Geregu Power Plc, the only listed power company in Nigeria, released its audited accounts for the year ended December 31st, 2022 showing revenues of N47.6 billion.
Geregu Power Plc became the first company to publish its audited financial statement for the year ending December 2022. PricewaterhouseCoopers is its independent auditor.
Investors reacted positively to the result sending the share price soaring by 10% at the close of trading on Tuesday. The shares have now gained 93% since it was listed last October.
Why are bulls coming for the shares?
Investors, appear to have reacted positively to the results after the company declared it was paying a dividend of N8 per share.
- The company reported a dividend of N20 billion or N8 per share which is an indicative dividend yield of 8% based on its listing price of N100 per share.
- Geregu Power was listed in October 2022, thus when annualized, the return is whopping around 24% for early investors.
- However, assuming an average price of N150 per share (since it was listed) annualized returns should is still an impressive around 16%.
- The current indicative dividend yield based on a closing price of N193 per share is around 4.1%.
- The company also has a healthy cash pile with a cash balance of N51.5 billion up from N3.9 billion reported a year earlier.
Details of the result
The company reported revenues of N47.6 billion compared to N70.9 billion for the same period in 2021.
The company also reported a pre-tax profit of N10.1 billion representing a 50.7% drop in profits year on year. Earnings per share also fell from N8.22 to N4.07 per share.
The company explained that the reason for the drop in revenues (which also affected profits) during the year was due to the challenges in the power sector. During the year, gas shortages resulted in a number of force majures forcing the national grid to collapse frequently.
- “As a result of a nationwide force majeure (FM) declared by Shell Petroleum Development Company Limited on the Trans-Forcados pipeline and its consequent effects on the Forcados oil terminal, gas supplies to the plant by Its primary gas supplier ceased from 17th of July 2022. The maintenance works on the pipelines were however completed at the end of November 2022 and gas supplies and normal operations have since then resumed.” Geregu.
Despite the drop in revenues, the company did report a higher gross profit margin of 48.5% compared to 46.9% same period in 2021.
- This is despite a higher inflationary environment that also saw energy input prices rise. The company also managed to keep operating costs (excluding payroll costs) flat at N4.7 billion nearly the same as in 2021.
- During the year, the company incurred a finance cost of N7.3 billion resulting from its N40 billion bond issuance.
- However, impressive treasury management of the loan helped the company also earn N7.6 billion in finance income leading to a net finance income of N348.1 million.
Optics
Investors appear unfazed by the decline in profits suggesting they may have seen this as a short-term challenge.
- The announcement of an N8 dividend may have also come as a surprise to a dividend-hungry market especially when you consider galloping inflation.
- Geregu Power’s share price gain of 93% in just under 4 months of being listed is also reminiscent of Forte Oil, a company that recorded more than 10x multiple when it was listed.
- Forte Oil was majorly owned by billionaire investor, Femi Otedola before it was sold. He now owns majority shares in Geregu Power Plc.
- The bulls appear to be after this stock.
