case, the Chairman of the Group, Aigboje Aig-Imoukhuede, tried to explain the reason behind the departure from the norm, putting forward the strong earnings profile of the bank.
Aig-Imoukhuede noted, “There are certain things I look at when investing in a business or considering an investment. When evaluating a business, if the business’s annual earnings run rate matches the amount I invested, I consider it a strong indicator.”
“For example, analyzing Access Bank’s earnings profile, even without accounting for currency devaluation profits, shows significant earnings potential. If devaluation occurs, the earnings forecast could double or triple.”
“Currently, the analysis shows a potential earnings value of about 17 naira per share, with a trading price of around 19.75 naira per share. This is not a bank that needs further reinvestment to make that money, meaning it won’t seek additional capital that could dilute its earnings.”
He then noted that the recent rights issue was essential to reward long-term investors who have supported the bank through difficult times, as the bank is poised to generate significant profits in the future.
Recall that in FY 2023, Access Holdings Plc hit earnings per share of about N17.23, based on its net income of N619.3 billion. The group’s earnings per share represent a 288% increase from the N4.44 earnings per share posted in 2022.
One of the most popular valuation metrics is the price-to-earnings ratio (P/E), which measures the share price of a stock as a multiple of its earnings. The closer this figure is to one or below one, the cheaper the stock.For instance, FBNH shares have a P/E ratio of 2.62, GTCO shares are at 2.36, UBA shares stand at 1.32, and Zenith Bank shares are at 1.74. Using the offer price of N19.75, the price-to-earnings (P/E) ratio of 1.15 for the issued share is notably lower compared to its industry peers.
This disparity suggests that Access Bank shares trading in the market with a 1.12 P/E ratio may be significantly undervalued.This lower P/E ratio suggests that the stock is undervalued compared to its peers, indicating that investors are paying less for each unit of earnings relative to other banks. This could be seen as an opportunity for investors if they believe that Access’ earnings will continue to grow
Another valuation metric is the price-to-earnings growth (PEG) ratio, which adjusts the P/E ratio by the stock’s earnings growth. Similarly, a PEG below 1x suggests that the stock is undervalued relative to its earnings growth potential and may offer attractive growth at a reasonable price, appealing to growth-oriented investors. Boosted by its recent performance, Access has a PEG ratio of less than one, making it attractive for growth-hungry investors.
Additionally, despite the group’s strong capital assets that is expected to be reflected in its higher price-to-book ratio , its P/B was 0.39, compared to the banking sector average of 0.63, indicating its asset was undervalued .
The above Access ’s valuation metrics, including a low P/E and P/S ratios combined with a very low PEG ratio, suggest that it might be an attractive investment, especially for those looking for growth opportunities at a reasonable price.
Besides valuation dynamics, Access is known for its dividend payouts .Access Holdings is a dividend paying company with a current yield of 11.05% that is well covered by earnings.
ACCESSCORP’s dividend (11.05%) is higher than the bottom 25% of dividend payers in the NG market (1.76%) and its dividend (11.05%) is in the top 25% of dividend payers in the NG market (6.58 .With its payout ratio (10.8%), ACCESSCORP’s dividend payments are thoroughly covered by earnings.
Key information
Dividend yield
11%
Payout ratio
Industry average yield 8.3%
Dividend per share ₦2.100
Earnings per share ₦20.23
A stock that maintains a relatively stable price has low volatility. A highly volatile stock is inherently riskier, but that risk cuts both ways. When investing in a volatile security, the chance for success is increased as much as the risk of failure. For this reason, many traders with a high-risk tolerance look to multiple measures of volatility to help inform their trade strategies
The Fundamentals That Are Expected To Drive The Offers
Access Holdings Plc (AccessCorp) is one of the leading financial institutions in Nigeria and the largest commercial banks in the country, also known as FUGAZ.
The year 2023 was a fantastic year for the tier 1 bank, with the share price gaining 172.4% and closing at N23.15 .and a market capitalization of N822.9 billion .i The bank ,indeed , achieved a highly impressive yearly gain
It is one of the best-performing FUGAZ stocks this year . Despite currently trading below its 52-week high of N30.70 , Access is still above its 52 week low of N14.45 at N19 .This performance suggests strong investor confidence and positive sentiment towards the stock, primarily based on its financial performance.
Financial Performance Driven By Strong Fundamentals
The stronger gross earnings cushioned the growth in personnel expenses and in operating expenses, raising profitability thrice above the FY 2022 amount. The pre-tax and post-tax profits increased to N729.00bn and N619.32bn in FY 2023 from N167.68bn and N152.90bn in FY 2022, respectively. The improved income statement line items improved ratios, with net interest margin rising to 5.40%, return on equity climbing to 36.20%, return on asset rising to 3.00%, NPL declining to 2.80%, and cost-to-income (CIR) dropping to 44.60%. Due to the high-risk environment, the group’s impairment charge on loans and advances increased by +14.55% to N84.37bn, but the net impairment charge on financial assets declined by -29.46% to N139.53bn in FY 2023, suggesting less default risk.
Commercial banks are not only rated for their bottom-line performances, especially from a regulatory standpoint. One of the most important regulatory prudential ratios is the capital adequacy ratio (CAR), which the central bank set at 15%.
Access surpasses this, posting a CAR of 21.09%. The bank has set a target of 24.5% in 2024, indicating a proactive strategy to strengthen its financial stability and resilience against potential losses.
Tier 1 capital represents 74% of total regulatory capital at
N1.475trn; FY’23 liquidity ratio is 12.3% above the regulatory minimum as its liquidity Ratio closed at 51.8% in FY’23 from 39.5% in FY’22. Capital and liquidity ratios have sufficient buffers to withstand
market shocks
Asset quality remains stable with an improvement in the NPL ratio to 2.8%
(FY’ 22: 3.1%) on the back of proactive monitoring and our disciplined
approach to risk management.
Adequate coverage ratio at 134.6% (Dec’2022: 98.6%), which is in line with
our strategy of maintaining a healthy coverage for the loan portfolio.
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The Offers Details
Access Holdings Plc, has announced the commencement of its N351 billion capital raising through a rights issue otherwise called an offer for subscription.
The lender said that it’s now focused on positioning itself among the top financial institutions in Africa.
“A subset of the group’s capital raising programme aiming to generate up to US$1.5 billion, the Rights Issue is designed to strengthen the Group’s financial footing and support ongoing working capital needs, including organic growth funding for its banking and non-banking subsidiaries.
According to the bank’s Acting Group Chief Executive Officer of Access Holdings Plc, Bolaji Agbede, the offer for subscription will further expand the group’s growth strategies and financial strength.
“The commencement of the Rights Issue subscription is an important step in our growth strategy and capital-raising plans, reinforcing our financial strength and accelerating our strategic ambitions. However, this execution is more than a capital raise; it is a pivotal process that will propel us towards our goal of becoming one of the top 5 financial institutions in Africa by 2027.
“We are confident that this exercise will solidify our position as a market leader and drive sustainable growth for years to come. Access Holdings’ Rights Issue offers 17,772,612,811 ordinary shares of N0.50 each at N19.75 per share.
“The Offer will be issued based on one (1) new ordinary share for every two (2) existing ordinary shares held as of Friday, 7 June 2024,” Agbede said.
The lead issuing house for the Rights Issue is Chapel Hill Denham Advisory Limited. Atlas Registrars Limited will serve as Registrars to the Offer.
Now operational in 22 countries across the globe, with 15 in Africa, Access Holdings has established itself as one of the continent’s most trusted perform
