By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-UAC of Nigeria Plc (UACN) has reported a N9.2 billion proceed from the sale of a 49 percent (49%) stake in UAC Foods Limited to Tiger Brands a South African Firm.

This was disclosed in the Research Note from Afrinvest West African Limited, Investment Research Firm for a Conference Call organised for Analysts and Investors on Thursday with Seniour Management of UACN to discuss its Unaudited Financial Results for the Half Year Ended 30 June 2011.

In highlighting the Financial Performance of UACN in the Review period at the Conference Call, the Company explained that the N5.4 billion Exceptional Item reported in the H1 Results relates to the Profit realised from the N9.2 billion sale of 49% stake in UACN Foods to Tiger Brands.

The Firm from the Research Note at the Conference Call said it would reinvest the proceeds to help improve capacity in operations and increase Market share, particularly in the refined edible oil food line.

Also, UACN plans to explore growth opportunities organically and inorganically.

According to the Company, two things will be done organically, one is that it has embarked on the installation of a third production line in its snack business (“Gala”) to help meet the growing market demand; this is expected to come fully on stream in about two months. Two UACN also plans to upgrade capacity in the “Swan Water” production line.

While inorganically, the Afrinvest Research Note from the Conference Call affirmed that the Group plans to merge (or acquire where necessary) with related entities, particularly in its quick service restaurant (QSR) and logistics business segments.

According to the Management of UACN, a Memorandum of Understanding (MoU) has been signed with a strategic partner in the QSR line and talks have reached an advanced stage.

UACN said that this move is expected to add significant value to its operations in terms of systems and processes, while leveraging on UACN’s brand and retail footprint.

The Firm also affirmed that there are plans for strategic acquisition in the South – South and South – East parts of the country to help mitigate the risk of having production lines in a single geographical location (Jos in this instance).

A review of the Half Year Result of UACN shows that Turnover grew by 14% from N23.773 billion in Q2 of 2010 to N27.101 billion reported in Q2 of 2011.

While Profit Before Tax (PBT) increased from N3.212 billion in Q2 of 2010 to N9.071 billion in Q2 of year 2011; indicating an increase of 182% in the review period.

Profit After Tax (PAT) increased by 249.7% when the Firm recorded N2.224 billion in the Q2 of year 2010 compared to N7.777 billion in Half Year Ended 30 June 2011.

From Afrinvest Conference Call Note, its Analysts affirm that on current valuations, UACN trades at 11.1x 2010 earnings, a discount to its peer average of 16.1x trailing 2010 earnings.

“We reiterate our positive stance on the long term prospects of UACN and expect to see the merger with Tiger Brands create synergies, enrich brand portfolio and improve innovation and branding, which should translate to higher earnings. We therefore place an ACCUMULATE rating on the stock, having established a target price of N44.76 based on a blend of valuation methodologies. This implies a 17.8% upside potential to its current market price (N38.00 as at 11 August, 2011)” Afrinvest said.

The call was hosted by Larry Ettah, Group Managing Director/Chief Executive Officer (GMD/CEO) of UACN, Abdul Bello, Chief Financial Officer (CFO) and J. I. D. Dada (Executive Director, Corporate Services), who presented an overview of the business segments of the Group and highlights of its H1 2011 financial performance.