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Originally Posted by Babs_O
Senior member Pumping. I do not have enough statistics at hand but my feeling is it is faster for a smaller capitalised company to grow than for a big capitalised company. UBA IPO was sold at N35 and current price is N51. If you buy with a medium to long term view Skyebank should do better at N17 on the market or even better at N14 at IPO price than UBA at N51 at this moment. The pre-IPO P/B of UBA was about 7.x and Post IPO 3.x While for Skyebank simillar numbers are 4.4 /1.55. That is Skyebank will relatively have more cash injection and hence potentially more working assets than UBA at current price and more chances at doubling the N17 price in the next 1 year than UBA has capacity to double N51. Thats my reasoning sha. Perhaps you have some other thoughts that make you take your position.
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Interesting arguement. I very much see your point and I appreciate your logic.
The problem is that this theory is too simplistic. More relative cash injection or working assets is not the only competitive advantage in Banking. The brand name of UBA alone is sufficient to make that irrelevant. What I mean is that we cannot look at only one side of the coin. There are other factors involved. When a solid bank like UBA has better fundamentals than a bank like Skye, you should know where to put your money. It is UBA that should be trading at a premium PE and not Skye.
For instance using the arguement above, Sterling Bank, Unity Bank and Ecobank should be the hottest stocks in the banking industry since they are so lowly priced. Do you think these are the banking stocks that will give the highest return this year? As you earn, so will the market price you.
Most of these small companies that blow up their prices becuase of POs will soon get to the point where they cannot maintain those prices. You just saw Access Bank. When I was selling Access this week folks were screaming about the results coming out. After declaring 3.1B PAT Q-1, they now come out with N4.81B in Q-2.
Yes, UBA's appreciation has been low since the PO but note that their PAT was hit with extraordinary items and the fact that there was no bonus issues turned investors off.
This is not an arguement though. I appreciate your point of view. I'm just making mine clearer.
