Mutual Benefits Assurance
I have been able to sell off Ashaka Cement and it was a huge relief. I got really tired of its unsustainable recoveries and I was able to sell relatively high at N54.00.
Unfortunately I was able to purchase only 5000 units of Deap Capital as against the 25000 that I ordered for. My stockbroker no longer provide margin trading services because lots of customers owe him money. Now, Deap Capital is on bid in the market, which means ordinary investors like us can no longer get it to buy. Well, I have to make do with the small amount I purchased and wait for the commencement of their IPO so that I can buy more.
I do not let such situations get me down anymore because there are so many other opportunities in the market which people don’t see. The wise investor shops around for them, buy and then wait for people to discover the gold mine and while they are scrambling for it, you sell high and then look for another one. UBA is presently getting more and more undervalued but people are not looking towards it, maybe because of its relatively high price at N47.
I have decided to work on Mutual Benefits Assurance today.
Mutual Benefits recorded a profit after tax of N655,000,000 in their 3Q results in September 2007 which is a -24.45% change as against the same period in September 2006 when they recorded a PAT of N867,000,000. There was a positive trend in the market price despite the ‘poor’ performance. People saw behind the façade. The poor performance was due to investments which this company has made in its business. They have spinned off five other subsidiaries, which will in the long and even the short run will positively impact their bottom-line. They have more than one stream of income, which is a good sign.
Their EPS is 11k with a linearly projected EPS standing at 15K. This means that their forward PE based on the current price of N4.25 is 28.33. The PE is relatively high compared to the rest of the market but it is low compared the industry average of about 40.
If a general market correction takes place, which is imminent, the stock price will fall further after an every day loss from the year high of N5.70 but considering the volumes of trading still going on in the insurance sector, it is not likely to take place in the short run and I believe it is still possible to make some money from Mutual Benefits.
My strategy will be a cautious buy keeping at the back of my mind that the stock is overpriced relative to the general stock exchange but undervalued according to industry standard and get out at around N5.60 to search for new opportunities for the short term.