Cheap entry point into a growing and profitable financial conglomerate that is de-risking as it grows

In the context of Access Holdings’ capital raising program (announced in 2023) and its recently-announced 1:2 rights issues, we believe that its current valuation represents an attractive entry point into a diversified pan-African and global growth story.

•Access Holdings trades at 0.31x its book value. To the extent that (a) its book value is likely to increase with time (retained earnings), (b) the market in future decides to rate its shares more highly (its Nigerian peers Zenith Bank and Guaranty Trust Holding Company are valued at 0.41x and 0.70x price-to-book, respectively), 0.31x price-to-book appears an excellent entry point today.

• How solid is the book value? Non-performing loans stood at 3.1% of gross loans at FY2023 with a cost of risk at 1.2%, an entirely manageable sum given FY2023 Pre-tax Profits of N729.0bn (all NPLs could be written off at a cost of less than 6-months Pre-tax Profits with zero impact on book value). 

• In the context of Naira devaluation Access Holdings’ asset quality gets better, not worse. At FY2023 20% of its assets and 26% of its equity were in its UK subsidiary, The Access Bank UK, with a high weighting to short-term (trade finance) loans. At FY2023 21% of its equity was spread across 13 African subsidiaries, a highly diversified and non-correlating portfolio of risk. Naira devaluation in Q1 2024 already means that close to 50% of its Net Profits are likely to come from outside Nigeria, approximately 25% from the UK, 25% from Africa ex-Nigeria. We think there is a strong case for Access Holdings’ rating breaking through the sovereign ceiling..

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