The initial public offering (IPO)
Transcorp Hotels plc (Transcorp Hotels) is currently in the market to raise N8 billion through an initial public offering (IPO) of 800 million ordinary shares of 50 kobo each at N10 per share. The offering will be followed by a listing of the entire shares of the company on the Nigerian Stock Exchange (NSE).
The Transcorp Hotels IPO, which UBA Capital plc is the lead issuing house while Lead Capital plc and BGL Capital are joint issuing houses, commenced September 25, and is expected to close on October 17, 2014. Transcorp Hotels is the hospitality subsidiary of Transnational Corporation of Nigeria plc (Transcorp).
Facts behind the offer
Recall that during the “Facts behind the Offer” presentation held at the NSE recently in connection with the IPO, the company which has considerable experience in the hospitality industry as the owner of Transcorp Hilton Abuja, one of the biggest and the most profitable hotels in Nigeria, assured investors and analysts as well as other stakeholders in the stock market that it will utilise the proceeds from the IPO to develop two high-end hotels in major commercial centres in Nigeria in order to capitalise on the increasing demand for world-class amenities. This is a major parts of the company’s growth strategy.
A member of the Transcorp conglomerate
Transcorp Hotels plc is a subsidiary of Transnational Corporation of Nigeria plc (Transcorp), a diversified conglomerate with core business interests in the hospitality, agro-business and energy sectors. The conglomerate’s array of prominent assets include an oil bloc (OPL 281); Transcorp Hilton Hotel, Abuja; Transcorp Metropolitan Hotel, Calabar; Teragro Commodities Limited, and a 972MW Ughelli Power Plant. Transcorp owns 88 percent stake in THP, while the Federal Government of Nigeria owns the remaining 12 percent.
Utilisation of offer proceed/attraction
Summary of the offer document shows that about N4.314 billion or 56 percent of the offer proceed will be utilised in Transcorp Hilton Ikoyi project with an estimated completion year of 2017, while about N3.389 billion or 44 percent of the offer proceed will be utilised in Transcorp Hilton Port Harcourt project, also with an estimated completion year of 2017.
Another comment that attracted prospective buyers in the IPO was that Hilton Worldwide will serve as the operator/manager of all the proposed new developments, which will become part of the International Hilton Hotels chain across Nigeria.
Analysts view on the Transcorp Hotels IPO
“With the increasing investment in hotels across Nigeria, competition is expected to become very stiff and cut-throat; however, key success factors would include local industry knowledge and experience, brand loyalty and customer relationship management. Having established themselves as a leading indigenous hotel investor and cooperating with a world-class hotel manager (Hilton), Transcorp Hotels plc would be able to win more customers and retain them, thereby grabbing more market share across the country,” according to research analysts at BGL, in their recent equity note.
On the attraction on investing in Transcorp Hotels plc initial public offering, the research analysts say: “We used several valuation methods to determine the appropriate value for the company, including the discounted cashflow method (DCF) and relative valuation methods with focus on price to earnings (PE) and price to book value (P/Bv) multiples. We also valued Transcorp Hotels plc using the percentage contribution to the Group’s income as a valuation method.”
The analysts say their various valuation methods produced upside price range of N14, adding that “with an upside potential of up to 40 percent to the offer price, Transcorp Hotels plc appears as an attractive investment.”
Other parties to the offer
The lead stockbroker to the offer is BGL Securities Limited, while joint stockbrokers are UBA Securities Limited, Cowry Securities Limited, and Milestone Capital Management Limited. The joint solicitors to the IPO are Ajumogobia & Okeke, and M.E. Esonanjor & Co, while reporting accountant to the offer is Akintola Williams Deloitte. The registrar to the offer is Africa Prudential Registrars plc; the receiving bank to the offer is United Bank for Africa plc; auditors to the company is PricewaterhouseCoopers, while solicitors to the company is Templars.
At the “facts behind the offer,” Valentine Ozigbo, managing director/CEO, Transcorp Hotels plc, said: “The Nigerian hospitality industry is fast becoming more competitive with the presence of international brands in recent years. We have a strong brand and success story in Nigeria as well as good long-term relationships with established suppliers in Nigeria. These, coupled with our partnership with the Hilton Worldwide for management of our facilities, opens up a large opportunity for our proposed developments in the high density areas of Nigeria to attract a considerable portion of business travel and tourist traffic, which should translate to adequate guest patronage.”
Emmanuel Nnorom, president/CEO of Transnational Corporation of Nigeria plc, said: “We are very proud of this achievement, the first initial public offering of one of our subsidiary businesses in Nigeria. The offering illustrates our continued drive to create value to our shareholders, by unlocking the value of the existing assets in our subsidiary and growing exponentially.”
Iheanyi Nwachukwu
