UACN Property Development Co.: Construction/real estate

THE COMPANY: UACN Property Development Company (UPDC) stands as the leader in the high-end segment of the real estate market in Nigeria. UPDC’s main business and core activities are the acquisition, development, sales and management of high-quality serviced commercial and residential properties in the luxury, premium and classic segments of the real estate market in Nigeria.

UPDC operated as a division of UAC of Nigeria until 1997 when it was incorporated as a public limited liability company and listed on the floor of the Nigerian Stock Exchange (NSE). The company is listed under the construction/real estate sector and the real estate development sub-sector on the NSE and has shares outstanding of 1.38bn, valued at N20.93bn ($131.86m). Over the years, the company’s portfolio has expanded in several regions in the country and now comprises residential estates and commercial properties in Lagos, Abuja and Port Harcourt.

2013 RESULTS: Revenue for the company grew 24% to N3.21bn ($20.22), up from N2.58bn ($16.25m) recorded in Q1 2012, as a result of healthy off-plan sales of residential and commercial projects within the mid-tier market. Profit before tax came in at N436.12m ($2.75m), representing a decline of 82% against the N2.4bn ($15.12m) recorded the previous year. The decline in the profit before tax was affected by a 109% increase in financial charges, which stood at N340.61m ($2.15m). The profit after tax margin was 9.8%, which was up by 29% from the 7.6% reported in Q1 2012, while profit after tax showed a 60% rise to N316.75m ($1.99m), compared to N197.41m ($1.24m) recorded in Q1 2012.

In fiscal year (FY) 2012 shareholders’ wealth grew marginally by 4% to N31.25bn ($196.88m), while book value per share stood at N22.74 (0.14), representing a price to book of 0.70x. The company remains underpriced, as its stock currently trades around N14.60 ($0.092). Distribution, administration and other expenses, which saw an increase of 29% in 2012, recorded 45% growth in Q1 2013 to N588.68m ($3.71m) from N406.56m ($2.56m) recorded in the previous year. Non-controlling interest recovered from a loss of N15.8m ($99,540) in Q1 2012 to a gain of N2.95m ($18,585) in Q1 2013.

Trailing earnings per share (EPS) grew 30% to N1.59 ($0.010), translating to a price-to-earnings ratio of 9.58x. The company declared a N0.70 ($0.0044) dividend for FY2012, translating to 44% payout ratio of its EPS. The company paid nearly half of its earnings, retaining about 56% showing its strategy of expanding capacity and resources through profit, rather than seeking funds in the capital market. UPDC has the potential to deliver a positive result, as it is poised to expand its operations nationwide. UPDC remained consistent in its payment of a high dividend for 2012. The company’s share price has appreciated by 29% year-to-date, due to investors’ confidence based on its impressive financials.

DEVELOPMENT STRATEGY: Despite a harsh operating environment, UPDC remained committed to managing its short- to long-term environmental responsibilities, both towards the communities in which it operates and towards future generations at large. In a bid to improve productivity, lower costs and reduce its reliance on the sale of buildings to secure long-term return on investment, UPDC launched a plan to raise N30bn ($189m) through an initial public offering of 3bn units of N10 ($0.063) each, as part of the UPDC Real Estate Investment Trust (REIT) – a corporate bond. This would help ensure the company has the financial resources necessary to execute its line of significant projects.

UPDC intends to hold 40% of the REIT, while 60% will be sold to the public. The cash being raised from the offer is intended to be applied towards the purchase of real estate assets. The stock is also set to be listed on the Nigerian Stock Exchange and will be openly traded, having the full potential of other ordinary shares. The trust is being listed as UPDC REIT.

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