University Press
University Press is one of the companies listed under the Printing and Publishing sector of the Nigerian Stock Exchange. This company put a smiles the faces of its investors towards the end of 2007 and in the early part of this year.
This is one of the companies that burnt my fingers because of my lack of knowledge and abundance of impatience. I remember buying the stock at N7.28 in August 2007 and then sold around November of the same year at the same price only for it to run away a few days later. This was what prompted me into scrutinizing companies qualitatively and studying their financials well before jumping in and out of stocks. I always remember this company with nostalgia because I have come to learn that investing in the stock market goes beyond the price.
I have decided to beam my searchlight on this company that I have developed a sentimental attachment for.
University Press went to the market to raise funds for expansion in March 2007, when they floated a rights issue of 1 for 1 at N1.80 and increased the number of their shares from 150 million to 300 million. Their 3rd quarter results for December 2007 showed that they were able to increase their turnover by 31.51% from N568 million to N747 million. Their profit before tax also increased by 47.2% from N125 million to N184 million and their profit after tax rose by 42.7% from N89 million to N127 million. Their year end PE comes to 24.39 at the current price of N13.66 based on a projected full year EPS of 56K. That simply means that the stock is presently at its fair value but there is no gainsaying the fact that it is poised to rise significantly once their year end result for March 2008 is released since they are likely to declare a handsome dividend.
The company is presently operating at a lower capacity than its potential. This is based on the return on equity which dropped from 1.19 to 0.85 after they raised funds from the capital market. They have invested in expansion but they have not been able to capitalized on the expansion. I guess this has not been helped by the poor reading habits of Nigerians. There is light at the end of the tunnel as I have been able to garner from the National Budget, which is yet to be passed anyway. The government has plans for the education sector via the UBE programme and they have decided to use the local publishers including University Press for the production of materials they will need for it. The company already has the capacity to handle such a massive project considering the expansion they invested in last year, which was a very smart move on their own part.
My conclusion is that my darling University Press is currently trading at its fair value but can still provide a short term capital appreciation since they are set to release their year end result for March 2008 and the stock of this company is a very good buy for medium to long term trading based on the opportunities that are set to present themselves for the year 2008.