← Back to MarketNIGERIA MARKET CONTEXT
Risk-Free Rate (FGN 10yr)
14.85%
Cost of Equity (Ke)
23.865499999999997%
VALUATION SIGNAL
SELL
Our valuation prices Nigerian Aviation Handling Company below the current NGX market price. Adjust growth inputs if faster dividend growth is expected.
CONSTANT GROWTH DDM
₦6.39
-96.6% vs NGX price
P₀ = D₁ ÷ (Ke − g)
₦1.11 ÷ (23.865499999999997% − 6.5%)
= ₦6.39
TWO-STAGE DDM
₦7.19
-96.2% vs NGX price
Stage 1: g = 11% for 5 years
Perpetual: g = 6.5%
Fair value: ₦7.19
COMPOSITE FAIR VALUE (AVERAGE OF BOTH MODELS)
₦6.79
OPPORTUNITY COST COMPARISON
T-bill alternative
22.52% risk-free
NAHCO dividend yield
0.53% (₦1.00 / ₦189.50)
Gap to beat T-bill
+22.0% capital gains needed
For NAHCO equities to beat T-bills at current prices, the stock must deliver 22.0% in capital appreciation on top of its 0.53% dividend yield — a total return of 22.52%.
Two-Stage DDM — Dividend Schedule
| Year | Stage | Growth | Dividend | Discount Factor | Present Value |
|---|
| 1 | Stage 1 | 11.0% | ₦1.11 | 0.8073 | ₦0.90 |
| 2 | Stage 1 | 11.0% | ₦1.23 | 0.6518 | ₦0.80 |
| 3 | Stage 1 | 11.0% | ₦1.37 | 0.5262 | ₦0.72 |
| 4 | Stage 1 | 11.0% | ₦1.52 | 0.4248 | ₦0.64 |
| 5 | Stage 1 | 11.0% | ₦1.69 | 0.3430 | ₦0.58 |
| TV | Perpetuity | 6.5% | ₦1.79 | 0.3430 | ₦3.54 (TV=₦10.33) |
WACC Breakdown
Market Cap₦5,949.54B
Total Debt₦3.00B
Equity Weight (We)99.9%
Debt Weight (Wd)0.1%
Cost of Equity (Ke)23.87%
After-Tax Cost of Debt6.30%
WACC23.86%
Sensitivity Analysis — g₁ vs g₂
₦6g₁=7.0 g₂=5.0
₦6g₁=7.0 g₂=5.8
₦6g₁=7.0 g₂=6.5
₦6g₁=7.0 g₂=7.3
₦7g₁=7.0 g₂=8.0
₦6g₁=9.0 g₂=5.0
₦7g₁=9.0 g₂=5.8
₦7g₁=9.0 g₂=6.5
₦7g₁=9.0 g₂=7.3
₦7g₁=9.0 g₂=8.0
₦7g₁=11.0 g₂=5.0
₦7g₁=11.0 g₂=5.8
₦7g₁=11.0 g₂=6.5
₦7g₁=11.0 g₂=7.3
₦8g₁=11.0 g₂=8.0
₦7g₁=13.0 g₂=5.0
₦8g₁=13.0 g₂=5.8
₦8g₁=13.0 g₂=6.5
₦8g₁=13.0 g₂=7.3
₦8g₁=13.0 g₂=8.0
₦8g₁=15.0 g₂=5.0
₦8g₁=15.0 g₂=5.8
₦8g₁=15.0 g₂=6.5
₦8g₁=15.0 g₂=7.3
₦9g₁=15.0 g₂=8.0
Nigeria-Specific Risk Factors
01
Naira devaluation risk. All dividends are naira-denominated, but Nigeria's exchange rate has moved from ₦460 to ₦1,614/USD in two years. Real value of dividend income for dollar-benchmarked investors erodes rapidly.
02
High risk-free rate compresses all valuations. With FGN bonds yielding 14.85%, the Ke−g spread is narrow. A 100 bps CBN rate rise cascades through Ke and sharply reduces intrinsic values.
03
Inflation distorts growth assumptions. Nigeria's inflation recently exceeded 34%. A 6.5% perpetual growth rate may represent negative real dividend growth. Always compare to current CPI.
04
NGX liquidity and data quality. Many NGX stocks have thin volumes, wide bid-ask spreads, and delayed financial reporting. Companies frequently defer dividends based on CBN regulations or recapitalisation requirements.
Owo provides financial modelling for informational purposes only. Not investment advice.