Geregu Power Delivers Impressive Return on Investment
Top performing stocks give investors capital gain and the opportunity to share the company’s profit. And, Geregu Power Plc has done both as the stage has been cleared for the company to create wealth for shareholders again in 2023.
The power company delivered a 95% return on capital investment from the beginning of the year to date.
What is the market holding next? Geregu Power is investing to boost capacity and it actually brought a strategic investor to its board – Fund for Export Development in Africa (FEDA).
Management told the Nigerian Exchange that with this purchase, FEDA now holds 5% of Geregu Power Plc Share, a company chaired by Femi Otedola.
Market data screened showed that the power company’s fair valuation has increased strongly as the market continues to see value and potential for growth in its key business segments.
In April, the company paid N8 per share dividend to shareholders and the market recognised this in its valuation as its price settled at N290.70 on Friday amidst bearish trading activities on major tickers.
Since the company listed 25 billion shares at N100 in Oct, it has gained more than 3 times its initial valuation, making the power company one of the best-performing stocks in the local bourse.
Though, its financial statement for 2022 showed that the company’s earnings declined amidst a tough operating environment. In the first quarter of 2023, the power company kickstart the year on a negative note.
The power generating company saw a decline in revenue. Thus, profit fell 36.3% to N3.54 billion from N5.5 billion as the company spent N3.1 billion on borrowings.
However, there was strong capital investment fueling positive sentiment about future earnings growth. Geregu disclosed that N40.085 billion unsecured corporate bonds for a 7-year tenor issued in July 2022 will be used to acquire one of the power-generating companies.
In part, the power-generating company’s first dividend payment announcement since it became a listed company appears attractive to some value hunters in the domestic bourse.
Last week, Geregu Power Plc dipped 10%.
Seven months after it became a listed company, Geregu Power Plc.’s valuation has increased to N727 billion over 25 billion shares outstanding at a market price of N290.70 kobo. It was valued at N250 billion in October 2022 when it was listed.
Before it slipped, the power company has reached N812.50 billion when its stock market price was N325.
In the stock market, the share price of the company has jumped 3x its listing price. Some analysts attribute the development to strong positioning by value hunters ahead of dividend payments.
Following its board of directors’ notice to pay dividends after shareholders’ approval is obtained at its annual general meeting, Geregu Power Plc share has continued to gain popularity in the Nigerian bourse.
MarketForces Africa reported that in October 2022, the company was listed at N100 per share on the Nigerian Exchange. The increase came despite its weak earnings.
Though, the company recorded a strong year-on-year decline in the top and bottom line following disruption in its business line, the board of directors recommend N8 dividend per ordinary share for shareholders with February 27 as the qualification date, its audited statement shows.
In its 2022 financial statement submitted to the Nigerian Exchange, the company’s profit fell by more than 50% to N10.171 billion, from N20.550 billion. This followed an apparent decline in activities level.
Geregu’s revenue slumped to N47.619 billion at the end of 2022, a decline of 32.89% when compared with N70.956 billion in the corresponding year in 2021. The company said in its financial statement that energy sold declined year on year to N30.252 billion, down 33.80% from N45.696 billion in the corresponding period.
Similarly, revenue from capacity charge nosedived to N17.367 billion from N25.260 billion.
Geregu attributes the decline in topline to nationwide force majeure declared by Shell Petroleum Development Company Limited on the Trans-Forcados pipeline and its consequent effects on the Forcados oil terminal, gas supplies to the plant by Its primary gas supplier ceased from 17th of July 2022.
It said in the audited report that the maintenance works on the pipelines were however completed at the end of November 2022 and gas supplies and normal operations have since then resumed.
Recall that in 2021, the FGN divested the remaining 20% shareholding to Amperion thereby making Amperion Power Distribution Company Limited the 100% owner of Geregu Power Plc.
With this development, FGN has ceased to be a shareholder of Geregu Power Plc. The Company was listed on the main board of the Nigerian Exchange Group on 05 October 2022, according to the audited report.
At the meeting, shareholders voted to re-elect Olufemi Otedola CON and Christopher Adeyemi, directors retiring by rotation. #Geregu Power Delivers Impressive Return on Investment#
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