Thursday, August 17, 2017 6:28PM / FBNQuest Research
7% cut to our EPS estimates over the 2017-18E period
UACN’s other businesses also contend with similar headwinds. Following discussions with management, we expect modest price increases across various products in the food & beverage category. Relatively softer input costs due to improved fx supply for imports and the harvest season in H2 are also supportive. As such, we see overall business costs easing in H2.
However, we have cut our EPS estimates over the 2017-18E period by 6.6% given that Q2 earnings missed our forecast by c.21%. Our price target of N26.0 holds because we have rolled forward our valuation to 2018. Year-to-date, UACN shares are flattish compared with a broad market gain of around +37% and has remained on the sidelines of the market’s recent rally.
Given capital raising efforts across various UACN subsidiaries it appears that dilution fears continue to weigh on investors’ minds. Nonetheless, we retain our Outperform rating on the stock due to the valuation gap to our fair value estimate. At current levels, UACN shares are trading on a 2017E P/E multiple of 18.7x for an average EPS growth of 52% over the 2018-19E period.
Q2 2017 PBT down -63% y/y to N805m
Sequentially, sales declined by -6% q/q while PBT was down -2.9% q/q on the back of strong other income growth (up +724% q/q). Compared with our estimates, while UACN’s sales were in line with our forecast, PBT came in behind our N1.2bn estimate by around 35%. Negative surprises on both net finance charges and opex offset positives coming through from the other income line.
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