Valuation Update: Given the remarkable results and the successful completion of both the Apartment Complex in Juba and Nakawa Business Complex in Kampala, we revalue UAPHL’s stock with a target price of Kes.72.00. We expect the top line will grow by 25% to Kes.11.3Bn in FY13E maintaining the growth momentum of 25% CAGR for the next 5 year horizon. EPS is expected to slightly dip to Kes.9.16 in FY13E compared to an EPS of Kes.9.83 in FY12 which was boosted by the weighting the newly issued shares.
Earnings Update and Outlook: The following stood out in UAPHL’s latest set of financials (FY 2012);
Profit after Tax: PAT was up 50% from Kes.919.68Mn to Kes.1.381Bn on the back of an improvement in both the underwriting and investment income. EPS improved from an EPS of Kes.7.66 in 2011 to Kes.9.83. We expected this growth in PAT to be maintained in the coming year.
Investment Income: This income segment recorded a 128% jump to Kes.2.44Bn. The company’s strategy to restructure its equity portfolio in the year to offset the losses that they suffered in 2011 and exploit the high interest rates in H1 12 via the money markets paid off.
Life Business Returns to Profitability: UAP life had recorded a loss of Kes.336.5Mn in 2011 but returned to profitability in 2012 posting a profit after tax of Kes.211.97Mn on the back of aggressive marketing.
Claims Ratio: The incurred claims ratio (calculated as Claims Payable/Net Premiums *100) deteriorated from 53.46% in 2011 to 56.70% in 2012. This was on the back of an increase in the life business that resulted to a larger portion of Policy Holder Compensation Fund. The ratio is still within the industry average of 58.5%.
Source; Genghis CapitalCc.
wazua@googlegroups.comIf you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.