Investment Firms Initiate Coverage on Transcorp Power
Top investment banking firms have announced decisions to initiate coverage on Transcorp Power Plc after the company was listed by introduction in the equities segment of the Nigerian Exchange (NGX) on Monday. CardinalStone, and Meristem Securities in a separate note announced they are covering Transcorp Power.
Listed at N240 per share on the floor of the Nigerian Exchange, the second lsited power genrating stock at the local bourse gained 10% following a fresh rally that came amidst depressed earnings releases by some listed companies.
“We initiate coverage on Transcorp Power Plc with a 12-month target price and projected market capitalisation of N323.64 and N2.4 trillion, respectively. Our target price implies a price return of 22.6% and a BUY recommendation on the stock”, CardinalStone said in a market update.
The investment firm said it outlook on the stock is premised on projected improvements in return metrics and is consistent with the company currently accounts for 7.0% of Nigeria’s installed grid capacity but generates 10.0% of the country’s power needs.
Analysts rate the company positive having noted that Transcorp Power’s leadership position in the West African Power Pool (WAPP) and planned strategic alliances with DISCOs, eligible customers, and state governments leaving legroom for output growth in the near term.
“The material export component of revenue is likely to continue providing some important hedge against the negative impact of Naira devaluation on costs linked to energy and equipment maintenance.
“The company’s average dividend payout ratio of about 75.0% over the last five years is materially higher than the mean of 48.0% for EMEA peers ex GEREGU over the same period.
“Our expectations for operating cash flow and dividend paid cumulative annual growth rate of 17.4% and 26.1%, respectively, between 2024 and 2028, are likely to keep investors mostly interested in the stock in the near to medium term.
“Our projection for a relatively low mean financial leverage of 328.6% over our forecast horizon (vs 487.3% in the last five years) and robust cash position make the ticker suitable for investors looking to outperform in a macroeconomic environment characterised by hawkish monetary policy and rising interest rates.
“The government’s plan to clear legacy debt owed to power sector players bodes well for receivables management and the overall cash flow position of the company. The company’s involvement in the black starting of the entire grid upon collapses may have conferred a level of systemic importance that may be critical to its outlook”, CardinalStone said in its market update.
Meristem Securities said its assessment of the firm’s financial performance reveals a resilient ascent marked by consistent revenue growth and strategic asset optimization.
“Looking ahead, we anticipate sustained revenue expansion for Transcorp Power, driven by existing capabilities and emerging opportunities. The company’s strategic initiatives, international market presence, and focus on operational efficiency position it for long-term success”. The investment firm estimated fair value of NGN2,289,899,272,281.17 for Transcorp Power Plc.
Shareholders
According to Meristem, as of December 31, 2023, the company’s register of members reveals a total of 7,500,000,000 outstanding shares. The firm said a significant majority of these shares (51.57%) is held by the parent company, Transnational Corporation Plc (TRANSCORP), amounting to 3.87bn shares.
RichPoint Limited is the second highest shareholder with 33.27% holding. Further down the line, Woodrock Energy Resources Limited, Seaforce Investments Limited and Thomassen Holding Limited have 7.46%, 3.60%, and 2.57% of the total shareholding, respectively.
The residual percentage of 0.20% is distributed among 7 shareholders with less than 1% each of the total shareholding. #Investment Firms Initiate Coverage on Transcorp Power Naira Suffers Big, CBN Goes Ballistic Against FX Whales
