Geregu Power Grows Investors Funds Six Folds in 17-Month

Risk-taking is billionaire Femi Otedola’s secret sauce. For his kind, a simple way to build and maintain wealth is investing. You don’t envy him if you are risk-shy despite tough economic conditions.

In 2022, if you had spread N10 million on Geregu Power Plc share at N100 per unit, you would be counting your gain right now. Those shares now would have been worth about N67.6 million – excluding dividend payments- driven by earnings and positive sentiment.

On Friday, the market repriced Geregu Power Plc to N675.90 due to sustained demand for the power generating company shares. Those who invested in the company would be 575% richer by now as the stock moved strongly in a positive direction over 18 months.

Geregu Power Plc’s popularity in the local bourse remains outstanding, gaining 575% between Oct 2022 and Feb. 2024.  The company’s market valuation increased to N1.689 trillion from N250 billion when it was listed some 17 months ago.

Investors’ sentiment about its future earnings seems strong, translating to increasing shares buying on the Nigerian Exchange. According to market data, Geregu Power Plc increased by 19% over the last five days of the trading session in the stock market after an earnings beat that produced N8 as the final dividend for the year.

On Friday, the market priced the stock at N675.90, as the company moved against a bearish trend in the local bourse.

Q1-2024 Earnings Expectation

Geregu released its earnings expectation for the first quarter of 2024 late last year. In a statement submitted to the Nigerian Exchange signed by its chief executive Akin Akinfemiwa and Chief Finance Officer Ganiyu Adisa, Geregu Plc expects to declare N5.56 billion as profit in the first quarter of 2024.

This comes in contrast to its cash flow from operation which is expected to settle at N590 million in the period. The company said it expects operating cash flow before working capital changes to settle at N9.79 billion in Q1-2024.

Details from the forecast document showed that the company expects a profit of less than N6 billion (about 18% of turnover) amidst an expectation that revenue would be over N31 billion in the same period.

The company forecasts its revenue to hit N31.242 billion, out of which it expects to offset N16.759 billion as costs of sales. This would leave the power-generating company with N14.482 billion as gross profit. The company’s administrative expense is expected to gulp N5.4 billion.

Net finance cost of about N800 million is expected to stand between the company’s operation profit of about N9.1 billion in the period and its pretax profit of N8.3 billion. Geregu Power estimated about N2.4 billion as tax provision for the period, reducing its profit for the period to N5.56 billion.

Femi Otedola, Chairman, Geregu Plc divested from the oil marketing business to focus on the power generation and distribution business.

FY2023 Earnings Beat

Details from its financial statement showed that Nigeria’s first power company to be listed on the local bourse posted an impressive double-digit revenue growth. Its return on equity for 2023 settled at about 107% while its board of directors declared N8 as the final dividend.

Equities investors in the stock market reacted positively to the dividend announcement as Geregu Power Plc’s share price climbed despite selloffs in the Nigerian Exchange.

Details from its financial statement revealed that Nigeria’s first power company to be listed on the local bourse reported impressive double-digit growth in the top line and bottom lines.

Revenue climbed as a result of increased energy sales and capacity charges recorded in 2023, according to data from the company’s financial scorecard.

Details showed that the power company’s revenue soared 74.1% year on year to N82.91 billion in 2023 and was driven by volumes from total energy sold and capacity charge generated.

Geregu Power generated N51.8 billion from energy volume sold in 2023 from N30.25 billion and an additional income of N31.1 billion from its capacity charge versus N17.37 billion in 2022. Meanwhile, the surge in the company’s revenue was offset by a sharp year-on-year increase seen in its cost of sales. Details showed costs of sales climbing by 64% to N40.3 billion in 2023.

However, despite this increase, gross earnings improved impressively by 84.35% to N42.66 billion in the period. The power company’s operating profit saw a remarkable 110% increase to N31.1 billion.

But administrative expenses surged sharply by 173.23% to N12.97 billion during the same period, mainly due to a significant rise in expenses related to the repair and maintenance of plant and machinery, which escalated from N212 million in 2022 to N6.37 billion in 2023.

Its net income came stronger despite the margin dilutive pressures. Profit after tax grew by about 58% to N16.05 billion in 2023. The company’s bottom line was supported by a surge in foreign exchange gains to N502.3 million during the year.

Shareholdings

Its majority shareholders would collect the largest part of the total dividend for the year. At the end of 2023, about 84% of the power company shares were held by Amperion Power Distributions Limited and Libraville Power. The company announced a free float of 16.26%. #Geregu Power Grows Investors Funds Six Folds in 17-Month#

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