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Tuesday, June 6, 2023

Transcorp is a Buy as Profit Surges 517.75% on Energy, Hospitality Boom

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Transnational Corporation of Nigeria or “Transcorp” Plc, the largest conglomerate in Africa’s most populous nation, has posted record profit, thanks to the contributions from the energy and hospitality segments.

The company with interest in  hospitality, power, agro-allied and oil and gas saw net income surge by 514.77 percent to N23.83 billion as at December 2021 from N3.79 billion as at December 2020.

Transcorp is delivering returns to shareholders while using their resources to generate higher profit as the return on average equity rose to 19.72 percent in December 2021 from 3.71 percent as at December 2020.

Revenue spiked by 47.74 percent to N111.21 billion in the period under review from N75.27 billion the previous year.

A breakdown of the top line figures shows revenue from electricity energy capacity surged by 37.58 percent to N89.47 billion as at December 2021.

Revenue from hospitality business (Rooms, food and beverages) spiked by 47.74 percent to N21.74 billion in December 2021 from N6.50 billion the previous year.

Analysts say the conglomerate giant benefitted from the opening of the economy that underpinned business activities and helped the country exit recession in 2020.

The Nigerian economy grew by 3.98 percent year on year (yoy) in the last quarter of 2021. Compared to 5.01 percent (yoy) in Q3-2021 and 0.11 percent (yoy) in Q4-2020, the performance of the economy in Q4-2021 represented a mixed stance, according to recent data by the National Bureau of Statistics (NBS).

The travel and hospitality sector was the hardest hit from the coronavirus pandemic as flights were grounded on the back of a lockdown imposed by the government to curb the spread of the virus.

Transcorp is making profit from core operations as operating profit increased by 114.29 percent to N38.53 billion in the period under review from N17.98 billion as at December 2020.

It has enough to cover distribution and administrative expenses and exceptional losses as gross profit was up 66.17 percent to N54.77 billion in December 2021 from N32.96 billion the previous year.

Gross profit margin increased to 49.25 percent in December 2021 from 43.80 percent the previous year. Operating profit margin moved to 34.65 percent in December 2021 from 23.90 percent the previous year.

Net profit margin increased to 21.43 percent in the period under review from 5.04 percent as at December 2020.

With strong growth in earnings and margins, Transcorp is poised to declare a bumper dividend to shareholders and it is expected that there will be a rally in share price.

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