Skye bank is one of the middle tier banks in the banking sector of the Nigerian Stock Exchange. They floated a public offer and rights issue early this year to expand their capitalization. The bank came as a merger of four banks, which have come together with different strengths and it is one of the few banks in Nigeria that seem to have an appetite into investing in the oil and gas sector of the Nigerian economy.
Skye bank released their half year un-audited results for the period ending March 2008 on the floor of the NSE yesterday. the company grew turnover by 60.47 percent, from N17.20 billion in 2007 to N27.60 billion in 2008. Profit before tax was higher, as the company increased from N2.50 billion in 2007 to N9.75 billion in 2008 indicating an increase of 282.80 percent. After tax profit was even higher as the company grew its profits by over 337 percent, from N1.75 billion in 2007 to N7.66 billion in the same period of 2008. Based on the half year results, Skye bank has been able to grow its returns on equity from 0.47 to 2.04 just within a period of one year. This analysis was based on about 7.5 billion outstanding number of shares before the offer that the company held. They are yet to make use of the funds they raised from the capital market and I expect that to have a great impact on their full year results later in September 2008.
At the current price of N19.78 their forward price earning ratio will come to 9.70 based on a linearly projected year end earning per share of N2.04. From this calculations, their fair value is around N44.87! Skye bank has suddenly become the cheapest stock I have analyzed so far. This stock may be cheap but that price level may be difficult to attain before their financial year end in September 2008 because of the selling pressure that will likely occur when the offer is finally listed on the floor. This can only deter short term players but Skye bank is a waiting gold mine for those who buy stocks for the long term.