Last Update25 Jul 25Fair value Increased 20%
WaneInvestmentHouse has decreased revenue growth from 27.6% to 12.0%, decreased future PE multiple from 94.9x to 77.5x, decreased discount rate from 29.0% to 10.0% and decreased shares outstanding growth rate from 0.1% to 0.0%.
Transcorp Hotels Plc continues to deliver robust growth in revenue and profit, bolstered by operating leverage, efficient cost control, and a strong balance sheet. The company recorded a 60% YoY revenue increase in H1 2025 and a 31% surge in net profit, underpinned by post-pandemic demand resurgence, effective expense management, and low gearing. This reflects positively on management execution and operational resilience.
✅ Key Strengths:
1. Strong Revenue Growth
- Revenue grew by 60% YoY from ₦29.72bn (H1 2024) to ₦47.57bn (H1 2025).
- Reflects increased demand for hospitality services, pricing power, and improved occupancy rates.
2. Margin Expansion & Operating Leverage
- Gross profit margin remains high at 76.1%, supported by a relatively low cost-to-sales ratio.
- Operating profit rose to ₦13.75bn, representing a 13% YoY increase, despite higher operating expenses.
3. Profitability
- Profit before tax rose 17% YoY to ₦12.23bn in H1 2025.
- Net profit increased 31% YoY to ₦8.68bn, with EPS rising from 65 kobo to 85 kobo.
4. Efficient Capital Structure
- Borrowings reduced from ₦16.08bn (Dec 2024) to ₦13.32bn (Jun 2025), a 17% decline in debt.
- Interest expenses reduced slightly, improving the interest coverage ratio.
5. Solid Asset Base
- Total assets rose 9% to ₦153.46bn, driven by reinvestment into PPE and working capital.
- Cash & bank balances rose by ₦2.55bn to ₦11.14bn, reflecting strong liquidity.
⚠️ Key Risks / Weaknesses:
1. Rising Operating Expenses
- Operating expenses grew by 72% YoY, outpacing revenue. However, growth is still lower than gross profit growth.
2. Deferred Tax Liability Build-up
- Deferred tax liability increased significantly by over ₦1.9bn to ₦14.32bn, which may result in higher future cash tax outflows.
3. Moderate Decline in Intangibles
- Minor reduction in intangible assets and long-term receivables may indicate amortization or collection timing mismatch.
4. Shareholder Dilution Risk (Deposit for Shares)
- Deposit for shares of ₦2.41bn (unchanged) may eventually dilute existing equity holders, though it could also support capital expansion.
📈 Outlook & Valuation Consideration:
The company has shown a consistent and significant rebound post-COVID and is capturing value from growing hospitality and tourism demand. It maintains strong pricing power, tight cost control, and has reduced reliance on borrowings. With earnings growth, reduced leverage, and cash accumulation, the stock is well-positioned for capital gains and potential dividend payout resumption.
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Disclaimer
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