FirstHoldco: “We Revise EPS, Target Price Downward” – Cordros Securities
Analysts at Cordros Securities Limited have downgraded their estimates on First Holdco Plc in response to the group’s unimpressive earnings performance in the first half of 2025.
FirstHoldco earnings per share (EPS) and target price have been downgraded as analysts build a bearish case against the financial services group.
In its financial statement, First Holdco reported a sharp decline in profitability, and asset quality came under intense pressures as reflected in higher non-performing loan ratio and provisioning.
Its profit declined by more than 22% in the first six months of operation amidst growing rivalry based on technology capability deployment to drive earnings growth.
On the other side, shareholding twists and infighting among vested interests at the group levels appeared to impact strategies, as it affected earnings, asset quality, and corporate governance records.
With some of its peers in the banking industry, First Holdco is reeling under forbearance and single obligor limit, which prompted the Central Bank of Nigeria (CBN) to place a suspension on dividend payment.
In its latest update, analysts at Cordros Securities Limited foresee First Holdco’s profitability headwinds and negative impacts of its asset quality on the overall outlook.
“We revise our earnings per share (EPS) and target price (TP) estimates downwards,” Cordros Securities Limited wrote in its latest update on Marina-based Elephant-branded financial services company.
Details from First Holdco results showed that the group’s gross earnings grew by 18.1% year on year, but profit after tax fell by 22.3% primarily due to higher impairment charges and fair value losses.
In its update, Cordros Securities Limited update its loan and deposit growth forecasts to 6.0% and 10.0% year-on-year from 29.7% and 15.0% yearon-year.
Analysts said the revised loans and deposit growth reflect a more cautious approach to credit expansion aimed at preserving asset quality, alongside the dampening impact of a relatively stable naira on foreign currency deposits.
The firm also raised its loan loss provisioning assumptions as First Holdco prepares to exit the Central Bank of Nigeria’s forbearance framework within the current financial year.
Earnings per share forecast for 2025 has been slashed by 19.80% to N14.70 from NGN18.33, resulting in a lower year-end target price of N31.14/s, Cordros Securities Limited said in its update.
Analysts downgrade First Holdco to a hold rating after the target price was reduced from NGN34.97/s.
“We retain our gross dividend per share estimate of NGN1.00 in 2025, which translates to a dividend yield of 3.0% based on the last closing price of NGN33.60/s.
“Our model suggests the stock is trading at a 2025E price-to-earnings ratio and price-to-book estimates of 1.7x and 0.3x, respectively.”
In its equity update, Cordros Securities Limited expects continued accretion in FIRSTHOLDCO’s core income in 2025, highlighting the impact of elevated yields.
Though the loan book has pared so far, First Holdco management noted that modest growth could be recorded in the second half of 2025 if interest rates begin to moderate, analysts said.
Cordros Securities Limited quoted First Holdco management a saying some loan exposures were downgraded to Stage 3, causing the non-performing loan (NPL) ratio to spike to 12.9% from 10.2% 2024.
“Given this, we now project higher impairment charges will surge by 34.2%, up from previous estimate of +12.0%, translating to a cost of risk of 6.0%.
“we also expect foreign currency losses to undermine the higher net fees and commissions and result in a 22.1% year on year decline in non-core income”, the firm said in its equity note.
Analysts now project operating income and operating expenses to grow by 2.8% and 12.9% year on year, respectively, resulting in a 2025E cost-to-income ratio of 59.2%, up from 43.0% in 2024.
All told, analysts at Cordros Securities Limited expect First Holdco pretax profit and profit after tax to decline by 8.9% and 7.2% year on year, respectively, resulting in a lower EPS of NGN14.70.
Asset quality pressures weigh on outlook
In the first half result, FIRSTHOLDCO recorded a further deterioration in the quality of its loan book, with the NPL ratio spiking and resulting in a subpar NPL coverage of 38.8%.
“Given the CBN’s ongoing directives, we expect the group to prioritize higher provisioning, cautious loan growth, and potential loan write-offs. In our view, this combination will weigh on the profitability outlook for 2025E”, Cordros Securities Limited wrote in its equity note.
The firm cited that First Holdco management expects to resolve the impaired loan exposures by the end of the year or by Q1-26, at the latest.
“We also anticipate that the second tranche of the bank’s capital raise will strengthen buffers and maintain its capital adequacy ratio above the 16.0% percent regulatory threshold,” analysts said. #FirstHoldco: “We Revise EPS, Target Price Downward” – Cordros Securities#
