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Union Homes Plc For the year ended December 31, 2008 Union Homes made a doubling in profit after tax from N1 billion to N2 billion. Turnover on its part rose to N8.92 billion against N8.4 billion it recorded in the previous year which represented an increase by 6.19 percent. Interestingly, net margin improved by about a 100 percent fold, growing to 22.4 percent compared to 11.90 percent in 2006. The implication being that notwithstanding increasing expenditure the company makes on the acquisition and development of properties, the management is able to control cost as to improve profitability. Union Homes which is currently trading at the secondary market on the technical suspension price of N5.50 per share will appeal to the investor on the strength of the firm's ability to grow volume while also guaranteeing efficiency as well as taking advantage of the immense opportunities opening in the industry. Recent floatation of N50 billion Real Estate Investment Trust (REIT)by the company is also viewed by analysts as another good income generating security for the investor. The REIT is sold at N51.50 per share, a price the various parties to the offer have described as heavily discounted, in a bid to encourage mass participation. Generally, real estate securities offer ample opportunities for investors that are averse to risk since properties hedge against inflation, often subject to price and capital appreciation and guarantee high yield on investment (through rental, lease and property sales income). Investments in real estate are highly profitable since properties appreciate in value and price over time. Investment risk in terms of losing money in properties is low provided structures are erected and maintained at specified standards. REITs, experts say, provide some form of inflation protection due to their low correlation with other financial assets.
Fidelity Bank Employing technical tools, the stock seems positioned on the way up the ladder, a development that is more pronounced when the PE Ratio is factored in. In the past trading week, Fidelity Bank made a good outing especially in volume of transactions and closing price. There is also the fact that investors are eagerly awaiting the release of the audited financial statement of the bank to June 30 2008, which many analysts believe will impact positively on the share price. Fidelity Bank which opened trading during the week at N8.30 per share closed at N8.46, thereby gaining 16 kobo or closing with price appreciation by 2 percent. It however closed on Wednesday at N8.44 per share. The bank exceeded its last full year eps of 29 kobo by 21 kobo or 72 percent in only nine months. It is also noteworthy that it exceeded its 2008 forecasts as contained in the last offer prospectus just within the third quarter. Fidelity Bank had projected eps of 49 kobo and 82.4 kobo in 2008 and 2009. On a forward basis and with a conservative eps of 75 kobo at year end, the PE Ratio on current price is 11.25x. The PE Ratio will make the equity appeal more to the investor, on industry comparison. All things being equal, investors in Fidelity Bank at the prevailing price stand to benefit by way of share price appreciation from the short, medium to long term. Besides, it is an equity that is gradually building strong fundamentals. Many analysts see the stock with high growth prospects. That is also informed by its financial reports as contained in the last audited report to June 2007 as well as in the quarterly results. The bank's gross earnings made over a doubling in the past year from N11.9 billion in 2006 to N24.9 billion in 2007, a growth by 108 percent. Profit after tax advanced by 46 percent up from N3.2 billion in 2006 to N4.7 billion in 2007. Earnings per share (eps)moved up from 20 kobo in 2006 to 29 kobo in 2007, representing a growth by 45 percent. Loans and advances increased by 870 percent to N2.9 billion from a paltry N303 million the previous year. Owners' equity advanced by 17 percent to N30 billion from N25.7 billion, just as total assets jumped to N218 billion, representing 80 percent appreciation over the N121 billion the bank recorded in 2006. Net assets was up by 16 percent to N1.94 from N1.67 the previous year. Customers' deposits increased by 128 percent to record N176 billion against N79 billion in 2006.
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