United Bank for Africa Plc

UBA · NGX · Banking 

MARKET PRICE

₦44.35

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NIGERIA MARKET CONTEXT

Risk-Free Rate (FGN 10yr)

14.85%

Equity Risk Premium

9.49%

Cost of Equity (Ke)

21.0185%

VALUATION SIGNAL

SELL

Our valuation prices United Bank for Africa Plc below the current NGX market price. Adjust growth inputs if faster dividend growth is expected.

-31.5%

vs. fair value

CONSTANT GROWTH DDM

₦26.39

-40.5% vs NGX price

P₀ = D₁ ÷ (Ke − g)
₦3.30 ÷ (21.0185% − 8.5%)
= ₦26.39

TWO-STAGE DDM

₦34.38

-22.5% vs NGX price

Stage 1: g = 18% for 5 years
Perpetual: g = 8.5%
Fair value: ₦34.38

COMPOSITE FAIR VALUE (AVERAGE OF BOTH MODELS)

₦30.38

OPPORTUNITY COST COMPARISON

Fair value

₦30.38

Current price

₦44.35

Signal

SELL  (-31.5%)

T-bill alternative

22.52% risk-free

UBA dividend yield

6.31% (₦2.80 / ₦44.35)

Gap to beat T-bill

+16.2% capital gains needed

For UBA equities to beat T-bills at current prices, the stock must deliver 16.2% in capital appreciation on top of its 6.31% dividend yield — a total return of 22.52%.

Two-Stage DDM — Dividend Schedule

Year	Stage	Growth	Dividend	Discount Factor	Present Value
1	Stage 1	18.0%	₦3.30	0.8263	₦2.73
2	Stage 1	18.0%	₦3.90	0.6828	₦2.66
3	Stage 1	18.0%	₦4.60	0.5642	₦2.60
4	Stage 1	18.0%	₦5.43	0.4662	₦2.53
5	Stage 1	18.0%	₦6.41	0.3852	₦2.47
TV	Perpetuity	8.5%	₦6.95	0.3852	₦21.39 (TV=₦55.52)

WACC Breakdown

Market Cap₦1,392.41B

Total DebtN/A (bank)

Equity Weight (We)100.0%

Debt Weight (Wd)0.0%

Cost of Equity (Ke)21.02%

WACC21.02%

Sensitivity Analysis — g₁ vs g₂

₦28g₁=14.0 g₂=7.0

₦29g₁=14.0 g₂=7.8

₦30g₁=14.0 g₂=8.5

₦31g₁=14.0 g₂=9.3

₦32g₁=14.0 g₂=10.0

₦30g₁=16.0 g₂=7.0

₦31g₁=16.0 g₂=7.8

₦32g₁=16.0 g₂=8.5

₦33g₁=16.0 g₂=9.3

₦35g₁=16.0 g₂=10.0

₦32g₁=18.0 g₂=7.0

₦33g₁=18.0 g₂=7.8

₦34g₁=18.0 g₂=8.5

₦36g₁=18.0 g₂=9.3

₦38g₁=18.0 g₂=10.0

₦34g₁=20.0 g₂=7.0

₦35g₁=20.0 g₂=7.8

₦37g₁=20.0 g₂=8.5

₦39g₁=20.0 g₂=9.3

₦40g₁=20.0 g₂=10.0

₦37g₁=22.0 g₂=7.0

₦38g₁=22.0 g₂=7.8

₦40g₁=22.0 g₂=8.5

₦41g₁=22.0 g₂=9.3

₦43g₁=22.0 g₂=10.0

Nigeria-Specific Risk Factors

01

Naira devaluation risk. All dividends are naira-denominated, but Nigeria's exchange rate has moved from ₦460 to ₦1,614/USD in two years. Real value of dividend income for dollar-benchmarked investors erodes rapidly.

02

High risk-free rate compresses all valuations. With FGN bonds yielding 14.85%, the Ke−g spread is narrow. A 100 bps CBN rate rise cascades through Ke and sharply reduces intrinsic values.

03

Inflation distorts growth assumptions. Nigeria's inflation recently exceeded 34%. A 8.5% perpetual growth rate may represent negative real dividend growth. Always compare to current CPI.

04

NGX liquidity and data quality. Many NGX stocks have thin volumes, wide bid-ask spreads, and delayed financial reporting. Companies frequently defer dividends based on CBN regulations or recapitalisation requirements.

Owo provides financial modelling for informational purposes only. Not investment advice.