Guaranty Trust Holding Company Plc (GTCO) plans to list new ordinary shares on the London Stock Exchange (LSE) to raise approximately $100.0 million is set to attract more institutional investors leading to a higher multiple in line with Emerging Market (EM) peers and higher stock price.
“We view GTCO’s strategic capital raise positively, as it reflects deliberate efforts by the bank to strengthen its balance sheet and broaden its investor base,” analysts at Cardinal Stone Partners said.
“We note that GTCO trades at a current PB of 0.97x, which is at 18.5% and 20.5% discounts to the EMEA peer mean and median of 1.19x and 1.22x, respectively. Thus, a re-rating of the stock looks likely to come from benchmarking to these Europe, the Middle East and Africa (EMEA) multiples and possible earnings upside aided by the efficient deployment of raised and existing investible funds.”
Cardinal Stone has a new blended 12-month Target Price of N98.91 for GTCO, suggesting a 19.5% upside and a BUY recommendation on the stock.
One of the largest selling point for institutional investors as GTCO lists on the LSE is its sound corporate governance.
In 2024, GTCO concluded an extensive clean-up on its risk portfolio, which significantly de-risked its balance sheet and led to it becoming the only Nigerian-owned bank without any forbearance loans as of CBN’s directive to end regulatory forbearance for Nigerian banks.
This disciplined balance sheet management, combined with its ongoing efforts to attract foreign institutional investors, supports the case for long-term value creation, according to Cardinal Stone.
“The timing of the capital raise also appears well-judged, aligning with renewed interest from Foreign Portfolio Investors (FPIs), who have notably provided some support to GTCO’s stock price on the NGX,” Cardinal Stone analysts said.
To gauge the potential market impact of GTCO’s planned dual listing, Cardinal Stone reviewed the trading dynamics of other Nigerian companies already listed on both the NGX and LSE— specifically, AIRTEL AFRICA and SEPLAT, and observed that dual listing has significantly expanded the shareholder base for both companies.
Particularly, for SEPLAT, this has resulted in the institution having the bulk of its shareholders (85.0%) domiciled on the LSE, with the cadre of these investors typically skewed to global institutional investors, including emerging market and sector-specific funds.
These investors often have deeper pockets and can price shares more efficiently than domestic participants, aided by the robustness of the LSE platform.
GTCO closed trading on Friday at N83.20 and has a market capitalisation of N2.84 trillion ($1.77 billion).
“For our base case blended valuation, we have applied a 50.0% weight to the mid-point relative valuation of N107.39/share, a 25.0% weight on residual income derived TP of N98.62/share, and the balance 25.0% weight on DDM derived TP of N82.23/share. This resulted in a new blended 12-month TP of N98.91, suggesting a 19.5% upside and a BUY recommendation on the stock,” Cardinal Stone said.
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