If you bought and held FCMB Group Plc stock in the past five years you would have outperformed all other major asset classes with the stock having a five-year return of over 350%.
The Group has consistently delivered solid returns to investors like other peers, with the share price delivering an impressive return of 295.2% over the last five years, ranking 2nd across the industry.
Despite the run-up in the stock, FCMB is still cheap by many investment metrics. The shares currently trade at a price to book ratio of 0.31.
The price-to-book (P/B) ratio is an evaluation metric that is used to compare the current market price of a company’s stock to its book value.
The P/B ratio is favoured by value investors for its usefulness in identifying undervalued companies. For value investors, a low P/B ratio (usually below 1) is the classic indication of an undervalued stock.
“The net impact of our model adjustments resulted in a revised 12-month Target Price of N11.49. The stock is currently trading at par with its 5-year mean Price to Book ratio of 0.3x. Our Target Price is also 70.2% higher than the last market close price. We, therefore, maintain our BUY recommendation on the stock,” Cardinal Stone Partners analysts said.
Also, Analysts at FBN Quest said,
“We have made material upward revisions to our ’24f-25f EPS forecasts for FCMB Plc following an impressive set of results in Q1’24 and an improved outlook for FY’24. Our price target of N14.8 implies a potential upside of +89.7%.”
Recapitalisation, earnings growth to lift stock price in 2024
FCMB Group’s recapitalization exercise of its banking subsidiary, First City Monument Bank Limited, is set to kickstart in the third quarter (Q3) of 2024.
Following CBN’s directive for banks to recapitalize before 2026, FCMB Group has detailed a comprehensive plan to raise the capital shortfall required to maintain its subsidiary’s international banking license.
According to the Group, the retention of its international license is paramount for its medium-term strategy as it anticipates continued growth and expansion of its international activities.
Under the detailed plan, the Group has highlighted three key phases: Phase I: Floating a capital raise of up to N150.0 billion via rights issue/public offer/private placement, Phase II: Executing other corporate actions to contribute over N110.0 billion and Phase III: Initiating private placements of between N110.0 billion – N140.0 billion.
For phase I, the FCMB Group has expressed that it would be entering the market in the third quarter *Q3) of 2024, with management expressing confidence in raising N100 billion (out of the phase I quota of N150.0 billion), given the express commitments made by its current largest shareholders to fully participate to the tune of their existing holding during the public offer exercise.
Phase II, which is expected to start in 2025, involves corporate actions involving its subsidiaries, particularly the relatively larger subsidiaries.
For full year (FY) 2024, aided by cross-selling opportunities across its businesses and the sustained adoption of its digital products which rose 62% year-on-year (YoY) for FY 2023, the Group expects digital revenue to increase by more than 35.0% for FY 2024.
Also, marketing synergies from its ecosystem strategy, and cost efficiency from digitalization, will drive its cost-to-income ratio (CIR) below 60.0%.
In full year 2024, FCMB has reaffirmed its strong commitment to building a supportive ecosystem driven by technology to transform its operations and enhance its competitive edge.
To this point, in FY 2023, the group deployed its proprietary core banking platform to three subsidiaries, with the main bank expected to commence migration in FY 2024.
Additionally, by employing process automation on loan origination, credit underwriting and disbursement, the bank has transformed its consumer finance business into a FinTech entity.
Elsewhere, the Group has seen progress on its technology platforms. The borderless banking platform, which is targeted towards diaspora flows, was commercialized in FY’23.
Secondly, its banking as a service platform recorded significant growth in FY’23, more than doubling its transaction volumes to 4.9 million.
These initiatives, coupled with significant investments in human capacity (over 50 in-house engineers) and the utilization of Artificial Intelligence are expected to support innovation and growth.
The Group has also doubled its dividend payout reflecting a strong growth trajectory as well as superior profitability and efficient capital utilisation.
FCMB Group Plc provides financial services including micro-lending, asset management, stock-broking, trusteeship and custodial services, foreign exchange, personal banking, corporate and commercial banking, investment banking and transaction banking products delivering cash, trade and liquidity management solutions to entities.
