…On recapitalisation, Access Holdings Plc has concluded its N351.01 billion capital raising program through a 1:2 rights issue in August, and is going through the capital verification phase now before announcing the outcome
MON SEPT 23 2024-theGBJournal| Access Holdings (ACCESSCORP)released its H1 2024 results after close of business on Friday 20th September, reporting Net profit growth of 103.5% y/y, buoyed primarily by a 128.9% y/y increase in Net Interest Income and a 111.9% y/y increase in Trading Revenues.
On the H1 2024 EPS of N7.61, the board has proposed an interim dividend of N0.45 per
share (+50.0%y/y), which implies an interim dividend yield of 1.2% on today’s closing price.
The overall performance is primarily attributable to the impact of the high yield environment and improved loan growth.
Although Q2 2024 earnings assessed on a standalone basis declined quarter on quarter, the overall growth was positive and underscores the firm’s focus on delivering performance and value to its shareholders.
The stock traded on a bearish note last week, losing 1.3%. The stock is up 12.4% over 1-year, 18.8% above its low point this year (25thApril) and we expect it to outperform the NGX Banking Index going forward.
Coronation Research analysts believe that the market ”is beginning – just beginning – to understand the earnings potential of a highly diversified and non-correlating portfolio of assets, with some 25% of Group equity in the UK and some 20% of Group equity spread across 13 African subsidiaries outside of Nigeria.”
”A price to book valuation of 0.24x represents an attractive entry point, in our
view. We recommend the stock a BUY with 45.9%upside potential,” Coronation Research said.
Access Holdings Interest income rose by 142.6% y/y in H1 2024 as interest on loans and advances to customers surged 117.2% y/y. In our view, the bank was able to reprice its loans to reflect favourable rates given the hike in the MPR rate during the period. Loans and advances to customers have increased by 34.8% y-t-d, driven by both organic expansion and foreign currency revaluation.
Elsewhere, interest on Investment securities (+89.3% y/y) and interbank lending (+285.1% y/y) contributed positively to the growth In Interest Income, driven primarily by improved market yields.
On the other hand, interest expense (+150.6% y/y) outpaced interest income following a 262.8% y/y increase in expenses on deposits from banks. We highlight that the bank’s Current Account Savings Account (CASA) mix improved to 66.4% in H1 2024 (FY 2023: 62.8%). However, its Cost of Funds (CoF) rose to 7.2% (H1 2023: 5.0%).
Consequently, Net Interest Income rose by 128.9% y/y with the Net Interest Margin (NIM) increasing by 101bps to 4.6%, according to our estimates.
Non-interest income grew by 128.5% y/y as trading revenues (+111.9% y/y) expanded. The increase is attributable to the N253.9bn rise in Net realised and Unrealised Foreign exchange gains on items not hedged and the N132.8bn in Fixed income securities trading recorded by the Group.
These were sufficient to make up for N334.7bn fair value loss on non-hedged derivatives.
Fees and Commission income also grew at an impressive rate, of 132.6% y/y, supported Credit-related fees and commissions and Channels and other E-business income. Operating expenses felt the impact of inflation, growing by 127.6% y/y.
However, the Group’s Cost-to-Income ratio fell to 60.4% (H1 2023: 60.7%) as the growth in income outpaced expenses. Pre-provision operating profit rose by 130.5% y/y.
Further down the income statement, loan loss provisions rose by 230.2% y/y reflecting macroeconomic challenges. Overall, the Group’s Pre-Tax profits rose by
108.2% y/y in H1 2024.
Asset quality remained impressive during the period, with the non-performing loan (NPL) ratio decreasing to 3.1%, down from 3.2% H1 2023, and on the same level of 3.1% reported at FY 2023, and well below regulatory limits.
However, the Group’s cost of risk jumped to 2.5% up from 1.2% in H1 2023 due to heightened expectations of credit losses.
Additionally, the Group’s total capital adequacy ratio (CAR) declined to 19.7% from 23.3% in FY 2023 due to additions of risk-weighted assets. The Group’s total capital adequacy stands well above the regulatory minimum of 16.0%.
Overall, the results showcased rapidly growing earnings from a highly diversified portfolio of earning assets over the period, particularly from core operations, and efficient deployment of its online channels.
As market rates moderate in Nigeria in Q3, Coronation Research say they expect a degree of moderation in funded income.
On recapitalisation, Access Holdings Plc has concluded its N351.01bn capital raising program through a 1:2 rights issue in August, and is going through the capital verification phase now before announcing the outcome.
Stock Rating: BUY
Price Target: N27.73
Price (23 September 2024): N19.00
Potential Upside (Downside): +45.9%
Ticker: ACCESSCO NL (Bloomberg)
Analysis provided by Coronation Research
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