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Transcorp Hotels spikes 33% ahead of earnings season

Transcorp Hotels Plc’s market valuation spiked 33% in the stock market as alpha-seeking value hunters raised their equity positions in the company ahead of the second quarter of 2023 earnings season.

The surge was propelled by positive sentiment in the local bourse as value hunters take positions in under-priced, growth stocks across segments. MarketForces Africa reported that the hospitality company said in its audited financial statement for 2022 that it is yet to meet the Nigerian Exchange free float requirement.

Its ownership structure showed that the leading Nigerian hospital company is 76.16% owned by Transnational Corporation Plc. with 76.16%, regulatory filing reviewed by MarketForces Africa Research showed.

Also, the Ministry of Finance Incorporate controls 11% of the group’s shares outstanding. MarketForces Research report showed that both Transcorp Plc and the Ministry of Finance incorporation control 87% of the group’s 10.242 billion outstanding shares.

Other shareholders owned 13% in the same period. The hotel company’s share closed the week at N23.40 in the local bourse on Friday. It had opened printed at N17.60 in the comparable week.

The hospitality company worth jumped to N239.675 billion spread over its 10.242 billion shares outstanding at a unit price of N23.40. The stock has rallied strongly despite the fact that its board of directors failed to declare cash dividend payments to shareholders in 2022.

This came in contrast to 13 kobo dividend declared and paid to shareholders in the financial year 2021.

In the first three months of the year, Transcorp Hotels generated N8.250 billion in revenue, a strong increase of 17.18% when compared with N7.041 billion reported in the comparable period in 2022.

It generated more than N5.467 billion from room service, accounting for 66% of total revenue in the period. In addition, food and beverage sales came in at N2.382 billion, representing about 29% of revenue.

Amidst Nigeria’s headline inflation rate, the hotel company’s sales costs surged to N2.447 billion from N1.915 billion in the comparable period. Still, gross profit came healthy at N5.802 billion, an increase of 13.2% above N5.125 billion reported in the comparable period.

A slump in finance income amidst cash tightening, higher income tax, and rising operating expenses eclipsed top-line performance. In September 2023, the company’s 13% N2 billion overdraft is expected to mature. The large outflow will reduce its cash position and pressure working capital more.

In its unaudited financial statement for the first quarter of 2023, the Hotels said the bank overdraft was secured by a negative pledge on the Company’s assets

However, analysts said the company has a choice to refinance in order to avoid a runoff on its finances. Transcorp Hotels’ profit declined to N461.606 million in the first quarter of 2023, from N853.682 million 12 months earlier, a 45.93% year-on-year decline.

In its financial statement, Transcorp Hotels Plc said as of 31 March 2023, it is not in full compliance with the free float requirement for the Nigerian Exchange Group.

However, a continued effort through good corporate governance practices, and consistent engagements with the market, financial advisors, and stakeholders are being undertaken to ensure that the Company is in compliance, within the agreed timelines, according to detail from its unaudited financial statement.

Following a successful Initial Public Offer (IPO), the Company is yet to meet its free float requirement since it was listed in January 2015 listed on the Nigerian Exchange Group. 

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