Earrly Investors Boost Transcorp Power Value by 33% to N2.4Trn
A growing numbers of early investors that have shown interest in Transcorp Power Plc future earnings prospect are driving the company’s valuation upward as a result of strong, sutained positioning in its stocks.
Transcorp Power Plc has been re-rated to about N2.4 trillion from a listing value of N1.8 trillion at the beginning of the week. The second power-generating company listed on the Nigerian Exchange was priced at N240 per share on Monday.
However, early interest investors have rallied around the company with the hope that its earnings stream would return positively. Transcorp Power Plc has consistently maintained a profitable business, according to Meristem Securities Limited.
In 2023, its profit before tax surged remarkably by 72.20% to reach its highest-ever level on record at N 49.28 billion, compared to N28.62 billion in 2022. The company’s profit after tax grew at its fastest pace in four years by 92.47% year on year to N33.27 billion from N17.28 billion in 2022. This sustained key profitability ratios above the four-year averages.
For 2024, analysts at investment firm Meristem Securities estimate a sustained expansion in net margin to 25.00%, signifying continued profitability. The firm estimated N2.3 trillion as the company market valuation. In its equities coverage initiation note, Meristem Securities said Transcorp Power Plc showcased a trend of relatively stable operating expenses with marginal increases from 2018 to 2020.
The investment firm said, however, in 2021 to 2023, amid an inflationary environment, administrative expenses surged by 63.34% 25.44% and 47.67% respectively. Analysts said the main drivers behind this surge were the upward revision of management fees and other operating expenses during the period.
Despite this, in 2023, the company’s earnings before interest tax depreciation and amortisation (EBITDA) expanded impressively by 67.61% year on year to N65.94 billion, compared to N39.34 billion in 2021. As a result, EBITDA margin climbed by 448 basis points to its highest on record at 48.00% from 43.54% in 2022 and its five-year average of 35.69%.
Meristem Securities stated that contrary to the decline in previous years, finance costs registered a slight increase of 8.28% year on year in 2022, primarily attributed to foreign exchange losses from dollar-denominated debt, as the Naira continued its free fall. Analysts said the impact of the Naira devaluation in 2023 was also shown in its finance cost as the firm recorded a foreign exchange loss of N8.42 billion, leading to a finance cost of N15.09 billion.
It is noteworthy that the company has effectively managed and cushioned its interest expenses, mostly funding its capital expenditure programs through reinvestment rather than taking on significant additional debt. Thus, interest coverage remains positive at 3.13x in 9M:2023, analysts stated in their coverage notes.
Additionally, the settlement of foreign currency debt obligations using proceeds from international business has prevented major currency mismatches between liabilities and income. The firm has made complete repayment of the USD215 million acquisition loan thus, reducing its exposure to dollar denominated debts, according to Meristem. #Early Investors Boost Transcorp Power Valuation by 33% to N2.4Trn
