Last Update30 Jul 25
Custodian Investment Plc – Strong Interim Dividend, Stock with Strategic Upside
Custodian Investment Plc's declaration of a 25 kobo interim dividend—a 66.7% YoY increase from 2024’s 15 kobo—is a strategic show of resilience amidst economic headwinds and rising operational costs. While the interim yield (0.76%) may appear modest, the underlying fundamentals, valuation gap, and conservative cash management suggest the dividend is not just sustainable, but part of a longer-term value creation plan.
✅ Strengths
- Earnings Resilience: Q2 2025 PAT forecast of ₦21.36 billion and total H1 revenue of ₦102.2 billion signal consistent performance despite macroeconomic pressure.
- Diversified Income Base: Growth in insurance-service revenue (+55%) across life and general segments supports income stability.
- Strong Cash Position: Over ₦26 billion in cash reserves provides flexibility for future payouts and business expansion.
- Undervalued Stock: At ₦33.00/share, Custodian trades at a trailing P/E of just 3.1x, well below the sector average and disconnected from its ₦53 billion FY 2024 PAT.
- Reliable Dividend Track Record: With ₦1.25 paid in FY 2024 and a likely repeat in 2025, shareholders can expect a forward yield of ~3.8%, solid for a conservative risk profile.
- Vertical Integration Advantage: Its model spanning insurance, pensions, real estate, and trusteeship supports diversified and stable cash flows.
⚠️ Weaknesses & Risks
- Margin Pressure: Increasing claims, underwriting costs, and inflation are beginning to compress margins.
- Regulatory Uncertainty: Potential changes in pension/insurance reserve requirements could impact bottom-line profitability.
- Macroeconomic Volatility: FX-linked investments could face devaluation risks in Nigeria’s fragile currency environment.
- Modest Interim Yield: The 25 kobo dividend translates into just 0.76% yield, potentially underwhelming for income-focused investors.
🎯 Recommendation
BUY at ₦33.00/share Target Price (12 months): ₦40.00 Upside Potential: +21% Forward Dividend Yield: ~3.8%
Despite a seemingly modest interim yield, the earnings quality, strong cash reserves, and consistent dividend record suggest Custodian remains a fundamentally strong and undervalued play in Nigeria’s financial sector.
This stock is ideal for long-term investors focused on dividend-growth, capital appreciation, and exposure to a diversified financial services business.
🔑 Key Catalysts to Monitor
- Confirmation of FY 2025 final dividend
- Strong Q3/Q4 earnings surprises
- Regulatory clarity across pension/insurance
- Further institutional accumulation (a bullish signal observed recently)
Custodian Investment Plc demonstrated robust financial performance in H1 2025, reinforcing its status as a leading player in Nigeria’s financial services sector. The company posted strong revenue growth, impressive profitability, and notable asset expansion. While certain risk exposures remain in operational costs and insurance liabilities, the company’s fundamentals, diversified income streams, and consistent shareholder returns make it a moderately strong buy for medium to long-term investors.
Strengths
- Strong Revenue Growth
- Gross revenue rose to ₦124.28bn in H1 2025 (from ₦82.76bn in H1 2024), a 50% year-on-year growth.
- Growth was supported by all core segments: insurance services (+46.6%), sales (+147.6%), interest income (+37.2%), and dividend income (+313.6%).
- Robust Profitability
- Profit before tax grew by 18.4% to ₦30.48bn.
- Net profit increased to ₦26.39bn, with EPS rising to 438 kobo from 377 kobo (a 16% increase).
- Company-level EPS surged 92% from 128 kobo to 246 kobo, reflecting strong investment income.
- Solid Asset Growth
- Total group assets grew by 12% to ₦456.3bn in just six months.
- Financial assets rose to ₦307.1bn, investment properties up 22.6%, and cash & cash equivalents increased by 17.8%.
- Equity attributable to shareholders rose 16% to ₦143.29bn.
- Capital Strength & Retained Earnings
- Retained earnings rose by ₦15.7bn in six months, supporting future dividend potential.
- Strong liquidity position, with cash exceeding ₦51bn.
- Diversified Income Base
- Income is well-diversified across insurance, investment, property, and other financial services.
- Company-only dividend income of ₦14.8bn (from subsidiaries) signals strong returns from investments.
Weaknesses / Risks
- High Insurance Liabilities
- Insurance contract liabilities surged by ₦42.4bn (+21.7%), suggesting increased policyholder claims exposure.
- Net reinsurance expenses rose significantly, impacting gross margins.
- Elevated Operating Expenses
- Group operating expenses jumped 55.3% to ₦92.95bn, mainly due to underwriting and claims.
- Management expenses also increased by 13.7%, which may pressure profit margins if not controlled.
- High Leverage on Liabilities
- Group liabilities stand at ₦301.13bn, representing 66% of total assets.
- Interest-bearing borrowings, though reduced, still expose the firm to finance cost risks in a high-interest environment.
- Valuation and Market Sentiment Risk
- Share price response may lag behind the company’s intrinsic value growth due to broader capital market sentiment and low liquidity on the Nigerian Exchange.
Custodian Investment Plc presents a strong case for medium to long-term investment, based on its:
- Consistent earnings performance,
- Strong asset base,
- Healthy liquidity and dividend potential,
- Diversified income sources.
However, investors should monitor:
- The company’s ability to manage rising expenses,
- Insurance liability risks,
- Impact of macroeconomic instability on investment portfolios and reinsurance arrangements.
How well do narratives help inform your perspective?
Disclaimer
The user WaneInvestmentHouse holds no position in NGSE:CUSTODIAN. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.