Geregu Power Rises to N1.174 Trillion from N250 Billion

Geregu Power Plc is one of the top stocks that has continued to rise in the stock market, gaining a whooping sum of N924 billion over 15 months ahead of the company’s earnings release. The company’s market valuation increased to N1.174 trillion from N250 billion in Oct 2022.

Analysts observed earnings growth recorded in the third quarter of 2023 propelled a surge in the indigenous power generating company’s shares movement. Investors’ sentiment about its future earnings seems strong, translating to increasing shares buying on the Nigerian Exchange.

The Exchange is supporting the rerating as the local bourse continues to hit new highs each day in stark contrast to Nigeria’s cracked economic condition, and uncertain directions. The share price of Geregu Power Plc increased by about 18% over the last five days of the trading session in the stock market on an expectation of higher earnings declaration for the financial year 2023.

On Friday, the market priced the stock at N469.7 over sustained positive sentiment in the local exchange. It was valued at N250 billion in October 2022 when it was listed. As of June 2023 Geregu Plc’s free float on the exchange was 12.46%, management declared in its unaudited financial statement.

Amperion Power Distribution Company Limited owned more than 82% at the time with an additional 5% credited to another investor Libreville Power Limited. In February 2023, Geregu Power Plc told the Exchange and the investing public of the purchase of 5% of its shares by the Fund for Export Development in Africa (FEDA). 

The purchase of the shares was concluded today the 21st of February 2023 with the purchase agreed in on the 21st of December 2022. Its third quarter 2023 unaudited financial statement didn’t reveal its shareholding position as Geregu Power Chair Femi Otedola has ramped up more shares.

9M-2023 Earnings Scorecard

The company posted more than N11.359 billion in profit at the end of nine months of the financial year 2023, a 13.26% growth from N10.029 billion the company delivered in the comparable period in 2022.

Detail from the company’s regulatory filing showed that revenue surged N55.747 billion, a significant increase of more than 42% year-on-year from N39.03 billion in the comparable period in 2022.

Following an increase in activity levels, Geregu Power Plc also recorded a surge in costs of sales amidst pressures on price levels in the economy. Details from its financials showed that costs of sales rose by 33.91%, from N20.057 billion to N26.86 billion.

The company’s performance was reduced by the absence of other income lines, exactly a year after it reported N11.444 billion at the end of nine months of operations in 2022. Dragging the company’s performance, impairment in financial assets widened to NN3.127 billion at the end of the nine months in 2023, versus N162 million reported a year ago.

The power company’s administrative overheard spending also surged more than double in the period, from N2.766 billion in 9 months of the financial year 2022 to N5.871 billion 12 months after.

Though operating profit remains relatively healthy when compared with the prior year’s result, negative cost movement impacted the company’s efforts to ramp up revenue. Naira Lost 11% as Banks Issue New Update on FX Spending

At the end of the nine months, Geregu Power reported N19.887 billion, more than 24% above N16.028 billion reported a year ago. Net finance surged moderately despite a much higher borrowing rate.

The company reduced the impacts of higher costs of borrowings with interest income on its naira assets in terms of finance income. Its result showed that finance costs surged to N8.849 billion from N4.225 billion in 9 months of 2022.

However, the company also ramped up income from its short-term naira assets. Geregu Power reported that its finance income rose to N6.088 billion in 12 months from N2.155 billion in the equivalent period in 2022.

Its profit before tax obligation surged from N13.957 billion at the end of 9 months of financial year 2022 to N17.486 billion exactly 12 months after as the company strives to boost its investors’ wealth

Q1-2024 Earnings Expectation

Geregu released its earnings expectation for the first quarter of 2024 late last year. In a statement submitted to the Nigerian Exchange signed by its chief executive Akin Akinfemiwa and Chief Finance Officer Ganiyu Adisa, Geregu Plc expects to declare N5.56 billion as profit in the first quarter of 2024.

This comes in contrast to its cash flow from operation which is expected to settle at N590 million in the period. The company said it expects operating cash flow before working capital changes to settle at N9.79 billion in Q1-2024.

Details from the forecast document showed that the company expects a profit of less than N6 billion (about 18% of turnover) amidst an expectation that revenue would be over N31 billion in the same period.

The company forecasts its revenue to hit N31.242 billion, out of which it expects to offset N16.759 billion as costs of sales. This would leave the power-generating company with N14.482 billion as gross profit. The company’s administrative expense is expected to gulp N5.4 billion.

Net finance cost of about N800 million is expected to stand between the company’s operation profit of about N9.1 billion in the period and its pretax profit of N8.3 billion. Geregu Power estimated about N2.4 billion as tax provision for the period, reducing its profit for the period to N5.56 billion.

Femi Otedola, Chairman, Geregu Plc divested from the oil marketing business to focus on the power generation and distribution business. #Geregu Power Rises to N1.174 Trillion from N250 Billion
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