How does Transcorp work out share valuations?

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By: Olufemi AWOYEMI, FCA
Lagos, Nigeria
January 2007
Transcorp is a difficult company to analyse and this is so because there is no precedent (not exactly so but then what is exactly similar in decisions clouded with controversies) to benchmark the concept with locally.
For most analysts, it is better to sit on the fence and let the investors give their instructions.
For the stockbrokers marketing the offer, it has simply been a case of see what happened from N1 to N6 and now N7.50. Do you know what it will be in the next few months and years? Are you aware that the oil block has not been factored into it?
And for the media, it is a straight forward ‘slam dunk’ from the PR firms who send out press releases that Transcorp is a ‘gift’ at N7.50.
No one, absolutely not one person has given a clear insight into how these figures were arrived at and what it all means. Maybe one person, the Rev. Olu Odejimi, the Doyen of the Stock Exchange who gave the most intelligent and rationale explanation for his decision to buy and sell the shares.
Not much is known about the company or its services except the service experience gained while lodging at Transcorp Hilton and a visit to their head offices in Lagos. The website offers controlled information and the other source of information is the newspapers, which frankly has been more negative than informative; creating a siege perception of sorts.
That does not mean that it would not do well, but it has a strong head wind ahead of it.
Chukwumah Biosah, President of CEBABL Audit Group, based in Los Angeles and our trusted analyst replied at the onset to the request to do a report on Transcorp:
“To write any analysis on the company, we will need internal information from Transcorp regarding -
1)    Management structure (i.e. calibre of management);
2)    Competition - (MTN, Glo, etc);
3)    Performance of current business (i.e., Hilton - Abuja, Energy, etc);
4)    Review the financial of the competition and project Transcorp future revenue/performance based on MTN’s & Glo’s current financials;
5)    Review other assets of Transcorp that would give it an edge over the competition; and
6)    Operational plans and strategies in place to introduce their cellular services
Additionally, I believe Transcorp already has 18 billion shares outstanding, and upon the completion of the IPO they will have more shares on float. We would have to prove to investors that they can pay dividends without using borrowed funds.”
He added, “In light of the time it would take to complete this type of analysis, it can only be done at a great cost financial and manpower hours to the company”
To write about Transcorp therefore, it was instructive to get closer to the players and to take them on, raising issues ranging from the office canteen gossip to more fundamental and financial implication issues.
We have thus invested time, money and resources to get this done for posterity sake and to be seen to have played our role in the Change & Transformation goals driving the creation of Proshare.
Even at that, the non availability of access and time to independently verify the information so obtained may create a challenge to reputations and could end up doing the firm a disservice. But it is a task that must be done and that is what we sought out to do when we took on Transcorp in London, during their Investment road show.
Jide Iyaniwura, CEO of NigerianAffairs.Com and Funto Akinkugbe of made it possible for us to have an all-access clearance to investors, fund managers, and the larger Diaspora group.
The meeting was an event best forgotten. It was a non-starter and a bad advertisement for what quoted firms in the country had to offer.
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