Transcorp Hotels: Strong Operational Efficiency, Cost Control, Suitable For Long-Term Investors

TRANSCORP HOTELS PLC (TRANSCOHOT)

Quarter Under Preview: 9-Months

Current Share Price: N174.9

Price At Released: N164.60

Latest Final Dividend: N0.64

Latest Interim Dividend: N0.10

Estimated Beta Value: 0.99x

Estimated Intrinsic Value: N24.90

Analyst: Jeariogbe Tunde Segun

The Company

Transcorp Hotels Plc is a Nigeria-based hospitality company. It is principally engaged in hospitality activities such as rendering of hotel services by providing accommodation, cuisines, fully equipped meeting rooms, and leisure facilities for business travellers and tourists from across the world. Its brands include Transcorp Hilton Abuja, and Aura by Transcorp Hotels.

The Transcorp Hilton Abuja is a five-star hotel with approximately 667 rooms, which includes rooms and suites, bars, and restaurants. It has approximately eight restaurants and bars, including the 24-hour Piano Lounge, Capital Bar, and the Fulani Pool Bar. It also provides meetings and events, exercise, and fitness services. Its Aura by Transcorp Hotels includes apartments and hotels. The company’s subsidiaries include Transcorp Hotels Port Harcourt Limited, Aura by Transcorp Hotels Limited, and Transcorp Hotels Ikoyi Limited.

The Financials

At the end of the first three quarters of 2025, the management of Transcorp Hotels reported a growth in Turnover Value to the tune of N72.313 billion from N48.486 billion in the corresponding period of last year. Cost of Sales equally increased by 21.89% to N17.255 billion from N14.156 billion. Operating Profit is now estimated at N24.685 billion compared to N18.633 billion in the similar period of 2024. In the same trend, Operating Expenses grew by 49.45% to stand at N30.870 billion against N20.656 billion. Finance Cost fell by 4.31% to N2.801 billion. Profit before Tax is currently estimated at N22.404 billion, versus N16.439 billion in the comparable period. Thus, after considering tax expenses, the Net Profit for the year stood at N14.824 billion, higher than the N10.239 billion reported for first nine months of 2024.

Current Asset of Transcorp Hotels at the end of the period is valued at N26.026 billion, versus N30.049 billion, a downward adjustment for the comparable period. Meanwhile Non-Current Assets improved by 12.49% to N128.225 billion. Total Assets is therefore estimated at N154.251 billion as against N144.040 billion in 2024 third quarter. Current Liabilities was valued at N39.650 billion, while Non-Current Liabilities valuation stood at N26.376 billion. Consequently, Total Liabilities is valued at N66.026 billion versus N68.026 billion in the comparable period of 2024. On this strength, Net Assets is estimated at N88.225 billion as against N76.012 billion in 2024 nine months business session. Kindly see the above table for details.

Financial Ratios

The financial ratios of Transcorp Hotels Plc shows improved financial stability and moderate risk exposure. Below are the details of ratios observed and their respective implications:

Debt Ratio dropped from 47.23% to 42.80%, indicating an improved control of leverage and reduced dependence on borrowed funds. Debt-to-Equity Ratio improved from 89.49% to N74.84%, showing stronger equity backing for liabilities, a good sign for long-term investors. Equity Ratio rose from 52.77% to 57.20%, confirming growing shareholders value and financial resilience. Also, Beta (0.99) suggests the stock moves closely with the overall market, it offers balanced risk and return potential.

In summary here, Transcorp Hotels Plc appears financially stronger and less leveraged, making it suitable for moderate to long-term investors seeking steady capital appreciation with controlled risk exposure.

Profitability Ratios

The company shows solid profitability momentum, even with a slight dip in EBITDA, just as it is becoming more cost-efficient, profitable, and consequently, delivering higher returns to equity holders, besides growth in total assets.

On the strength of these ratios, we can deduce that: profit margins and returns are improving steadily, the company is efficiently managing costs and leveraging assets. The Return on Equity above 15% signals strong management performance and sustainability profitability.

In summary, Transcorp Hotel’s profitability ratios reflect healthy business fundamentals and enhanced returns, making it attractive for growth-oriented investors aiming for medium to long-term capital gains, with moderate risk exposure.

Efficiency Ratios

First, we observed stable Operating Expenses, meaning management has maintained strong cost discipline even as operations expands. Also the result shows improved asset turnover, which reflects better deployment of assets to drive sales, this is a mark of operational strength and productivity. In our opinion, these put together indicate strong internal efficiency, essential for sustainable profitability.

Summarily, Transcorp Hotels Plc demonstrates strong operational efficiency and cost control, positioning it as a well-managed growth stock with improving earnings capacity.

Investment Ratios

The High PE-Ratio of 113.73x suggests the market has priced in strong future growth, or that the stock is overvalued relative to current earnings. Earnings growth of EPS over 45 is healthy, but not enough to justify such a high P/E on its own. This means that investors expect significant expansion or revaluation ahead.

The Low earnings yield of 0.88% shows that short-term return from earnings is minimal, this is typical of growth stocks with long-term potentials. The rising book value reinforces improving shareholders’ equity and business asset value.

Summarily, Transcorp Hotels Plc shows strong growth in earnings and equity, but the very high P/E ratio and low yield make it suitable only for long-term investors with a growth-oriented objective.

Best Investment Objective Approach

On the strength of all the financial ratios observed so far, we are of the opinion that the best investment approach for Transcorp Hotels Plc is a long-term capital growth, ideal for growth-oriented investors seeking capital appreciation rather than immediate income. Investors who can tolerate short term price volatility, the plan should be to hold for 2-5 years or more.

Please understand that based on our estimated intrinsic value for each unit of Transcorp Hotels shares of approximately N25 per share, compared with its market price, we believe that it is currently fundamentally overvalued, suitable only for Long-Term growth investors, expecting strong future expansion rather than near-term returns.