Before you take a plunge

As an investor, you do not need to jump on the bandwagon due to the hype in the property market. It is never too late to invest in real estate. Whether you are buying your first or twentieth property, you should be concerned about the future prospects of a city not the past. And because real estate involves a substantial capital commitment, you need to first do a fundamental research. Ask probing questions to uncover the potential of the area and ascertain the reasons for rising demand to determine whether the momentum can be sustained or not. Before you buy any property, consider the following:

Rising average income

If an area's average income is rising faster than the state or regional average, property prices will be propelled upward. Strong demand may push price up even when average income in an area is unchanged or declining such as when retirees are attracted to an area. This can only be profitable in the short-run but not in the long-run.

Growing population

The influx of people into an area is an indication that property prices may rise. If an area can boast of a conducive environment to business, people will be attracted to it. The availability of ample job opportunities, proximity to an industrial estate, security, lower tax rate, friendly labour law and industrial harmony signal that property prices will rise in the future.

Proximity to a town witnessing a price hike

Real estate boom in a town or city may eventually spill over its borders into neighbouring towns. A redeveloped area witnesses a price hike that spreads to surrounding older towns.

Transportation expansion

Major transportation upgrade pulls in buyers and tenants. This drives property values up and reduces vacancies.

Double Your Money In Ibeju-Lekki

Ibeju-Lekki Local Government is a coastal area carved out of the old Epe Local Government in Lagos State. It can be accessed from Lekki, Epe and Ikorodu. Property prices in Lekki are out of the

reach of the middle-income workers who work in Victoria Island, Ikoyi and Lekki. This makes Ibeju- Lekki the next property hub for the

middle-income investors who may wish to enjoy rental income and property appreciation in future. A lot of estates have sprung up and we expect many more soon. We expect massive developments in the area in the coming years.

Lekki has witnessed huge developments in the last few years and prices of properties have skyrocketed. The Lekki Free Trade Zone will make Lekki an important industrial estate in the next few years. When the Lekki Deep Sea Port and the airport are completed, Lekki would be the gateway to the world.

The Lekki axis has been witnessing influx of people which would put pressure of property prices going forward. The proximity of Ibeju-Lekki to Lekki has made it the next property destination for the middle class. Though few developments are taking place in Ibeju-Lekki, we expect demand to increase. Over the long term we expect Ibeju-Lekki to deliver handsome returns. Major real estate acitivity in the area still revolves around land buying and selling and construction of mostly residential property. Demand for land is on the increase as many investors discover the opportunities in the area. Land is affordable in Ibeju- Lekki; it ranges from NGN1.3 million to NGN5 million.

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UAC of Nigeria Plc

Company Overview

UACN is a diversified business whose operation in Nigeria dates back to 1879. The company is an active player in the food and beverages, real estate, paints and logistics sectors of Nigeria's economy. Its subsidiaries include UAC Foods Limited, MDS Logistics Limited, UAC Restaurants Limited, Chemical and Allied Products Plc, UACN Property Development Company Plc, Grand Cereals Limited, Warm Spring Waters Nigeria Limited, Livestock Feeds Plc, Portland Paints and Products Nigeria Plc. UACN boasts of leading brands such as Gala Sausage Roll, Supreme Ice Cream, SWAN Natural Spring Water, Dulux paints, Debonairs Pizza and Binggo Dog Food.

Management has been growing the business through both organic and inorganic means. The ability to consolidate its market share in the Quick Service Restaurants (QSR) business through franchising is a plus for the management team of UACN. Besides, the company acquired Livestock Feeds Plc and Portland Paints and Products Nigeria Plc in order to enhance its market share in the relevant segments of its business.

Mr. Daniel Owor Agbor chairs an eight-man board of directors while Mr. Larry Ettah was appointed the managing director in January 2007, after about 2 decades with the company.

Investment Thesis

UACN is a leading player in the food and beverages industry with its brands of Mr. Bigg's, Gala, Supreme Ice Cream and SWAN Natural Spring Water. Food and beverages had a revenue boost of 17.5% in 2016 compared to 8.1% of the previous year. It is responsible for about 70% and 50% of total revenue and Profit Before Tax (PBT) respectively.

Though this segment has low margins, we believe that increased sales volume and cost containment would help improve earnings and margins. The company mitigates its risks with a broad product portfolio. The margins from paints and logistics are encouraging despite the harsh operating environment. Paints produced 10.4% (2015:12.4%) of revenue and had a PBT margin of 25.4%. However, the company made a huge loss of NGN1.8 billion from its real estate business despite recording 25% revenue rise. Food remains its core business and revenue from this segment has been increasing over the years. UACN should benefit from the Quick Service Restaurants business owing to the large branch network of its franchised restaurant, Mr. Bigg's. Gala Sausage Roll remains a leading brand in the country. We hold a buy recommendation for UACN at the current market price of NGN17.39. Historical Price/Earnings (P/E) ratio is 5.6 times and Price to Sales is 0.4 time. Earnings yield gained 5% to end the year at 18%. Total assets are growing; Book Value Per Share and Sales Per Share averaged NGN36.5 and NGN40.7 respectively.

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Quick Steps to Restructure a Business

A company that is consistently under-performing and losing its market position needs to restructure its business. Contrary to popular opinion, it is not all about cutting costs and downsizing. This is because doing so may jeopardise the ability of the business to compete well going forward. And there is a minimum resource level required to make the restructuring process a success. In fact, you may need to increase the staff strength to enable the business tap opportunities and turn the corner. The following steps are important for a successful restructuring:

1. Obtaining Background Information

Before you can successfully diagnose the business and proffer solutions, you have to understand the nature of its  business. It is essential in order to identify the company's  strengths and weaknesses. In addition, you much juxtapose the company's strategies  with competitors' strategies to determine how industry participants position themselves in the marketplace. Understanding the industry will uncover industry key success factors such as product performance, product quality, distribution network, cost structure, service delivery and so on. 

2. Examining the Company's State of Affairs.

A company embarks on restructuring because things have gone awry and the company needs to be resuscitated. You must investigate deeply the causes of dismal performance. It would help determine which part of the business can be retained or which one should be discarded. Also, you would know whether the business is overstaffed or understaffed. 

3. Devise a Blueprint

The commitment of the staff of the company is required for the plan to be carried out successfully. Therefore, they must be involved in crafting strategies to revamp the company. In addition, external stakeholders such as banks and creditors have to be involved. For instance, the restructuring process may need loan from the company's bankers. 

4. Execution and Review

Strategies outline the courses of actions to achieve stated objectives. There won't be results if strategies are not followed through. Furthermore, there must be a review to ascertain whether things are working according to plans. This will reveal what works and what doesn't work. This is how the company can stumble on a great strategy because what works on paper may not work in reality.

Double Your Money

Doubling your money might be a major headache to you. No worries,  Rule 72 will do the magic. Assuming that you know the rate of return on any investment vehicle-interest rate on deposit, capital appreciation on sticks, and rental income-number of years to double your money is 72 divided by the rate of return.

Number of Years to Double= 72 ÷ Rate of Return

This is a quick screening method to know whether the investment suits your risk appetite. So, you do not have to dissipate energy digging deep when the payback period is unappealing to you.