Roll Up Your Sleeves; Abbey Mortgage Bank (AMB) May Have a Great Future.

The bank is staunch to keep growing and insights tell investors could hold.

Investors could hold this stock since its issues with credit loss expense (a reason for its major loss in 2020) has been resolved. Much of that short fall was as a result of a close line between operating income and expenses. With over N3.8 billion assumed to be losses on loans and advances, the bank failed at yielding net gains at those times.

2018 down 2015 also went through rough patches with renumerations, salaries, subscriptions and other necessary cost voiding income beyond measure.

AMB operates in a growth market. Interest earned on loans, advances, short term funds, cash and investment securities has surmounted to N7.2 billion in 2023 (from its younger N1.1 billion days).

Working capital has tripped off to N4.4 billion (a 77% fall from the Skye). There’s been reductions on funds held with other institutions while it has more advances and cash with the central bank. Due to cash requirements, it took off about N19 billion from its fixed placement accounts in other banks.

It currently has about N1.1 billion in receivables, prepayments, stationery and stocks.

Past huge losses have clustered its accumulated deficit to about N5 billion, but its recent streak on operating performance (since 2021) has caused a current retained earnings figure of N623 million. I could see that the bank has been revived up, much thanks to the insane reduction in credit loss expense (from an insane N3.9 billion loss figure to a N180 million gain in 2021).

The bank has been thriving on great paths since then. Recently, write backs on financial assets have been accompanying its operating income towards the N3.3 billion range.

It has enjoyed a decent earning figure in 2023, rising above 10%.?

Cash has been quite tick. Earned $5.4 billion in 2022, consumed a lot in 2023 to meet up interest and tax payments. More loans and advances to customers coupled with huge securities acquisition shedded off operating cash.

It has purchased N20 million worth of computer software. Disposed assets worth N18 million, received N28 million as dividend income, spent less on capital expenses (saving N228 million in cash).??

AMB added N4.4 billion to its debt, which was got from Development Financial Institutions; though the financing is in tranches, the facility is secure. Shareholders paid N4 billion as capital contribution and currently settles with N12.8 billion (for 2023 cash and equivalents).

I ran the numbers, its price/fair value is currently at 1.88 which means the market is currently trading at an 88% premium. But due to future growth potentials (that gear earnings up) that ratio should level down overtime.

As investors, you might underweight this stock for now (given the valuation), but from a realistic sense, allocating some funds to AMB (on your expectations that it should grow its earnings over time) isn’t irrational at all.

Abbey, a primary mortgage bank, is licenced by the Central Bank of Nigeria and the FMBN. Founded in 1992, with an initial authorized share capital of N5 billion. It currently runs at 8 branches across the world with over 140 employees.

For the future, it has partnered with VFD group as it continues to expand and embrace innovation. Its business cuts across savings, asset management, real estate financing and more.

Disclaimer: I do not own any shares of these stock. These are facts, digest well. Your personal research is desired.?