Meristem Analysts Value Transcorp Power at N2.3trn

March 4, 2024
transcorp power Plc

By Aduragbemi Omiyale

Analysts at Meristem Research have put the value of Transcorp Power Plc at about N2.3 trillion (precisely N2.290 trillion), higher than its current value of N1.8 trillion.

The power-generating firm joins the Nigerian Exchange (NGX) Limited today, Monday, March 4, 2024, by introduction. It will be the second GenCo (Generating Company) to list its shares on the domestic stock exchange. The first was Geregu Power Plc owned by Mr Femi Otedola, which joined in October 2022.

Transcorp Power, a subsidiary of Transcorp Plc, a firm controlled by Mr Tony Elumelu, listed today on the bourse about 7,500,000,000 ordinary shares at N240.00 per unit.

In an analysis of the company, Meristem Research said Transcorp Power is undervalued as its fair value should be N2.3 trillion based on some parameters it stated.

The investment firm said its valuation process considered GenCo’s growth prospects, inherent risks, and both positive and negative factors influencing its outlook

On how it arrived at the valuation, Meristem said, “We utilised a blended Discounted Cash Flow (DCF) valuation model (Equity Discounted Cash Flow Model, Enterprise Discounted Cash Flow Model, Dividend and Economic Profit Model) and the Relative Valuation Approach.”

A brief look at the financials of the organisation showed a steady growth in its revenue for three years.

In the 2020 fiscal year, it generated N65.12 billion and this grew to N74.33 billion in 2021, N90.35 billion in 2022, and N137.38 billion in 2023.

Meristem projected that the earnings could rise to N302.15 billion in 2024, N407.49 billion in 2025 and N976.94 billion in 2028.

As for its post-tax profit, it was N11.46 billion in 2020, N19.54 billion in 2021, N17.28 billion in 2022, and N33.27 billion in 2023. It is projected to hit N75.53 billion in 2024, N106.21 billion in 2025, and N253.70 billion in 2028.

Analysts see Transcorp Power as a profitable business because of the export drive of the organisation, which started in 2020, when the energy firm supplied power to the Benin Republic, empowering it to tap into diverse revenue streams and capitalise on opportunities beyond the confines of the domestic market.

“We anticipate a sustained expansion in revenue, driven by a combination of existing capabilities and emerging opportunities that the company is well-positioned to capitalise on.

“The recent completion of the overhaul of one of its major turbines, which had been out of operation since 2019, is expected to significantly enhance the company’s capacity utilization and power generation in the near term.

“Furthermore, the company’s bilateral agreements with downstream distribution companies, especially those with high collection rates from users (Discos), will facilitate direct interactions without intermediaries.

“This is poised to result in shorter payment periods and increased transparency, thereby mitigating power losses and improving overall accountability.

“In summary, we reaffirm our expectation that the company is strategically positioned to maintain its robust revenue performance,” the firm said in a note obtained by Business Post.

Aduragbemi Omiyale

Aduragbemi Omiyale is a journalist with Business Post Nigeria, who has passion for news writing. In her leisure time, she loves to read.

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