We initiate coverage on Nigerian Exchange Group Plc (NGXGROUP) with a 12-month Target Price (‘TP’) of N65.38 and a projected market capitalisation of N144.1 billion. Our TP implies a price return of 13.1%, supporting a HOLD recommendation on the stock. Our recommendation reflects expectations of improving return metrics and is underpinned by the following considerations:
- NGXGROUP is a leading provider of integrated market infrastructure in Nigeria, Africa’s fourth-largest economy, which is projected to grow at an average rate of 3.3% over the next five years—compared to 2.1% for South Africa and Angola, and 4.6% for Egypt and Kenya. Given a market capitalisation-to-GDP ratio of just 24.4% domestically, far below South Africa’s 290.5% and the UK’s 175.9%, NGXGROUP appears well-positioned to unlock significant growth potential within Nigeria’s underdeveloped capital market.
- Trading metrics on the exchange reveal that the five-year compound annual growth rates (CAGRs) of total deals stood at 22.0% for equities, 12.8% for bonds, and 72.2% for ETFs. Holding their last five-year CAGRs constant, equity and bond turnovers could also reach N8.4 trillion and N11.2 billion, respectively (approximately $5.5 billion and $7.3 million, based on the official USD/NGN rate as of August 28, 2025), over the next half decade.
- NGXGROUP is proactively working to increase the number of listed companies while enhancing its existing suite of products, including equities, fixed income, ETFs, and derivatives. It is also developing new offerings such as Nigerian Depositary Receipts (NDRs), Single Stock Futures, Digital Assets, and Tokenised Securities to deepen investor engagement and attract a broader range of market participants. These initiatives, alongside a focus on creating attractive options for ESG-conscious investors, leave legroom for some upside.
- NGXGROUP has a well-diversified business profile and has ensured improving returns, with group PAT and EBITDA growing at CAGRs of 52.4% and 117.1%, respectively, in the last four years. This positive earnings track record also justifies its sustained commitment to strategic capital expenditures (mean of c.N486.8 million since 2020) that are geared towards improving diversification and quality of earnings.
- We employed a blended valuation approach incorporating the discounted cash flow and relative valuation (price to book and price to earnings) methodologies to arrive at a comprehensive valuation of NGXGROUP. The discounted cash flow approach mostly captures the company's operational dynamics, which are largely driven by transactional and investment income. On the other hand, the relative valuation method benchmarks NGXGROUP against peer exchanges supported by the law of one price. The blend of both approaches resulted in a projected 12-month total return of 16.6% (3.5% in dividend yield and 13.1% in capital appreciation).
