Transnational Corporation plc
Modelled after the “chaebols”
Transnational Corporation plc (Transcorp) was incorporated on November 16, 2004, as a private sector response to the economic reform initiative of then President Olusegun Obasanjo’s regime. At the beginning, Transcorp was modelled after the South Korean “Chaebols.” These Chaebols were powerful global multinationals owning numerous international enterprises. Listed on the NSE in 2006, the company has a shareholder base of about 300,000 investors, and operates as a diversified investment company by investing in companies focused in the hospitality, agribusiness and energy sectors.
Ownership change gives new vision and direction
For a long time, Transcorp was on the low end of the rating scale of investors for a mix of factors, which led to more investors betting against the company’s shares. However, with the acquisition of a majority stake in the company by Tony Elumelu-owned Heirs Holdings, the perception of the company among investors has changed for the better.
Strong performance in 2014
Driven by strong earnings from new businesses, the company is expected to record impressive growth in profitability in 2014. The company’s record revenue from the recently acquired Transcorp Ughelli Power Plant Limited (TUPL) will be a significant contributor to the performance. With additional total revenue of N6.40 billion to the Group revenue in Q1 2014, representing 60.83 percent of total revenue during the quarter, the Group’s investment in power sector has arguably paid off.
Buy recommendation
Using the Discounted Cashflow (DCF) valuation method with a calculated weighted average cost of capital (WACC) of 11.05 percent and a long-term sustainable growth rate of 7.42 percent, we arrive at an intrinsic value of N8.26 for each share of Transnational Corporation of Nigeria plc, implying a potential upside of 58.54 percent over the next 12 months. We therefore place a Buy recommendation on Transcorp plc.
WAPIC Insurance plc
Established in 1958
WAPIC Insurance plc (WAPIC) was established in 1958. The company operates a general insurance business in Nigeria, and through a wholly owned subsidiary, WAPIC Insurance (Ghana) Limited in Ghana. It also operates life insurance business in Nigeria through another wholly owned subsidiary, WAPIC Life Assurance Limited. The company is among the top four listed insurance companies in Nigeria.
Restructured to compete more favourably
Following the take over of the company by Access Bank plc, turnaround activities began in WAPIC with focus on the institution of strong corporate governance and compliance, improved underwriting capacity, human capital development and customer acquisition and retention. The overriding objective of the company is to dominate the insurance industry in Nigeria and become the most respected insurance company in Africa.
The company articulated a very strong strategy of customer acquisition and retention. Primary to customer acquisition is an efficient sales team and organisational structure while excellent operational service and prompt claim settlement will aid customer retention.
Strong corporate governance as a competitive edge
In order to create a solid foundation for sustainable growth and to be ready for risk-based supervision, the company instituted a new corporate governance policy with the creation of board committees in compliance with the code of corporate governance policy of the industry regulator, the National Insurance Commission (NAICOM). The company also complied fully with the regulatory requirements of the Nigerian Stock Exchange (NSE) and the Securities and Exchange Commission (SEC).
BUY recommendation
Using the price-to-book value (P/Bv) multiples, WAPIC appears to be undervalued. WAPIC has a price-to-book value of 0.73, while it peers’ ranges between 0.55 and 1.71. Therefore, using peers’ weighted average P/Bv ratio 1.20, we arrive at a fair value of N1.27 for WAPIC share. Hence, we recommend a Buy.
