A friend of mine once described the stock market as a zoo. You cannot predict what is going to happen. You can spend all day scouting around for a particular animal and you may not find it whereas it may sitting down somewhere conspicuous staring at you right in the face. And when you finally find it you feel like kicking yourself around.
I have been scouring all over the stock exchange looking for a good stock that will yield good returns not only in the medium to long but also in the short run. I had almost felt like tearing my hair from the roots because the only stocks that seemed to fit the bill were only UBA and Oceanic bank and I was beginning to wonder if the stock market would not crash tomorrow because of all the high valuations that was pervasive in the market. I was about to give up when someone asked me to take a closer look at Diamond bank. I ran a quick acid test on the financials and I was amazed. I took a closer look at it and discovered that it was not a mirage it is real. Diamond bank is for real. Then I felt like kicking myself around for not seeing it all this while.
Diamond bank floated a GDR in November 2007 at the rate of $13.75. They had a pre-existing 9,416,129,021 outstanding shares. They released their 3rd quarter results for January 2008 to the floor in February. There was a 46.23% increase in turnover from N28.525 billion in the previous corresponding quarter in 2007 to N41.713 billion while the profit before tax rose by 98.94% from N6.015 billion to N11.966 billion. The profit after tax rose from N4.632 billion to N9.573 billion which was a 106.67% increase. Based on the 3rd quarter results the ROE was slightly affected by the placing that was done in April 2007 but there was still a net increase of 66% from 1.22 to 2.03. This is a company that will simply roll out N2.03 for every N1.00 you invest into it! This is based on just the 9 months results. It is possible for it to rise to as high as 2.71 by the time they release their full year results. I am looking forward to that.
Now this is getting exciting. Their linearly projected year end EPS for April 2008 will come to N1.36 and at the current market price of N21.00 the year end PE ratio comes to 15.44.
Diamond bank is currently trading below its fair value of about N29.92, which is a very conservative value as I will not be surprised if it goes as far as N34.00 within the next one to two months. There is no point wasting time. I have to call my stockbroker to divert all my holdings in Mutual Benefits to Diamond bank before I miss the train.
PS. I am just hearing some news that Afribank has fantastic financials too. I will go check it out. What are these banks up to?