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Analysts Okay Pricing of Afribank Plc Share Offer


November 16, 2007



InvestIQ, independent technical and price fundamental analysts, have expressed their professional opinion on the share price of the current Afribank Nigeria Plc share offer, confirming the widely held belief that the stock price and the discount offered were based on the true worth and prospects of the banks stock.


In their analyst report, recently released on the Proshare website, the nation’s premier online investor information and analyst services hub; the firms Board of Analysts submitted that the fair price of the Afribank Plc stock is worth N30.61k. It will be recalled that the stock closed upon technical suspension for this offer at N30.49k.


Justifying their computation of the price, they affirmed that “In consideration of the calculated stock price relative to the offer price, the stock price for Afribank does not appear to be over valued.”


It added that “a review of the historical performance of other bank stocks that recently concluded their secondary offering indicates that Afribank stock price is likely to resume trading at, or above the pre-suspension price of N30.49k, not at the offering price”.


It concluded that “though the offer price is only N5.61k, or 18.32% removed from our calculated stock value of N30.61k, we recommend this stock as a long-term BUY.”


Afribank opened its public offer to raise 4 billion ordinary shares of 50k each @ N25 each on November 1, 2007 and would close the offer on December 10, 2007.


FSDH Securities Limited (formerly Counters Trust Securities Limited) believes that a fair price of the stock at the time of the offer is N31.76k (average).


The firm arrived at this fair value for Afribank Plc. by using four (4) valuation metrics which are: Dividend Discount Model (DDM), Discounted Future Earnings (DFE), Maintainable Earnings (ME) and Price to Earnings Relative (PER) valuation methods.


In their valuation, they used the three-year dividend projection and the forecast PAT of the bank for the years ending 2008, 2009 and 2010.


They also used the five (5)-year historical PAT’s of the bank for the years ended 2003, 2004, 2005, 2006 and 2007 after adjusting for exceptional items paid in 2005 and 2007.


In their analysis report summary, they explained that in order to arrive at the value of each share they used 5,108,433,332 (excluding the bonus shares of 1 for 5 shares which were in issue as at 31st March, 2007) and 10,130,118,000 Ordinary Shares which would be in issue in 2010 after the Public Offer.


The decision by most analyst to recommend a buy decision on the stock at the current offer price as predicated by the valuation results is further encouraged by the recent half year results of the bank recently released which revealed a 102% increase in Gross earnings and a corresponding 187% increase in PAT for the period ended September 30, 2007.

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