TRANSCORP Hotels Plc’s market valuation gained 40% in the stock market as alpha-seeking value hunters raised their equity positions in the company ahead of the second quarter of the financial year 2023 earnings season.
The hospitality giant stock has been making an uptrend consistently as the local bourse sustained an uptrend which has seen the market price of some growth, and value stocks popping significantly. Year to date, the company’s share has gained more than 422%.
The surge in its market valuation was aided by improved sentiment in the stock market rather than earnings or dividend declaration. However, investors are pricing business outlook into naira assets amidst reforms.
On Friday, the company’s market price inched to N32.65 ahead of the second quarter of 2023 earnings releases by companies listed on the Nigerian Exchange.
Shareholders and value hunters are in the buying mood as the local bourse returns cloud inflation rate pressures. 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 N32.65 in the local bourse on Friday. It had opened the week at N23.40 per share.
The hospitality company worth jumped to N334.418 billion spread over its 10.242 billion shares outstanding. The stock has rallied strongly despite its board of directors paid 12 kobo per share to shareholders in 2022 as a dividend.
Transcorp Hotels’ earnings have been declining at an average annual rate of -13.8%, while the Hospitality industry saw earnings declining at 8.7% annually. However, revenues have been growing at an average rate of 13.1% per year.
Transcorp Hotels’ return on equity settled at 3.5%, and it has net margins of 7%. In the first three months of the year, Transcorp Hotels generated N8.250 billion in revenue, a substantial increase of 17.18% when compared with N7.041 billion reported in the comparable period in 2022.
In the first quarter of 2023, its unaudited financial statement showed that Transcorp Hotels’ earnings per share declined to 5 kobo from 88 kobo in the comparable period in 2021. 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, translating to a 45.93% year-on-year performance slowdown.
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.