Company: Transnational Corporation of Nigeria Plc
Current Market Price at Earnings Release: N1.26
Intrinsic Value: N3.23
Latest Cash Dividend: N0.02
By: Jeariogbe Tunde Segun (Equity Analyst)
Key Financial Tickers:
• This report considers the half year financial statistics recently released by the management of Transcorp for the period ended 30th June, 2018.
• The company, Transcrop, has controlling interest in 14 other companies from where it enjoys consistent dividend. They are:
i. Capital Leisure and Hospitality Limited
ii. Transcorp Hotels Plc
iii. Transcorp Hotels Calabar Limited
iv. Transcorp Energy Limited
v. Teragro Commodities Limited
vi. Transcorp Power Limited
vii. Transcorp Staff Share Ownership Trust Company Limited
viii. Transcorp Properties Limited
ix. Transcorp OPL 281 Limited
x. Transcorp Telecomms Limited
xi. Transcorp Trading and Logistic Limited
xii. Transcorp Refining Company Limited
xiii. Transcorp Hotels Ikoyi Limited
xiv. Transcorp Hotels Port Harcourt Limited
• The result is positive as all the income indices improved outstandingly above the corresponding period of 2017
• The reported net finance cost for the period was N5.402 billion as against the N4.988 reported in the corresponding period of 2017
• Administrative Expenses was estimated at N7.617 billion compare to N5.663 billion last year.
• Turnover for the period improved over similar quarter of 2017 by 58.28% at N54.089 billion. Compared to the N34.173 billion reported in the previous half year.
• Operating Profit soared above prior half year by 82.20%, from N9.520 billion to N17.346 billion
• Profit before tax stood at N11.944 billion, 163.53% above the N4.532 billion estimated in 2017
• Thus, Profit for the period achieved through the six-month period was N10.875, same as 161.19% above the N4.163 billion last year
• Total Comprehensive Income stood at N10.971 billion as against N6.219 billion
• Retained Earnings improved by 24.62% as it is currently valued at N35.865 billion as against N28.780 billion
• Total Assets grew by 9.82% to stand at N290.262 billion, up from N264.301 billion achieved in the previous half year financials
• Similarly, Total Liabilities stood above last year’s figure by 7.43% at N184.395 billion
• Following the same trend, Net Asset appreciated to N105.866 billion from N92.661 billion.
• Estimated Debt is same as 118.66% of the shareholders’ equity/Net Assets. This is far above the industry average of 29.33%.
• Meanwhile, estimated current ratio is above unity at 0.92x as against the industrial average of 88.52x. The theoretical implication of this is that the company will not be able to swiftly service its current liabilities as at when due.
• The share price of Transcorp is fully patronized on the floor of the exchange. This can by justified by the estimated 2.24 beta value for the period being analysed.
• Cost of Sales Margin is currently estimated at 54.57% slightly below the 56.48% estimated last year.
• Profit before Tax margin is 22.08%, which is 66.50% above the 12.18% estimated from 2017 half year statistics
• The amount reported as Profit for the period is 20.11% of the Turnover figure.
• Return on Average equity is currently estimated at 10.27% compared to the 4.49% estimated in 2017
• Return achieved on Average Assets is now 3.75% against the previous 1.58%.
• The management of Trascorp achieved Total Assets Turnover of 18.63%, 44.12% above the 12.93% asset turnover achieved in the prior quarter
• Equity Turnover on the other hand was 51.09% as against the 36.88% equity turnover estimated from its statistics last year
• Thus, the equity was effectively multiplied 2.74 times, slightly below the 2.85 times turnover of Q2-2017
• Fixed Asset Turned over was equally fair at 27.65%, as against the 18.69% last year.
• In line with the level of growth achieved in the income statement, and since the share outstanding of Transcorp did not change within the two periods compared in this report, the amount earned per share soared by 161.19% over comparable year
• The 27k Earnings Per Share is a Yield of 21.23% of the current market price of Transcorp as at the time this report was made available to the investing public
• Nevertheless, P/E-Ratio dropped to 1.18x from 3.93x, which shows a reduced investor sentiment for Transcorp, just as on the positive side, it reduced the investments recouping period in the stock
• The estimated Price to Book Value is below unity (1) implying an underpriced status of Transcorp Plc
• Confirming the above further is the estimated Book Value of N2.60 as against the N1.26 investors’ valuation on the floor of the exchange
• In valuing the share price of Transcorp, we adjusted our valuation model to consider the low frequency of dividend payment by Transcorp. We classified it in our growth stocks and therefore anticipate an improvement over the years. We also put into consideration its sensitive sectors of operation in the nation’s economy, bearing in mind various regulations that may either dampen or boost its performance.
• Going by the above we have conservatively valued each unit of Transcorp share at N3.23. Please note that should the current growth status be maintained till the end of 2018, the valuation may be upgraded, depending on the various economic indices at that moment.