STAKEHOLDERS BACK UBA CAPITAL RAISING SUSPENSION

By Nkiruka Nnorom
Despite the recent warning by United Bank for Africa (UBA) on possibility of recording slide in its 2011 final year profits, Citi Group Research team said they are still optimistic that the stock holds some hidden value that investors can benefit from.

Based on recent report issued by the firm, the bank's shares are highly undervalued and are expected to reach N5.00 pr share by year end.

According to the report, at the market price of slightly above N2.00, the market has over punished the stock, though it has as much value as Zenith Bank in terms of deposit base.

'Whilst we are not disregarding the credibility issues with UBA's management post its third consecutive year of disappointing earnings, we believe that the market's derating of its shares has been excessive.

Whilst the full year 2011 profit warning has provided the market with yet another reason to question the value in UBA's business model, we continue to believe that its liability driven profit model will deliver strong future earnings growth, which is currently not being priced in by the market,' the report stated.

Meanwhile, stakeholders in the capital market have said that the management's decision to suspend the bank's planned capital raising was a move in the right direction.

The stakeholders, who include stockbrokers and shareholders, agreed that going ahead with the capital raising would have been a huge failure, considering the level of apathy among investors.

Reacting to the suspension, Mr. David Adonri, Managing Director/CEO, Lambert Securities Limited, said the decision was well informed, saying that the success of the offer could have being marred by the stagnancy in primary segment of the capital market.

For him, the market is not conducive for capital raising exercise, adding that the likelihood of recording success if the bank had gone ahead with the offer is quite remote. 'It is just like getting in the way of a moving train. Definitely it will crush you.'

Describing the suspension as a show of courage, Chief Gbadebo Olatokunbo, member, Renaissance Shareholders Association of Nigeria, said the bank is privy to certain information that must have warranted a change of plan.

'Kudos to them for having the boldness to say they are not coming out with the offer. I believe they have sought advice from professionals and they must have studied the market well before taking the decision. I think taking that line of action is better than going ahead with it only to fail at the end,' he said.

Speaking in the same vein, Mr. Dele Odusanya, Managing Director, Quantum Securities Limited, said, 'It is like when you are selling a product. If you plan to sell a product and you envisage that it will not yield the expected returns, why waste time and energy pursuing the project. It is better suspended.'