Geregu Stock Price Soars as Investors Cheer PPP Deal, Solid Earnings

Geregu Power stock price may just be marking time and consolidating on its technical patterns before making an explosive move higher as a number of positive catalysts are set to drive its fundamentals for long term growth.

Geregu on Friday, released its second quarter (Q2), financial statement showing a 34 per cent jump in revenue from energy sold, and capacity charge. Its stock trading on the NGX rose 6.45 per cent to a new 52-week high of N330 per share, as investors cheered the announcement of a partnership with the Lagos State Government, the State Grid Corporation of China and the African Development Bank (AfDB).

According to Moneycentral, an online news platform, for the 3-months period to June 2023, revenue for the energy giant stood at N20.465 billion, while gross profit rose by 48.5 per cent to N11.175 billion.
Other positives for the quarter included a reduction in receivables due from related party Amperion Power Distribution Company Ltd, to just N6.9 billion as a total of N31.58 billion was paid to Geregu Power.

Overall, trade receivables fell by 22.4 percent to N59.633 billion. Geregu remained in solid liquidity position as its cash and cash equivalents for the period stood at a healthy N44.3 billion.
Geregu earns more interest than it pays, so coverage of interest payments is not a concern.
The firm repaid N35.82 billion in long term borrowings helping to cut its outstanding term loans by 47 per cent to N17.363 billion. The outstanding amount is a N17 billion facility types 1 to 2 from First Bank Ltd at 20 per cent interest rate to augment working capital and finance major overhaul.

Geregu alongside its co- investors and technical partners, the State Grid Corporation of China (largest electricity company in the world) had agreed in principle to go into a partnership with LASG to enhance its transmission capacity by circa 3,000MW through a combination of upgrades and new development in the short-medium term with the AFDB acting as the lead arranger and financier in the partnership.

The objective was to support stable and affordable electricity to Lagos state residents ahead of building and developing a state grid with a capacity >10,000MW in the long term.
The benefit of the quick win was that it allows both distribution and transmission upgrades for the immediate provision of a minimum of 3,000 MW which is well and over the current 500MW supply.

Geregu Power’s market capitalisation stood at N825 billion as of last Friday.
On a year-to-date basis, the stock is up 121 per cent as traders continued to digest the numerous positive catalysts set to drive the earnings power of the firm much higher in coming months.

“Investors and other speculators are looking to buy the shares, which could push it much higher towards the N1,000 per share level, especially in light of the positive announcements on PPP as well as future plans of the company in terms of planned acquisitions. There is also the new Government in Abuja under President Bola Tinubu who will further open up the power sector to private sector players like Geregu,” a buy side analyst at a major investment firm told MoneyCentral.