Transnational Corporation of Nigeria (Transcorp) Plc, at the weekend, outlined the key initiatives and business environment that will drive its performance in the year. It also assured shareholders that it would deliver improved returns in the new business year.
Transnational Corporation of Nigeria (Transcorp) Plc, President, Mr. Emmanuel Nnorom, who spoke against the backdrop of the challenges in 2016, said the new business year has started on a positive note with the improvement in gas supply and foreign exchange situation as well as the decision of the Federal Government to provide guaranteed payment for power supply. Its power business, Transcorp Power Limited, contributes 75 per cent of the group’s earnings.
According to him, the three main challenges faced by the group’s power business are being resolved and the operating environment is improving. These include the Federal Government’s renewed commitment to the power sector by way of the recent N701 billion guarantees to NBET for payment for energy sold and associated invoices.
He said the N701 billion NBET guarantee would boost confidence among the power sector stakeholders and attract new investors into the sector with Transcorp power, which ranks among the top three in the sector, being one of the major beneficiaries. The NBET owed Transcorp Power Limited about N50 billion by December 31, 2016.
“The first thing international investors want to know is how we get paid for the power we generate. In 2016 that question had become near impossible to answer. The undeniable fact is that if we truly intend to develop Nigeria we must first develop the power sector. This recent move by the Federal Government appears to be a step in the right direction,” Nnorom said.
He added that the complete disbursement of Central Bank of Nigeria (CBN) NEMSF N309 billion intervention fund awaiting National Assembly approval would also enhance the liquidity in the sector.
He pointed out gas supply has increased tremendously since mid February, thus making the Transcorp Power Limited to increase capacity utilisation, which had dropped from 65 per cent in 2015 to 55 per cent in 2016, to an average of 70 per cent and a peak of 90 per cent since mid-last month.
He added that the conglomerate has also been working to secure alternative sources of gas to complement existing supply while laying the groundwork for future expansion in anticipation of increased gas supply.
He added that the conglomerate has secured provisional commitments from its lenders to convert Dollar-based loan to Naira subject to liquidity, noting that the NBET new initiative of paying power generating companies (Gencos) in Dollars for power sold to neighbouring countries, will also help to ameliorate foreign exchange situation as well as the pricing of the forex impact on increased gas cost into the tariff.
“The value of the Naira is headed in the right direction. As the Naira regains its value, it instantly improves the bottom line of Transcorp as foreign exchange loans were solely responsible for reported loss. As long as 2017 maintains the positive momentum it has started with, the future looks bright for Transcorp and its investors,” Nnorom said.
He pointed out that in spite of the challenging operating environment in 2016, the conglomerate was able to close the year with revenue growth of 46 per cent, which he described as impressive, given the fact that Transcorp’s power business contributes 75 per cent of the group’s earnings.
He noted that the group’s hospitality business, Transcorp Hotels Plc, has continued to show resilience and profitability as it ended the 2016 business year with a profit of N5 billion. Transcorp Hotel is paying gross dividend of N3.04 billion or dividend per share of 40 kobo to shareholders.
Key extracts of the audited report and accounts of Transcorp Hotels for the year ended December 31, 2016 showed that its turnover rose from N13.98 billion in 2015 to N15.31 billion in 2016. Profit before tax stood at N5.24 billion in 2016 as against N5.38 billion in 2015. Profit after tax rose by 17.1 per cent from N3.5 billion in 2015 to N4.1 billion in 2016.
They showed considerable improvements in operating activities. Total sales rose by 45.8 per cent while gross profit and operating profit rose by 24 per cent and 37.9 per cent respectively. However, foreign exchange loss leapt by 208.6 per cent and compounded other finance costs to increase the conglomerate’s net finance loss by 127.5 per cent, turning the bottom-line to red.
Group turnover rose from N40.75 billion in 2015 to N59.42 billion in 2016. Gross profit also improved from N24.33 billion to N30.17 billion. Operating profit rose to N20.72 billion in 2016 as against N15.03 billion in 2015. Forex loss, however, worsened from N6.06 billion in 2015 to N18.70 billion in 2016. With this, net finance loss stood at N26.64 billion in 2016 compared with N11.71 billion in 2015.
With these, the conglomerate suffered a pre-tax loss of N5.93 billion in 2016 compared with a pre-tax profit of N3.32 billion in 2015. After taxes, net loss reduced to N1.13 billion in 2016, still a significantly worse position than net profit of N2.03 billion posted in 2015.
Tag: Transcorp
-
Transcorp optimistic on improved performance in 2017
-
Transcorp Abuja begins $100m renovation
Transcorp Hilton Abuja said it has commenced a major renovation that would upgrade the five-Star Transcorp Hilton Abuja guest experience in every aspect.
The upgrade, estimated to gulp about $100million, is the first of its kind in the 30-year history of the hotel, the firm said in a statement, saying it underpins its commitment to deliver an experience that cannot be duplicated by any other hotel.
When completed, the iconic Transcorp Hilton Abuja would offer guests a brand new and ultramodern furnishing concept to rival other five-star hotels worldwide.
All 670 guest rooms and suites have been redesigned, as well as refurbishing of the Executive Lounge, elevators and elevator lobbies, meeting rooms, Congress Hall and the hotel lobby. The spa and restaurants will also be upgraded to reflect the standards of the modern traveller with high expectations, it said.
-
Transcorp scales up as expansion gathers momentum
•Targets 25% of Nigeria’s power generation
Transnational Corporation of Nigeria (Transcorp) Plc has stepped up implementation of key strategic initiatives aimed at enhancing the productivity, efficiency and scope of its businesses while exploring opportunities for new ones that could impact on future returns.
With major acquisitions in power and agribusiness, new initiatives in its hotel and tourism business and the ongoing exploratory activities from its existing oil block, the management of Transcorp at the weekend provided updates on the various initiatives across the group’s four business lines. They includ hotels, agriculture, power generation and oil exploration.
President, Transnational Corporation of Nigeria (Transcorp) Plc, Mr. Emmanuel Nnorom, said with the group strengthening its various business lines, Transcorp is rapidly transforming into a well-diversified conglomerate that provides ordinary shareholders a unique opportunity to share in Nigeria’s economic fortunes.
He said the group has continued to improve operational and cost effectiveness as well as explore opportunities to expand product offering as part of its strategic thrust for brand building and extension. He added that with the sustained profitability and dividend payment over the years shareholders have already started to reap the rewards of the group’s turnaround.
Nnorom, who took select senior journalists on a brief visit to the site of the group’s new Transcorp Hilton Hotel construction in Ikoyi, Lagos, noted that the group has already made significant progress in key sectors of its business; in the hotel and power sectors, a development that is already impacting positively on the group’s performance.
It should be recalled that Transcorp Hotels, where Transcorp holds 83 per cent equity stake, raised N20 billion in bond issues in 2015, to finance the enhancement of its flagship Abuja-based Transcorp Hilton Hotel, including a multipurpose banquet centre and construction of Transcorp Hilton Hotel, Lagos, among others.
The Transcorp Hilton Lagos, a full service, 350-room hotel on Glover Road, Ikoyi, will be the Hilton Group’s second hotel in Nigeria by Transcorp, following the award-winning Transcorp Hilton Hotel Abuja, which is one of the leaders in Hilton’s global network.
Nnorom said the completion of the ongoing projects by Transcorp Hotels would further position the group as the leader in Nigeria’s hospitality industry, pointing out that Transcorp Hilton Port Harcourt has gotten the necessary planning approvals from the Rivers State Government and it is currently revising its design to optimise the use of its expanded site.
According to him, Transcorp Hilton, Abuja will be upgrading 670 rooms in the next 18 months with works already ongoing on the installation of new elevators and procurement of fittings for guest and meeting rooms as well as external works on construction of a new access way, warehouse and car park.
In the power business, Nnorom said Transcorp has made several important business decisions, which will have significant impact on its fortunes going forward. The power business already contributes nearly two-thirds of the group’s revenue.
According to him, ongoing initiatives should lead to significant increase in capacity and efficiency in the power business with the overall target of achieving about a quarter of Nigeria’s total power generation.
He outlined that the acquisition of additional turbines for power generation, increase in the output of the plant from 160 megawatts to 650 megawatts in 2015 and being on track to deliver 850 megawatts of available capacity in 2016 have positioned the power business for continuous growth.
“Our target is to be responsible for at least 25 per cent of the total power generated in Nigeria. Currently, challenges to the actualisation of this goal include, but not limited to supply of good quality gas, transmission losses and inadequate evacuation infrastructure and payment of owed debts to Transcorp Power limited by MBET. Despite these challenges, Transcorp Power Limited is determined to forge ahead in the discharge of her primary objectives and in the creation of lasting value for Nigerians at large,” Nnorom said.
He said Transcorp will soon join the elite group of oil-producing companies as it has already advanced in the exploration of its oil block-OPL 281 and signed of production sharing contract with the Nigerian National Petroleum Corporation (NNPC) while continuing to prepare for drilling and seamless production.
He said the group expects the OPL 281 to begin commercial production by 2018.
“We have put in place a world class management team and are committed to developing the synergies between our natural resources portfolio and our power interests, creating an integrated energy approach that directly links Nigeria’s natural resource wealth to the daily needs of our people,” Nnorom said.
He commended Transcorp’s shareholders for their support and assured them that the board and management will not relent in positioning Transcorp as a true vehicle for popular participation in Nigeria’s bright future and prosperity.
In his remarks, managing director, Transcorp Power Limited, Mr Adeoye Fadeyibi commended the Federal Government for the innovations introduced in repositioning the power sector such as increase in tariff to strengthen the energy sector, ongoing metering processes resolving issues of stranded power.
“We have repositioned the Ughelli Power Plant towards contributing significantly to the government’s plan to generate 10,000 megawatts before the end of next year. It is our plan that we will contribute significantly to the energy pool,” Fadeyibi said.
He reiterated the commitment of the Transcorp Power Limited to increasing the capacity of its power plant in the short term while urging Nigerians to support ongoing reforms in the power sector to ensure stable and efficient power supply.
-
Shareholders approve Transcorp’s 1.94b bonus shares
Shareholders of Transnational Corporation of Nigeria (Transcorp) Plc at approved the distribution of a total of 1.936 billion ordinary shares as bonus shares for the 2015 business years.
At the annual general meeting in Calabar, Cross River State, they commended the conglomerate for what they described as resilient performance in 2015 in spite of the difficult operating environment. The bonus shares were distributed on the basis of one bonus share for every 20 ordinary shares of 50 kobo each held by each shareholder.
Key extracts of the audited report and accounts showed that turnover stood at N40.75 billion in 2015 as against N41.34 billion in 2014. Gross profit dropped from N27.63 billion to N24.33 billion. Profit before tax declined from N7.73 billion to N3.32 billion while profit after tax slumped to N1.44 billion in 2015 as against N3.30 billion in 2014.
Chairman, Transnational Corporation of Nigeria (Transcorp) Plc, Mr. Tony Elumelu, said the company remained steadfast in her efforts to consolidate on the significant achievements recorded to date and will continue to explore opportunities that will lead to the creation of significant value for all stakeholders in the coming years.
In his remarks, president, Transnational Corporation of Nigeria (Transcorp) Plc, Mr. Emmanuel Nnorom, said the company made good progress on delivering on its strategy in 2015 as the group continued to improve operational and cost effectiveness as well as explore opportunities to expand its product offering.
“The group continues to benefit from our ongoing investment in all our subsidiaries and new business lines, which enhance Transcorp Plc’s offering and position us for further growth. Our long-term value creation for our shareholders is our target which will come from the diversification plans, which includes the construction of new hotels in Lagos and Port Harcourt, ongoing installation of new turbines at Transcorp Power Plant, all which will result to an increased capacity after completion. The future of our company is very bright, considering the strategic path being undertaken by the board,” Nnorom said.
-
Transcorp records N7.2b pre-tax profit in Q3
Transnational Corporation of Nigeria Plc (Transcorp) witnessed a top-down decline in performance in the third quarter as the group struggled with decline in its hospitality and tourism business.
Key extracts of the nine-month report for the period, which ended September 30, 2015, showed that group turnover dropped marginally to N30.43 billion in 2015 as against N31.40 billion recorded in comparable period of 2014. Gross profit also dropped from N21.12 billion to N18.18 billion. Operating profit declined to N11.04 billion as against N12.36 billion.
Profit before tax slipped from N9.71 billion to N7.19 billion while profit after tax dropped from N8.26 billion in third quarter 2014 to N5.88 billion in third quarter 2015. Group total assets, however, rose by seven per cent to N182.98 billion by September 2015 as against N170.76 billion recorded at the beginning of this year.
Chief executive officer, Transnational Corporation of Nigeria (Transcorp) Plc, Mr. Emmanuel Nnorom, said the performance of the conglomerate in the past nine months reflected the stability that has been injected into the group’s corporate strategy since 2011, particularly in light of the challenging business environment.
According to him, the power business has remained a key part of the group’s business contributing 65 per cent of revenue and the diversification of the business lines has provided stability.
“We expect significant improvement in the power sector in the coming weeks, as this accounts for a significant part of our turnover,” Nnorom said.
Group chief financial officer, Transnational Corporation of Nigeria (Transcorp) Plc, Ibikunle Oriola said the group’s agribusiness contribution has increased by 1220.5 per cent, with revenue growth of 1179 per cent driven by orders received for sale of orange juice concentrate.
“We have maintained steady top line numbers in our power and hospitality business, as our Agribusiness continues on a strong growth trajectory,” Oriola said.
He noted that revenue declined slightly by nine per cent in the hotel business as average daily rate grew to offset the impact of slightly declining occupancy rates caused by lower visitors’ traffic in Abuja adding that the group expects a stronger finish in the fourth quarter of 2015 due to a number of announced events and expected uptick in government activity.
Transcorp, which is owned by more than 300,000 shareholders, holds a diversified portfolio comprising strategic investments in the power, hospitality, agribusiness and oil and gas sectors. The conglomerate’s notable businesses include Transcorp Hilton Hotel, Abuja; Transcorp Hotels Calabar; Ughelli Power Plc, Teragro Commodities Limited, operator of Teragro Benfruit plant and Transcorp Energy Limited.
Transcorp recorded a turnover of N41.3 billion for the year ended December 31, 2014, indicating an increase of 120 per cent over N18.8 billion recorded in 2013. Group gross profit also rose by 92 per cent to N27.6 billion as against N14.4 billion in 2013.Group operating profit rose by 33 per cent to N13.6 billion. However, profit before tax declined by 14 per cent to N7.7 billion in 2014 from N9.0 billion in 2013. But total assets for the group grew by 14 per cent from N149.6 billion in 2013 to N170.8 billion in 2014. It declared a dividend per share of 6.0 kobo.
The Nigerian Stock Exchange (NSE) named Transcorp as the most compliant quoted company in 2014. According to the NSE, the most complaint listed firm award is given to the company that demonstrates the highest degree of compliance with the rules and regulations regarding disclosure obligations of listed companies to the Exchange in a particular year. Such a company is also expected to have demonstrated its recognition for the importance of corporate governance.
-
Transcorp, NGO to build IDP camp
Assisting Caring Empowering (ACE) Charity in collaboration with the Transcorp Hilton is set to build a temporary camp for displaced people in Abuja.
The camp which will have all modern facilities will be situated in Kabusa and accommodate 250 internally displaced families.
It will be managed by the charity organisation.
Founder of ACE Charity Kiki James explained that the camp will be made out of old containers and surrounded by a fence.
“We want to set up a proper Internally Displaced Persons (IDP) camp like that of Syria, in Kabusa. Hopefully it should be ready before the year runs out; our donor agencies are already sending the containers. Transcorp Hilton does a lot in terms of providing most of the things we need. The camp is going to be equipped with a skills acquisition centre, school, clinic and warehouses to keep the relief materials donated by our donor agencies,” she said.
Public Relations Manager Transcorp Hilton Abuja, Mr Shola Adeyemo explained the ACE charity partnership is the longest that they have had with any charity organisation and this is because of the honesty that they saw in them.
He said that Transcorp will assist ACE in maintaining the camp by helping in hygiene management and staff.
-
Transcorp on course for greater returns, says CEO
Transnational Corporation of Nigeria (Transcorp) Plc yesterday highlighted key developments across its business segments with an assurance that the conglomerate is on course for sustained growth and greater returns to investors.
Chief executive officer, Transnational Corporation of Nigeria (Transcorp) Plc, Mr. Emmanuel Nnorom, during a visit to the Nigerian Stock Exchange (NSE) yesterday in Lagos, said the conglomerate has continued to witness exciting developments across its business segments.
He said the conglomerate has consolidated its power, agribusiness and hotel and tourism businesses with strategic business partnerships and contracts that should enhance performance in the period ahead.
Transcorp, which is owned by more than 300,000 shareholders, holds a diversified portfolio comprising strategic investments in the power, hospitality, agribusiness and oil and gas sectors. The conglomerate’s notable businesses include Transcorp Hilton Hotel, Abuja; Transcorp Hotels Calabar; Ughelli Power Plc, Teragro Commodities Limited, operator of Teragro Benfruit plant and Transcorp Energy Limited.
Nnorom said The Coca-Cola Company, which is launching a new line of fruit juice made from concentrate, has announced Transcorp as the sole local-concentrate sourcing partner for the line.
Teragro Commodities Limited processes orange, mango and pineapple concentrates for industrial markets at its processing plant in Benue State. The 26,500 metric tonnes capacity Benfruit Plant is the first and only Nigerian-owned and operated juice-concentrate processor of its kind. It first began producing concentrate for Coca-Cola in 2014.
“The partnership reflects Teragro’s ability to deliver a product that meets international quality standards. The company has its ISO 9001 and FSSC22000 and has proven it can compete with concentrates imported from countries such as the United States, Spain and South Africa, among others,” Nnorom said.
He added that Transcorp Hilton Abuja is embarking on a full renovation of its 670 rooms and on- site facilities, the first renovation of its kind for the property since 2003.
According to him, the renovation entails a total overhaul of existing facilities and development of additional facilities. The company plans to refurbish rooms, commission a congress centre, upgrade restaurants and the spa area and use the surrounding territory to commission high-end apartments, offering access to hotel facilities, for wealthy Nigerian individuals.
He pointed out that the Abuja renovation comes alongside other key milestones by the hospitality business including the development of new properties in Lagos this month and Port Harcourt, the addition of a luxury apartment building and the creation of a 5,000 person capacity convention center.
In the power business, Nnorom said the conglomerate has fully achieved its short term post-acquisition operational strategy for the Ughelli power plant as set out in 2013. The strategy was based largely around the recovery of installed capacity at the power plant and included detailed assessment of the turbines on a case-by-case basis to determine the optimal route for return to operations of each of the turbines.
He noted that the development of a sound and executable strategy laid the foundation for the ramping up of generation capacity from 342 megawatts by December 2013 to 610 megawatts by the end of 2014, a 78 per cent increase in available capacity year-over-year and a 300 per cent increase from takeover.
Transcorp recorded a turnover of N41.3 billion for the year ended December 31, 2014, indicating an increase of 120 per cent over N18.8 billion recorded in 2013. Group gross profit also rose by 92 per cent to N27.6 billion as against N14.4 billion in 2013.Group operating profit rose by 33 per cent to N13.6 billion. However, profit before tax declined by 14 per cent to N7.7 billion in 2014 from N9.0 billion in 2013. But total assets for the group grew by 14 per cent from N149.6 billion in 2013 to N170.8 billion in 2014. It declared a dividend per share of 6.0 kobo.
The Nigerian Stock Exchange (NSE) named Transcorp as the most compliant quoted company in 2014. According to the NSE, the most complaint listed firm award is given to the company that demonstrates the highest degree of compliance with the rules and regulations regarding disclosure obligations of listed companies to the Exchange in a particular year. Such a company is also expected to have demonstrated its recognition for the importance of corporate governance.
-
Transcorp/IoD sign MoU on asset swapping
As part of efforts to ensure comparative advantage and promote growth, Transcorp Hilton Hotel Plc and the Institute of Directors of Nigeria have reached an asset swapping agreement.
In an agreement signed by the directors of the organisations recently in Lagos, the two outfits are going to exchange their landed properties in Ikoyi, Lagos in order to suit their needs.
While the Institute would give its parcel of land at 53 Glover Road where its office is presently located to Transcorp, the hospitality company would in return offer its land at No 1Rumens Road, both in Ikoyi, Lagos to the Institute.
The IOD’s Director-General, Victor Banjo, said the idea ensures that the two organisations operate in a convenient and highly accessible environment.
He said the idea is bound to strengthen the operation of the institutions, as well as helping in providing additional services for the growth of the economy.
Banjo, while speaking at the IoD’s Annual General Meeting in Lagos, said efforts are been made to reposition his organisation, using all available resources at its disposal.
He said:” Transcorp has agreed to give its parcel of land measuring 2,800 square metres to IoD, while IoD in return would give its land measuring 2,040 square metres to Transcorp.
In addition, Transcorp has paid a sum of N300milion to the Institute in line with the huge premium placed on its land.
“Two separate firms were hired to value the IoD’s property and the outcome of the exercise was that the property located at Glover Road attracts huge value.”
He said Transcorp is planning to build a hotel on the land, adding the construction of the permanent site of the institute would start on the land soon.
-
Our plan is on course, says Transcorp
Transnational Corporation of Nigeria (Transcorp) Plc has assured that the withdrawal of SacOil Holdings Limited from their joint oil prospecting venture will not affect the group’s developmental plan for its energy business.
SacOil had indicated to the Johannesburg Stock Exchange (JSE) of South Africa, where it is listed, that it has withdrawn from participation in OPL 281 on April 1, 2015 as part of SacOil’s ongoing portfolio rationalisation. The OPL 281 is an onshore oil block situated in Delta State in Nigeria and within the portfolio of Transcorp’s businesses.
Transcorp had in May, last year signed the Production Sharing Contract (“PSC”) for OPL 281 with the Nigerian National Petroleum Corporation (NNPC) and received full regulatory approvals to commence oil and gas prospecting in OPL 281. Transcorp is the operator and developer under the contract.
President, Transnational Corporation of Nigeria (Transcorp) Plc, Mr. Emmanuel Nnorom, said the SacOil withdrawal would have no impact on the funding and development of the OPL 281.
According to him, OPL 281 is one of the most prolific remaining oil and gas exploration assets in the Niger Delta and the substantial reserves form part of Transcorp’s integrated energy strategy, which combines power generation, downstream refining and petrochemicals.
“Sacoil’s withdrawal has no impact on the funding of the OPL or our development plans,” Nnorom said.
He noted that since the signing of the PSC with NNPC, Transcorp has pursued an aggressive work programme aimed at bringing OPL 281 into oil and gas production by the end of 2017 addig that the group has so far acquired and evaluated some 150 sq km of 3D seismic, with its first well planned for drilling by the end of this year.
Transcorp recorded a turnover of N41.3 billion for the year ended December 31, 2014, indicating an increase of 120 per cent over N18.8 billion recorded in 2013. Group gross profit also rose by 92 per cent to N27.6 billion as against N14.4 billion in 2013.Group operating profit rose by 33 per cent to N13.6 billion. However, profit before tax declined by 14 per cent to N7.7 billion in 2014 from N9.0 billion in 2013. But total assets for the group grew by 14 per cent from N149.6 billion in 2013 to N170.8 billion in 2014. It has declared a dividend per share of six kobo.
Nnorom said the group expects better performance across all its businesses in the current business year.
According to him, the group’s new hotels development in Lagos and Port Harcourt are progressing well and its Agribusiness division has commenced delivery of juice concentrates to international beverage manufacturers in Nigeria.
“With the signing of our Production Sharing Contract (PSC) by the Nigerian National Petroleum Corporation (NNPC), our oil and gas business is on course for the drilling of its first well this year,” Nnorom said.
-
Analysts pick UBA, Transcorp, Oando, 16 others for high returns
Investors seeking high-return stocks should consider United Bank for Africa (UBA), Transnational Corporation of Nigeria (Transcorp), Oando Plc, Cadbury Nigeria and 16 other stocks with potential to deliver double-digit capital appreciation.
Analysts at BGL Plc said the downtrend in 2014 has opened attractive opportunities in the Nigerian stock market noting that Nigerian equities are currently trading at attractive compare to regional peer and other emerging markets.
According to analysts, while Nigeria’s market price-earnings and price-to-book ratios compare favourably with other emerging markets like Brazil, Russia, India and China (BRIC) and its regional peer South Africa, price earnings ratio of most sectors on the Nigerian Stock Exchange (NSE) are also lower than those of its peers; indicating significant buy opportunities.
Analysts at BGL outlined that banking, consumer goods, conglomerates, health care and building materials sectors present very attractive valuation at the moment.
A list of stocks recommended by the analysts showed that Transcorp has the highest upside potential with a possible return of 140.8 per cent. Analysts said Transcorp’s share price, which opened yesterday at N3.78 per share, could rise to N8.26 per share. They noted that UBA’s share price, which opened yesterday at N4.94 per share, to rise as high as N10.51 per share. Oando has an upside potential of about 93 per cent with a possible target price of N37.95. Cadbury Nigeria is estimated to have possible upside potential of about 69 per cent with a target price of N64.81.
Other stocks with strong return outlook included FBN Holdings, 49.7 per cent; Access Bank, 48.3 per cent; Diamond Bank, 51.7 per cent; FCMB Group, 38.3 per cent; Fidelity Bank, 56.2 per cent; Skye Bank, 62.7 per cent; Dangote Cement, 48 per cent; Lafarge Africa, 64.1 per cent; Nestle Nigeria, 40.3 per cent; PZ Cussons Nigeria, 76.8 per cent; Dangote Sugar Refinery, 71.9 per cent; Honeywell Flour Mills, 77.9 per cent and UAC of Nigeria, with potential return of 64 per cent.
Others included Zenith Bank, with 19.9 per cent; Nigerian Breweries, 19.2 per cent, Total Nigeria, 42.8 per cent and Flour Mills of Nigeria, with potential capital appreciation of about 22.3 per cent.
Analysts noted that the uncertainty surrounding the financial system is clearing out as the major reforms in the banking sector have been completed and the need to resume financial intermediation by banks has become glaring.
According to analysts, the uncertainty in the banking sector led to cautious approach to investing activities; hence the below market performance of the sector.
“However, the expected increase in liquidity from election spending may temper the effect of the tight monetary environment for the banks and boost their investing activities and profitability. It may also lead to the narrowing of yields on fixed income instruments to the benefit of the equity market. The channelling of liquidity to productive sector would help the market while stronger earnings from increased financial intermediation by banks would also boost investors’ sentiment for banking stocks,” the analysts’ report stated.
BGL noted that due to identified infrastructure gaps in terms of housing, transportation and power, there would be more focus on building and construction going forward, which would impact positively on building and construction stocks.
According to analysts, since the provision of the infrastructure needs is largely to be private sector driven, there would be better efficiency and transparency in the handling of the projects with positive implication for the capital market.
Analysts pointed out that the merger between Lafarge Africa and Ashaka Cement Plc in order to achieve cost reductions through scale and removal of duplicated duties has positive potential effect on the sector while the newly launched Mortgage Refinance Company (MRC) is expected to boost housing development over time; leading to increased demand for building materials.
“Consumer goods stocks are defensive stocks. The capacity to generate cashflow all year round portends huge value for these companies. In addition the ban on the importation of some items and the increase in tariff on some will create a favourable competitive environment for the players in the sector. The ban on importation of refined cube sugar is expected to generate increased business and volume sugar manufacturers; hence our optimism on their stock performance. The return to profitability of some consumer goods companies after years of negative performance signal that they have started benefitting from the restructuring embarked upon while the consistent positive performance of the industry bellwethers offers an attraction to the sector’s stocks,” the report stated.
Analysts pointed out that although the unwieldy nature of conglomerate companies usually makes them difficult to analyse and understand, several of them are known to hide inherent values.
They noted that in addition to risk reduction through diversification, some of the conglomerates have invested in highly profitable and cash generating business with strong upside potential, pointing out that conglomerate companies with investment in defensive sectors herald very attractive returns for investors.
“We expect that the conclusion of the Petroleum Industry Bill to unleash significant investment in the sector, particularly unlocking value for the downstream petroleum sector as well as the upstream sector. The increased foray of indigenous oil and gas companies into the upstream and midstream oil and gas sectors and the expansion into power generation and distribution offer significant upside for the stocks of quoted oil and gas companies in Nigeria,” the analysts’ report stated.
According to analysts, companies with operations in the upstream, mid-stream and downstream sectors like Oando Plc portends great inherent value especially with the purchase of the assets of Conoco Phillips Nigeria Limited. Most of the international petroleum marketing companies have also been consistent in their performance with attractive returns to investors.