Monday, March 04, 2013 / The Analyst

The forecast presented recently by UPDC Plc as contained in the UPDC REIT - Prospectus February 2013, suggests a strong commitment on the part of the management towards an investment that will deliver impressive prospects in terms of future returns for both shareholders and investors.

Given that the UPDC REIT is an initial public offering, validating the forecast presented therein will lean more towards qualitative judgments rather than historical assessments of financial performance; not just of the underlying assets in terms of rental incomes but of the aggregate portfolio,

Yet, analysts at proshare have often adopted the use of believability index on the promoters/sponsors of such initial offerings as a veritable gauge of what shareholders and prospective investors can moderately expect they would not go below.

The Believability Analysis

An analysis of the Construction & Real Estate Sector puts the UAC-PROP on the caution list as the company’s performance trend as regards its forecasts thus far appears less impressive; suggesting that the company has either not been given much attention to the forecasting it delivers or was challenged during the market downturn in navigating a path during the fast developing real estate market shifts.

A cautiously optimistic stance on the firms’ ability to deliver on the figures presented will also be consistent with the weak posture of previously listed REITS in the market which were challenged from the start due to the models deployed, quality of sponsors and the absence of underlying assets – all characteristics that the UPDC REIT stands heads and shoulders above.

Sectoral Review

Further, it is equally discernible that UPDC Plc fared better in comparison to other companies in the sector – who were off-track completely; with the exception of Julius Berger Plc who delivered on its forecasts consistently.

It is noteworthy to point out that majority of the companies in the sector under review are not consistent with their forecasts figures as it ought to be. Therefore, the analysis provided here must be so considered – having used publicly available information submitted to the bourse.

Nevertheless, UACN-PROP returned -1.10% and -19.26% of believability figure, indicating weak chances to deliver on its PAT and Turnover respectively - a clue for moderate expectations as regards to recent forecasts presented.

This might appear ironic given that the company (UACN-PROP) has a recent history of surpassing its PAT forecast as we saw in Q4'11. The company projected PAT of N1.69billion for Q4'11 but recorded N1.99billion as profit after tax, indicating 17.94% growth against the forecast.

Thus, the absence or lack of sufficient forecasts figures might have impacted the believability figure as represented above.

Share Price Performance

Looking at its share price performance, the company has recorded year-in-year-out losses in the last four years i.e. 2009 to 2012. We cannot isolate the unimpressive price trend from the market downturn, hence its low believability figures and market sentiments.



It would appear that the company has weathered the market downturn and heading into its recovery phase. The stock closed with negative posture at end of 2012 by a margin of -1.67% loss, extending the losses of -26.01%, -16.87% and -27.32% experienced in 2009, 2010 and 2011 respectively as the general market confidence level remained very low in those periods.

Year to date however, the stock has experienced a trend reversal trend with YTD price appreciations of +28.14%, indicating improved bargain tendency and sustained positive sentiments towards the stock in the year so far.

This would indicate renewed investors’ confidence and shareholders loyalty as the stock experienced low volatility amid persistent lacklustre trading pattern witnessed so far in the year.

Related News:

1.    JBERGER forecasts N3.9b PAT - Proshare

2.    UPDC REIT – The IPO Investment Fast Facts

3.    FSDH Asset Mgt Ltd Appointed Fund Manager for UPDC REIT

4.    UPDC REIT Initial Public Offer - Equity Note from BGL

5.    UPDC N30bn REIT Offer Opens Today

6.    UPDC REITs Public Offer – Frequently Asked Questions

7.    REIT's in Nigeria: An Uninspired History of Sponsors

8.    UPDC to raise a N30bn IPO offering in Own REIT - Proshare

9.    UPDC REIT IR Page

10.  UPDC REIT - Prospectus February 2013

11.  UPDC REIT Application Form
 

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