Geregu Power Stock Poised for Explosive Growth as Positive Catalysts Drive Fundamentals

Geregu Power, a prominent player in the energy industry, appears to be on the verge of a significant breakthrough as it consolidates its position and exhibits promising technical patterns.

Market experts believe that the stock’s current price may just be marking time before an explosive upward surge, fueled by a series of positive catalysts that are set to drive the company’s long-term growth.

The second-quarter financial statement released by Geregu on Friday revealed a remarkable 34 percent increase in revenue from energy sales and capacity charges.

The company’s stock, traded on the NGX, experienced a notable 6.45 percent surge, reaching a new 52-week high of N330 per share. This positive development was met with great enthusiasm by investors, particularly in light of Geregu’s recent partnership announcement involving the Lagos State Government, the State Grid Corporation of China, and the African Development Bank (AfDB).

The company’s unaudited financial statement showed Geregu Power recorded revenue of N20.465 billion during the three-month period ending in June 2023, representing a 48.5 percent increase.

Also, Geregu reduced its receivables from related party Amperion Power Distribution Company Ltd to a mere N6.9 billion, while receiving a total payment of N31.58 billion. This resulted in an overall decline of trade receivables by 22.4 percent, settling at N59.633 billion.

In terms of liquidity, Geregu remained in a robust position with cash and cash equivalents amounting to a healthy N44.3 billion while the company’s interest earnings exceeded its interest payments, alleviating concerns over interest payment coverage.

During the quarter, Geregu also demonstrated its commitment to financial stability by repaying N35.82 billion in long-term borrowings.

This repayment led to a significant 47 percent reduction in outstanding term loans, which now stand at N17.363 billion. The outstanding amount represents a N17 billion facility provided by First Bank Ltd at a 20 percent interest rate, serving to augment working capital and finance major overhaul projects.

One of the major highlights for Geregu during this period was its collaboration with the State Grid Corporation of China, the largest electricity company globally, and the Lagos State Government (LASG).

The partnership aimed to enhance Geregu’s transmission capacity by approximately 3,000MW through a combination of upgrades and new developments in the short-to-medium term. Acting as the lead arranger and financier, the African Development Bank played a crucial role in facilitating this partnership.

The objective of the collaboration is to ensure stable and affordable electricity supply to residents of Lagos State, with long-term plans of establishing a state grid with a capacity exceeding 10,000MW.

This quick win initiative will enable immediate distribution and transmission upgrades, providing a minimum of 3,000MW, a significant improvement compared to the current 500MW supply.

Geregu Power’s market capitalization currently stands at an impressive N825 billion. Year-to-date, the stock has soared by an astonishing 121 percent, as traders continue to absorb the positive catalysts driving the firm’s earnings potential.

Market analysts and speculators anticipate further growth, with some eyeing the N1,000 per share milestone, largely due to positive announcements regarding public-private partnerships (PPP) and the company’s future acquisition plans, coupled with the favorable stance of the new government led by President Bola Tinubu in Abuja, which aims to open up the power sector to private sector players like Geregu, add further momentum to the company’s prospects.

“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,” explained a buy-side analyst at a major investment firm.