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UACN property: Time to buy shares

by Business News Report

By Omoh Gabriel,Business Editor
UACN Property Plc is building its stocks, assets, reserves and equity to enhance its future earning streams. This strategic investment build up which started some years ago has impacted positively on the company’s share price at the Nigerian Stock Exchange.
UACN Property which share price was N2.50 in 2000 has lifted its price to an average price of N6.60 at the end of the 2003 financial year. As at May 2004, the share price has risen to N10 on the floor of the Nigerian Stock Exchange. The price is set to go up further in the years to come as the company continues to invest in property that would boost future earnings.
In 2003, the company signed a technical and management agreements with a France based Accord group for the management of Novotel-Festac hotel, the former Festac 77 Hotel which UPDC acquired in 2002. The contract for the reconstruction which is estimated at N2.25 billion has been awarded and work has started.
UPDC plans to complete the luxury apartment complex on the high brow 51-55 Glover Road, Ikoyi. Of the 54 flats being developed 18 units will be sold while 36 units will be retained for investment purposes. Other 16 flats on Burdillion Road, Ikoyi will be added. The company recently bought the controversial 1004 block of flats which it hopes to develop for rental purposes.

As is the case with real estates, investment usually appreciates and UPDC will in the future boost its earnings which will lead to an appreciation of its market value and price. Investors interested in future capital gains can begin to buy shares in the company.
Earnings per share
The company in the last five years has been improving on its earnings per share. In 1999 the average earning per share was 15 kobo. This rose to 49 kobo in 2000, it further improved to 57 kobo in 2001 and inched up further to 74 kobo in 2002. In 2003 it jumped to 90 kobo. From the company’s investment profile, future earnigns are likely to be higher. The company has also not failed to pay dividend in the last five years. The dividend for share has also been improving.
While in 1999 it declared a divident of N140 million, it paid 14 kobo per share as dividend. In 2000 a dividend of N300 million was declared which amounted to 30 kobo per share. This moved up to N350 million, a 35 kobo per share dividend in 2001. The same level of dividend was declared in 2002 while in the 2003 financial year dividend inched up to N450 million resulting in 45 kobo per share.
The company’s net asset per share has also not lagged behind. It moved up from N6.29 in 1999 to N6.53 in 2000, N6.69 in 2001 and peacked at N14 in 2002. It however declined to N13.25 in 2003.
The company has also been building its reserve with retained profit. Last year alone, a total of N453.4million was posted as retained profit. The company’s financials indicate a strong company with future high yields on returns on investment.
Pre-tax profit margin
Profit before tax of UPDC inched up in 2003 record. Pre-tax profit therefore rose from N846.9 million in 2002 to N1.044 billion in 2003. This translate to 34.9 per cent margin on turnover. In order words, the company made N34.9 as pre-tax profit on every N100 sales made in 2003.
Return on assets
Total assets of UPDC grew by 0.2 per cent to N14.1 billion. Rate of Assets turn over also improved to 22.6 times from 12.3 times in the preceding year. Since the profit margin was higher, return earned on assets also moved up to 7.9 per cent from 6.0 per cent in 2002. This means that every N100 assets earned N7.9 in profit compared to the N6 the previous year.
Return on Equity
Shareholders funds in the company declined by 5.5 per cent to N13.252 billion in 2003 from N14.03 billion in 2002. Mainly because of the decrease in the revaluation of asset. Return on equity however increased to 7.8 per cent from 6 per cent because of higher net profit for the year.
Operating Expenses
A higher 36.8 per cent of sales revenue was spent on operating expenses. In 2003 a total of N254.95 million was spent as operating expenses as against the N186.3 million spent in 2002. Operating cost for the year thus rose by 36.8 per cent. The increase was as a result of higher maintenance cost and cost of investment in property sold.
The company income was boosted by the sale of premium homes which yielded a total of N1.09 billion as against the N48 million it generated from the same source in 2002. Also sales in luxury apartment was lifted from N122.2 million in 2002 to N286.7 million in 2003.
Further increases came from rental homes which yielded N287.3 million, sales of investment properties N798.5 million while service charge income rose to N10.8 million. As a result gross income rose by 72.1 per cent.
Interest Income/Expenses
The company in 2003 received interest income amounting to N28.988 million as against the N10.686 million it received in 2002. The company during the year obtained bank loans and commercial papers from five financial houses to the tune of N1.78 billion as against the N740.7 million loans it obtained in 2002. Interest payment on loans were not shown.
Employee Productivity
Pre-tax profit per worker averaged N6.37 million in 2003 compared to the N5.49 million in 2002. Staff cost also rose, averaging N877,400 compared to the N780,000 in 2002.
As the company continues to invest in properties, its future earning prospects are bright. The financial indicators are strong-and this should encourage prospective shareholders to buy the company’s share. However the company must watch its growing bank loan portfolio, as the loans mature, it would require a lot of funds to service as well as pay back. Such expenses are charged on profit and loss account.

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