TRANSCORP | Transnational Corporation Of Nigeria Company Update : Business conglomerate poised for a stellar year

    In this report, we adjusted our revenue and earnings forecast upwards to reflect increased optimism in both the power and hospitality businesses and capture the potential impact of the commencement of the company's oil and gas business on valuation. For the former, the likely increases in available capacity and foreign earnings from the exportation of power to the West African power pool amidst an even weaker Naira support our optimism. Increases in the average daily rate (ADR) for the hotel business (+38.0% YoY) would also help with revenue accretion for the hotel business. Similarly, aided by valuation by parts, we incorporate potential earnings accretion from the commencement of the oil and gas business, which we valued using NAV. Our parts valuation resulted in a target price of N7.75 and a BUY recommendation on the stock

    The company's oil and gas investment suggests material upside potential to medium-term earnings. Specifically, initial assessments reveal that the company's oil & gas assets include 77 million barrels of crude oil and 1.0 trillion standard cubic feet in gas reserves and engagements with authorities are currently ongoing to convert its OPL to an OML. According to management, the company remains poised to achieve oil production in 2025, while gas production will commence two years after. In addition to its likely direct earnings accretive impact, the segment has the potential to significantly improve the company's prospects by ending erratic gas supply to its turbines and further supplying other market players in the Nigerian gas market. We have assumed that production from the asset will rise from 45,360 barrels of oil equivalents per day (boepd) in 2025 to 108,820 boepd in 2035, with expected average realisable prices set at $82.96 per barrel for crude oil and $4.11/standard cubic feet of gas within the period.


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    CardinalStone is a full service investment banking firm with a vision to build a world class investment banking firm of African origin; operating out of Lagos, Nigeria. The firm was incorporated in April 2008 and began operations in June 2008. CardinalStone is duly registered with the Securities & Exchange Commission in Nigeria to carry on business as an Issuing House, Fund Manager and Broker/Dealer The Firm's activities are carried out across five business units: Asset Management, Investment Banking, Private Equity, Securities Trading and the Business Support Group.
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