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.
No comments:
Post a Comment