Transcorp Stock Undervalued After Huge Rally as N32 Seen as Next Target

Transnational Corporation of Nigeria (Transcorp) stock has had a huge run up in its shares in the past 12-months, however the rally may still have room to run with Discounted cash flow analysis showing the stock is still trading some 43% below fair value.

Transcorp shares are up 1,470 percent in the past year pushing the firm to a lofty market capitalization of N758 billion as at Friday, Jan 19^th.

The conglomerate which operates as a diversified investment firm invests in companies focused in the hospitality, agribusiness and energy sectors.

When estimating fair value and looking at its future cash flows via a Discounted Cash Flow model, TRANSCORP (N18.65) is currently trading below estimate of fair value of N32.84.

TRANSCORP’s PE Ratio at 55x earnings also compares favorably to its peers like Geregu Power which trades at 102x earnings.

Transcorp shares were down 2.86% to N18.65 per share at the end of Friday trading. The shares are likely consolidating after its huge run up for its next sprint to the N30 per-share level.

In its most recent results filed with the Nigerian Exchange (NGX), Transcorp reported an impressive revenue of N128 billion in Q3 2023, compared to N96.2 billion in Q3 2022, marking a substantial 33% growth year-on-year while operating income also grew by 36% to close at N42.7 billion as of September 2023, compared to N31.5 billion in September 2022.

Total Assets increased by 8% from N442.7 billion in December 2022 to N479.8 billion in Q3 2023

Hospitality businesses sustained strong growth, recording 31.76% growth in revenue from N22.7bn to N29.9bn, significantly higher than pre-covid performance. Profit also grew by 62% from N3.4bn to N5.5bn

Power subsidiaries’ revenue grew by 33.4 % from N73.6bn to N98.2bn despite the challenges of Gas and infrastructure in the sector, showcasing the group’s innovative and resilient business strategy.

Commenting on the result, Transcorp’s President/Group Chief Executive Officer, Dr. (Mrs) Owen D. Omogiafo OON, expressed enthusiasm and confidence in the Group’s performance trajectory, stating:

“Our Group, with our diverse investment in power, hospitality, and energy sectors has reported remarkable results, demonstrating resilience and agility in the third quarter of 2023 amidst the prevailing economic headwinds, including forex challenges, Naira devaluation, gas challenges, and rising inflation.”

“We remain agile, constantly exploring dynamic ways to maintain value for all our stakeholders, and focused on driving sustainable growth, improving lives, and transforming Africa.” asserted Dr. Omogiafo.

Transnational Corporation Plc (Transcorp Group) is a publicly quoted Conglomerate with a shareholder base of approximately 300,000.

The Group’s diverse portfolio comprises strategic investments in the Power, Hospitality, and Energy sectors. Among its notable businesses are Transcorp Hilton Abuja, Transcorp Hotels Calabar, Transcorp Power, Transafam Power, and Transcorp Energy.

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