GTCo PLC 2022FY Earnings Result | Inevitable Slowdown in Bottom-Line Amid Spiraling Impairment Charges
GTCo released the audited Full-year results for 2022FY, revealing a strong topline performance. Gross Earnings, which exceeded our 2022FY estimates, grew by 20.42% YoY to NGN539.23bn on the wheels of increased interest and non-interest income. Interest Income climbed 21.92% YoY to NGN325.40bn while Non-Interest Income grew by 18.20% YoY to NGN213.84bn. On the other hand, Operating Expenses rose by 21.96% YoY to NGN197.90bn following a spike in communications, technological related expense, and administrative expenses (+67.18% YoY), staff welfare costs (+75.91% YoY) and energy cost (+82.75% YoY) in the period. Net impairment charge on other financial assets spiraled from NGN760.80mn in 2021FY to NGN35.95bn in 2022FY following a NGN35.55bn impairment charges on Ghana investment holdings. Consequently, Profit Before Tax (PBT) and Profit After Tax (PAT) deteriorated by 3.32% YoY and 3.24% YoY each to settle at NGN214.15bn and NGN169.17bn respectively. As a result, Net Profit Margin dropped by 7.67% to 31.37% in the period.
Overall, we arrived at a target price for GTCo at NGN32.62 for 2023FY using a blend of Dividend Discount Model, Residual Income Model and Relative Valuation methodology. At its current price of NGN25.15 as of 19th April 2023, this translates to an upside prospect of 30%. Thus, we put a “STRONG BUY” rating on the stock.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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