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Why You Need To Buy First Bank Of Nigeria Shares Now

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The first reason to invest in First Bank shares is that the share price is low at below ten Naira. I will not say at all time low since some people picked them up when it was less than three Naira some two or three years back. Sorry, I didn’t tell you back then, but the good news is that our God is a God of second chance and you have been remembered.

You have paid the tuition fees, by that I mean; it’s now about ten years since the crash of 2008 and it is only fair that you reap from those loses you may have taken. My people say “anaghi eji mgbagbu ahara ogu” (you do not run away from war due to risk of being killed).

A good number of people have since shied away from the stock market, but the discerning ones understand that people are still making it big. Good news is that this time you are taking a calculated risk back by the power of www.peterobidike.com.

If you have cash and time (project managers will call it cost and schedule) on your hands,you have a golden opportunity to make as much as a hundred percent on your capital within the next one year or say one and a half year to be more precise.

It will only be fair that you give me a cut of the profit (at least 10%, ok, just 10% is what am asking for) when your alert lands. Anyway, I leave that up to you and your conscience.

Point is, the low pricing of First bank has been as a result of their exposure to some companies namely; Aiteo, Atlantic energy and Etisalat.This led to their making huge provisions in their annual reports that have eroded value and resulted in their non payment of dividends to shareholders.

Their Non-Performing Loan (NPL) has been above 20%, a threshold that precludes them (the bank) from paying dividend even with reasonable profit after tax. The only dividends of 20 to 25k they have managed to pay in the past have come from their subsidiaries.

From the Q2 conference call, the Aiteo loan is now performing and their projection is that they will hit an NPL of 15% by the end of 2018. In the Q2 conference call, they confirmed that if you take out the NPL from the three exposure companies that their NPL will be about 9.8%.

So it is a question of ‘when?’ They mentioned some political undertone to the Atlantic energy facility but hopefully it will be resolved.

My forecast is that the NPL will come to less than 10% by Q3 2019 and hence you will see a jump in their share price to reflect that reality, given that investors will rush to take positions knowing that they will then be in a position to pay reasonable dividend.

Hence by Q3 2019, you will expect to see that jump in their share price. That jump can also happen earlier, depending on the quarterly results and outlook in 2019.

I expect to see the price come to its full potential by end Q1 2020 when they finally release their 2019 full year results and pay dividend commensurate with its peers (if not junior peers sef).

With Guarantee Trust Bank and Zenith Bank selling at far above thirty and twenty Naira respectively, First Bank will follow suite and trade at twenty Naira or above no doubt, hence my forecast of over a hundred percent return on investment.

First Bank brought in new teachers to help with their struggling students and flog themselves into line. I guess you know them as “risk officers”. Like students with bad report card, you will notice the frustrations when investors wait longer than necessary to see their report card in every quarter and during first quarter for the full year results.

They always give the same excuse; that they are a holding company and hence have to wait for all the subsidiaries to have their approvals, as if they are the only holding company in Nigeria unless they are comparing themselves with our notorious Power Holding Company.

Anyway with this new teacher, investors hope they will not be ‘Father Christmas’ henceforth so that they will not find themselves in this kind of mess again where they have made over four hundred billion Naira as provisions for bad loans.

Proper controls will hopefully help them tighten any loose ends on that one.

On political risks to my forecast, nothing to worry about as my time frame overrides anything of such. In fact, it can only be an upside where Nigerian political risk is concerned.

With the start of the presidential campaign scheduled for 18th November, the prices can only deep further depending on how Atiku and PMB are able to “talk to” or “talk with” each other. If they heat up the polity with bad language then investors might take off and hence, an opportunity to enter at a lower price.

Luckily their Q3 2018 results that just came in two days ago is not that impressive so I see a further opportunity for their share price to deep a little lower so that the children of God can join the bus.

I am still waiting for the conference call and experts to do justice to the result and tell us whether we are on track to meet the end 2018 NPL target.

On a global angle, whether oil price will crash again (like 2008), to make the likes of Atlantic and Aiteo go back to non performing loan status will be tough given that Trump is still in the White House and sanctions on Iran are about to take effect! And Saudi Arabia is even becoming a bad boy in the committee of nations now.

I have done my bit; you do yours and bring me my cut come Q4 2019 or Q1 2020, whichever is earlier for you.

Obidike Peter wrote from www.peterobidike.com and p_obidike@yahoo.com

Monday 22nd October 2018

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