The day Transcorp came to ‘power” the Nigerian Capital Market

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The ceremonial ringing of the closing bell (a tradition set aside to either welcome visiting dignitaries or mark significant events/accomplishments) had a familiar note for the Board and Management of Transcorp Power Plc on March 4, 2024, as the company took to the podium at the trading floor of the Nigerian Exchange (NGX) to announce the listing by introduction of its shares on the NGX. For Peter Ikenga, the Managing Director/Chief Executive Officer of one of the country’s biggest thermal power plants, the ceremonial bell might have sounded strange. But for Tony Elumelu, the familiar note he attached to the sound of the gong can only be likened to the familiarity that world-class football stars who ended their careers in one club like Steven Gerrard, Paolo Maldini, Francesco Totti, Oliver Khan, and Ryan Giggs have each time they emerge in their home turf for a match.

Accompanied by Emmanuel Nnorom, Chairman, Transcorp Power Plc, Peter Hertog and Risqua Mohammed, Directors of TPP, as well as Owen Omogiafo, President/Group Chief Executive Officer, of the parent company, Transcorp Plc, Elumelu would feel at home standing on the raised platform and looking down at the trading floor. Having brought at least five businesses to the capital market, and having also raised capital that strengthened the United Bank for Africa Plc through several securities instruments offered by the Nigerian Exchange, it was a familiar terrain as far as the market was concerned.

Elumelu was leading Transcorp Power, a subsidiary of Transcorp Group into its first day in the market as a publicly quoted company. If there was excitement about the arrival of Transcorp Power, it was not just because of the arrival of a newbie at the market; on the contrary, it was to a large extent because of the presence of Elumelu, a powerful businessman, whose record of bringing winning brands to the market is well-known.

Before Transcorp Power, the company led by the Founder of the Tony Elumelu Foundation had brought many other businesses to the market. These include the United Bank for Africa Plc, United Capital Plc, Africa Prudential Plc, Afriland Properties Plc and Transcorp Hotels Plc. It was no wonder the Managing Director of the Nigerian Exchange, Alhaji (Dr) Umaru Kwairanga, proclaimed that the listing of Transcorp Power would open up the NGX for greater investment.

Kwairanga invited brokers to ensure the Power portfolio is attractive to investors, whom he also enjoined to benefit from the values being brought to the market.

The values, reading how the market is reacting to the listing of this company, can be felt in the quick uptake of the 40 million shares released as the introductory offer. In keeping with the promise Elumelu made at the Facts behind the listing on democratizing wealth, shareholder of Transcorp Power sold down their holdings, so that more shares would be available for the general public – over 150 million units were traded subsequent to the listing day. What a man!

Power is a new type of securities on the Nigerian bourse. Transcorp Power is the second firm in the power sector to become publicly quoted. With the experiences of the companies in the Heirs Holdings Group, Transcorp Power is set to take advantage of the depth of the Nigerian market to generate the capital it needs to expand operations and meet its revenue target of more than N500 billion it has set for itself in the next seven years.

The numbers indicate the company will likely achieve or even surpass this. Revenue has been on a steady increase since the past five years, rising from N55.9 billion in 2019 to N142.1 billion in 2023. This represents a 158% increase over the period. Similarly, profits (before tax) rose by 469 percent over the same period, rising from N9.26 billion in 2019 to N52.86 billion in 2023.

Those who, like the Chairman of the NGX, displayed excitement at the listing of Transcorp Power are being proven right. As of the close of trading on Friday, March 8, 2024, Transcorp Power’s share value has grown from the N240 traded on the listing day, to more than N352, representing a gain of 47 percent.

These numbers may point to the early interest investors are taking in power sector stocks, but it is also indicative of the value in the entry price of N240, which is attracting investors, given the low entry price and the potential for high yield.

Speaking on the listing, Abdulmumin Ali, a financial analyst based in Abuja said a fair analysis of Transcorp Power’s performance points to a future of impressive outing in the capital market. Transcorp Power, he observed, is quite profitable and will be more profitable in the future.

“For instance, Transcorp Power had their Revenue from contracts with customers grow by 57% over the past year to culminate in a Profit Before Tax of N52.7bn as of the year ended December 31, 2023. This in effect was an 84% growth in profit from N27.6bn as of December 2022.

The expected increase in capacity and revenue is the nectar that is luring investors. The question many are asking is whether the Nigerian capital market is big enough in stature to accommodate the funding demands of capital-intensive projects as power sector firms would be demanding.

But speaking on the issue, Mike Eze, a foremost stockbroker and CEO, Crane Securities Limited was confident that the Nigerian capital market was big and sophisticated enough to absorb any project brought to it.

“Ours is a market, though an emerging market, was rated the best-performing market in the world in 2023 by the International Finance Corporation (IFC). We got favourable ratings from other international agencies as well. The capital market can raise funds to any required capacity. It all depends on the needs of the issuer! This market, the Nigerian Exchange Plc has the capacity and the appetite to take the demands of the power sector and indeed other sectors should they all decide to come at the same time,” he said.

Another operator at the capital Market, Vincent Ugwu, Managing Director/CEO of De-Lords Securities Limited, believes the capital market may eventually become the destination of most of the players in the power sector in Nigeria because of the advantages the market has in raising low-cost capital.

“There is no doubt that the interest that investors are showing in the stocks of Transcorp Power will attract other players. Opportunities abound in the power sector in Nigeria. There are opportunities in the gas value chain, there are opportunities in widening the areas of coverage and there are also opportunities in cross-border selling of power. Discerning players such as Transcorp Power will always come to the capital market and get the sort of growth they dream of,” Mr. Ugwu stated.

People may say it is early days and premature to judge the performance of Transcorp Power, but having gained close to 50 percent after just one week of trading is indicative of a bright future for both the company and the investors smart enough to take early positions.

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