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Resort Savings and Loans: Median P.E. Ratio

Resort Savings and Loans Plc is one of the three companies listed on the mortgage companies sector of the Nigerian Stock Exchange. Currently trading at N0.50 per share as at February 10, 2010, it is presently the least expensive mortgage stock in the country. Despite its low price, analysis shows that the Resort’s share price is actually fair.

Market Average

In the mortgage companies sector of the Nigerian Stock Exchange, the share price of Union Homes is currently the highest, Aso Savings having the second highest share price, and Resort has the least price. On February 10, 2010, investors exchanged about 478,380 units of the Resort’s shares.
Going at a price of N0.50 per share, a study of the market average of mortgage companies share prices (N0.71 as at same date) shows that share price of Resort is about 29.6 per cent undervalued. In this regard, it is regarded as undervalued. However, the market average method is not always fool proof hence we move to the price/earnings ratio, a more globally acceptable method.

Share Price	N	Over/Undervaluation
Resort Savings and Loans Plc	0.50	-29.6%
Aso Savings and Loans Plc	0.65	-8.5%
Union Homes Savings and Loans Plc	0.98	38.0%
Average	0.71
Prices are as at February 10, 2010

Price/Earnings ratio

The Price/Earnings ratio clearly shows that out of the mortgage companies stocks, Resort is not at all overvalued. For February 10, 2010, it had the median P.E ratio, just like it had for weeks.
In its most recent annual report, Resort declared earnings per share of 2 kobo same as it did in 2007, the preceding year. Because of this, Price/Earnings (P.E.) ratio as at February 10, 2010 was 25.00 and this was the median P.E. ratio in the mortgage companies sector for that day. Out of the three stocks on the mortgage companies sector, Aso Savings had the highest P.E ratio (32.50), followed by Resort (25.00), and then Union Homes (0.00).
Its P.E ratio positioning shows that Resort stock is actually fair-priced.

Price/Earnings Ratio
Resort Savings & Loans Plc	25.00
Aso Savings & Loans Plc	32.50
Union Homes savings and Loans Plc	0.00
Figures are as at February 10, 2010

Market to book value

The 2008 financial report and accounts of Resort states that it has assets worth N6.7 billion and liabilities valued at N1.1billion, leaving it net assets (or net worth) of about N5.7billion. This is the book value of the company and it is quite healthy.
The market scene tells a slightly different story. The company in 2009 had 20billion issued and fully paid share of 50kobo each. Multiplying this number of shares by the current market price we arrive at the market value of the company which is N10.0 billion.
The market value of N10.06 billion is higher than the book value but not much is, suggesting that the stock of Resort is fair-priced.

Resort Savings and Loans Plc
Current price	N.50
P.E. Ratio	25.00
Current EPS	2k
Market Value	N10.0bn
Book Value	N5.7bn

Other things to consider
It is pertinent to note that shareholders of Resort Savings and Loans have not received dividend in a while.

Source: Financial Standard, Monday,March 01, 2010

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