Abbey Mortgage Bank, PLC., the Nigerian leading mortgage bank has seen its stock price reaching new heights lately on the Nigerian Stock Exchange (NSE). This boost in the stock’s value has reassured investors confidence and their confidence in the African real estate market.
Founded in 1991 and headquartered in Lagos, Nigeria, the bank offers mortgages, financial advisory, and real estate services. It caters to both individuals and corporations. Its products include various mortgage products including construction loans, personal mortgages, and mortgage refinancing; savings accounts, fixed deposits, and current accounts; personal loans and consumer finance; and digital banking services, debit cards, and prepaid cards.
Abbey Mortgage Bank is the largest and most profitable Primary Mortgage Bank in Nigeria. More importantly, it is one of the seven licensed Primary Mortgage Banks by the Central Bank of Nigeria and the Federal Mortgage Bank of Nigeria. The bank recently reported a 250% growth in customer deposits within a year.
The stock price of the company increased by more than 25% within a year change. The company generates N6.5 billion in revenue and has a net income of N695 million. Its earnings have grown 32.3% per year over the last five years. This indicates that the company’s value is growing quite steadily and healthily.
The company has a market capitalization of N24.57 billion and a 28.7 P/E ratio. Normally a P/E ratio is considered good when it is lower than the average P/E ratio, which is between 20-25. When looking at the P/E ratio alone, the lower it is, the better. In the case of Abbey Mortgage Bank, its P/E ratio is high enough. This indicates that investors are willing to pay more for the stock because they believe in the potential that the company is able to reach.
As was aforementioned, Abbey Mortgage Bank has been growing earnings at an average annual rate of 32.2% while the Diversified Financial industry saw earnings growing at 18.9%. Revenues have been growing at an average rate of 39.4% per year. As a matter of fact, Abbey Mortgage Bank’s return on equity is 10% and has a net margin of 26.2%.
Financial Position Analysis
Source: Simply Wall Street
The company has total assets of N54.3 billion; total equity of N8.68 billion; and total loans of N14.1 billion. Its assets-to-equity ratio is 6.4. In the short-term, it is expected that the company’s liabilities outweigh its assets (N26 billion in assets and N37 billion in liabilities), but in the long-term, as you can see in the figure, its assets will significantly outweigh its liabilities as they are expected to increase by another billion naira (N27 billion) and its liabilities to decrease to N8.26 billion.
In other words, Abbey Mortgage Bank has a positive outlook for the future, which is why investors do not mind paying for a higher p/e ratio. The future will tell us if the company will continue to perform this well, but for now, we must say that it is on the right path to maintain profitability and shareholder value.