Where Are The Shares of UBA Headed?

[Stockbear]

Does this help anyone?

Where are the shares of UBA (Nigeria) Plc. headed?
Posted Monday, January 8, 2007

The last time I profiled UBA stocks in my November 28, 2006 article titled “Is the Decline in Bank Stocks an Ominous Sign for the NSE?” the stock closed at N21.96 and was in a downward trend. It had violated its 20 days simple moving average of 25.39, its 50 days simple moving average of 25.5, and threatening to test its 200 day moving average of 17.23.
However, on January 8, 2007 the stock closed at 27.95 which is approximately 5.99, or 27.2% increase from its November 2006 low. When the stock was declining in November 2006, the entire NSE market and especially the banking sector was in a downtrend.

Nevertheless, UBA shares has reversed course and broken through almost all its minor resistance at the January 8, 2007 stock closing price.

What has caused the reversal of fortune for this stock? It appears that the stock reversed course about December 14, 2006 around the period the company reported its financial numbers for the 18 month period ended September 30, 2006. The report indicated that UBA's deposit base soared by 278 percent, from N205 billion in 2005 to N776 billion in 2006 while its gross earnings rose by 247 percent, from N26.1 billion in 2005 to N90.47 billion in 2006.

Additionally, the bank proposed of N1 dividend per share plus a bonus of 1 share for every 5 shares currently held. While the reported numbers were very impressive by any standard, one is left to wonder why UBA reported an 18 months financial position instead of a 12 month financial position. An 18 month financial statement is unconventional by any accounting standard (domestically or internationally)
Technically: The stock is less than N1 away from N28.66, the previous 52 week high it attained on October 17, 2006. Technically the stock price has risen above all its pertinent simple moving averages (20, 50, 100, & 100 days) as highlighted in the schedule below. However, this stock would have to break through the N28.66 (the previous 52 week high) before it moves higher. The previous 52 week high would be a strong resistance. If it breaks through that resistance the next major resistance would be N30, and if it breaks through N30, the stock could test N38.89, the first Fibonacci target.

SMA 1/8/2007 Share Price Above or Technical
UBA Prices Closing Price below SMA Grade
10 Day SMA 26.07 27.95 1.88 Very Strong
20 Day SMA 25.48 27.95 2.47 Very Strong
50 Day SMA 25.31 27.95 2.64 Very Strong
100 Day SMA 24.36 27.95 3.59 Very Strong
200 Day SMA 19.52 27.95 8.43 Very Strong

Conclusion:
It appears the shares of UBA is firing on all cylinders and baring any political upheaval or unforeseen events that would cause investors to lose faith in the Nigeria economy and NSE, this stock is likely to repeat the feat performed by the shares of First Bank Nigeria in 2006. Another bank stock that investors should look out for is GTB. It also appears to be breaking out of its trading range. It has moved above its 52 week moving average and it is likely to trade up to the mid twenties; considering all technical indications and stability in the market.

However it should be noted that there was a recent N8 billion judgment against UBA. From what I read in the press, the bank has already paid out some portion of the judgment amount. It would be very pertinent for the bank’s management to assure investors that the payment will not have any negative impact on the proposed dividend payment, the operations of the bank, or previously provided financial projections.