Oil and Gas Free Zones Authority Nigeria

UACN (UAC of Nigeria) Plc: A Good Investment

By Folakemi Emem-Akpan

Projections/Future outlook

The 2016 financial year was quite the profitable one for UACN (UAC of Nigeria) Plc. While growth indices and profitability ratios generally slowed down a bit over the preceding year’s, they still competed favourably against industry standards for the period.

This stock is a great asset for shareholders as it pays good dividend. It may however be difficult for new investors to buy into the company as its stock is currently high priced.

For investors who are able to buy into the company, this will be a worthwhile investment because the stock is currently undervalued, so such investors stand to benefit from capital appreciation as the stock value rises to meet its potential.

Capital adequacy

Not only did UACN have a lower capital adequacy in 2016 than it did in the prior year, the result overshot the industry standards for the period under review.  At 88.1 percent, and higher than the 84.9 per cent result recorded in the prior year, the company’s result is still very high and suggests that its financial strength in the future is solid.


Mr. Ettah is the Group Managing Director/Chief Executive Officer of the Company. He started his career as a Management Trainee in UACN in 1988, and has held several Senior Management positions in the company. He was appointed an Executive Director in 2004, and became the Group Managing Director/Chief Executive Officer in 2007. He holds a B.Sc. degree in Industrial Chemistry and an MBA, and is a graduate of the renowned Executive Programme of Ross School of Business, University of Michigan. He is the President of Nigeria Employers’ Consultative Association (NECA).

Mr. Daniel Owor Agbor is the non-executive chairman of the board, and  the Managing Partner of the law firm of Udo Udoma & Belo-Osagie. He brings to the Board of UACN a wealth of experience from his distinguished careers in banking and legal practice.

He holds a B.Sc. degree in Political Science, an M.PA (Masters in Public Administration), and a Bachelor of Laws (LL.B) degree. He held various positions in Nigeria International Bank Limited (now Citibank Nigeria Limited), and in Gulf Bank of Nigeria Limited. He has attended several training programmes within and outside Nigeria including Euromoney Training Programme on effective Risk Management Oversight for Board Members & Executives.


The company did not perform as well in 2016 than it did in 2015 in terms of return on assets (ROA) and return on equity (ROE). ROA for the year was 5.6 per cent, down from 6.0 per cent in the prior year, and was a little lower than the manufacturing industry average for 2016. ROE followed a different pattern however, growing to 7.4 per cent in 2016 from 7.0 per cent in 2015. This was a little higher than what most other companies recorded for 2016.


As per the liquidity position of the company, it is still able to convert assets into needed funds as quickly as it did before, maintaining a current ratio of 1.2 times in 2016, same as it did in the preceding year. This suggests efficiency of the company’s operating cycle and its ability to turn its products into cash. Cash asset ratio was also very close to the acceptable 0.2 times (0.18 times in 2016 as compared to 0.22 times in 2015), meaning that it has readily available funds to pay off current liabilities.


The company earned more revenue in 2016 than it did in 2015, in contrast to the preceding year when it made less revenue. Revenue for the year was N84.6 billion, 14.6 per cent more than the N73.8 billion recorded in 2015. This is as compared to a decline rate of 14.1 per cent in the prior year.

The level of pretax profit grew over that of the prior year, but only at an infinitesimal rate. Profit before tax was N7.77 billion, just 0.5 per cent more than the N7.73 billion recorded in 2015. It also recorded a 9.7 per cent growth in after tax profit during the course of the year, with the after tax profit growing to N5.7 billion.

Despite these growths, profit margin (which measures a company’s ability to squeeze as much profit as is possible from income) dipped to 9.2 per cent from 10.5 per cent before.

Actual Vs sustainable growth

UACN recorded a profit margin of 9.2 per cent during the course of the year, as compared to 10.5 per cent in the prior year. This means that every N100 worth of turnover made a profit of N9.20, as compared to N10.50 in the prior year.

For the review year, the company retained 66 per cent of its profit, slightly up from 63 per cent in the prior year. With a profit margin of 9.2 per cent, a retention ratio of 0.66, an asset turnover of 0.61 times and an asset to equity ratio of 1.81, the company had a sustainable rate of 6.7 per cent. This means that using only the resources it generated, the company had the capacity to grow by 6.7 per cent during the course of the year. It however grew faster, as indicated by its actual growth of 14.6 per cent. This is a commendable feat.

Stock market performance

Our analysis determines that it the UACN stock is undervalued. Currently trading at a share price of N14.60 (as at September 8 2017), nets assets per share is a much higher N39.84, and this is much higher than the value of the current market price. This is a clear indication of undervaluation. Secondly, the book value to market value ratio is much higher than one, another clear indication of undervaluation. While book value is N76.5 billion, the market value is a much lower N28.8 billion. It is obvious that the company is worth much more in reality than the price it is currently trading at. This also indicates undervaluation. We recommend a buy at this price.


Our analysis shows that the UACN stock in one that pays dividend, so it is an ideal stock for the investor who is interested in a regular dividend income.


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