← Back to MarketNIGERIA MARKET CONTEXT
Risk-Free Rate (FGN 10yr)
14.85%
Cost of Equity (Ke)
22.9165%
VALUATION SIGNAL
SELL
Our valuation prices Seplat Energy Plc below the current NGX market price. Adjust growth inputs if faster dividend growth is expected.
CONSTANT GROWTH DDM
₦1,881.10
-83.6% vs NGX price
P₀ = D₁ ÷ (Ke − g)
₦290.00 ÷ (22.9165% − 7.5%)
= ₦1,881.10
TWO-STAGE DDM
₦2,359.14
-79.5% vs NGX price
Stage 1: g = 16% for 5 years
Perpetual: g = 7.5%
Fair value: ₦2,359.14
COMPOSITE FAIR VALUE (AVERAGE OF BOTH MODELS)
₦2,120.12
OPPORTUNITY COST COMPARISON
T-bill alternative
22.52% risk-free
SEPLAT dividend yield
2.18% (₦250.00 / ₦11,486.20)
Gap to beat T-bill
+20.3% capital gains needed
For SEPLAT equities to beat T-bills at current prices, the stock must deliver 20.3% in capital appreciation on top of its 2.18% dividend yield — a total return of 22.52%.
Two-Stage DDM — Dividend Schedule
| Year | Stage | Growth | Dividend | Discount Factor | Present Value |
|---|
| 1 | Stage 1 | 16.0% | ₦290.00 | 0.8136 | ₦235.93 |
| 2 | Stage 1 | 16.0% | ₦336.40 | 0.6619 | ₦222.66 |
| 3 | Stage 1 | 16.0% | ₦390.22 | 0.5385 | ₦210.13 |
| 4 | Stage 1 | 16.0% | ₦452.66 | 0.4381 | ₦198.30 |
| 5 | Stage 1 | 16.0% | ₦525.09 | 0.3564 | ₦187.15 |
| TV | Perpetuity | 7.5% | ₦564.47 | 0.3564 | ₦1,304.97 (TV=₦3,661.45) |
WACC Breakdown
Market Cap₦360,620.74B
Total Debt₦600.00B
Equity Weight (We)99.8%
Debt Weight (Wd)0.2%
Cost of Equity (Ke)22.92%
After-Tax Cost of Debt6.50%
WACC22.89%
Sensitivity Analysis — g₁ vs g₂
₦1938g₁=12.0 g₂=6.0
₦1991g₁=12.0 g₂=6.8
₦2049g₁=12.0 g₂=7.5
₦2113g₁=12.0 g₂=8.3
₦2184g₁=12.0 g₂=9.0
₦2078g₁=14.0 g₂=6.0
₦2136g₁=14.0 g₂=6.8
₦2199g₁=14.0 g₂=7.5
₦2269g₁=14.0 g₂=8.3
₦2347g₁=14.0 g₂=9.0
₦2227g₁=16.0 g₂=6.0
₦2290g₁=16.0 g₂=6.8
₦2359g₁=16.0 g₂=7.5
₦2435g₁=16.0 g₂=8.3
₦2520g₁=16.0 g₂=9.0
₦2385g₁=18.0 g₂=6.0
₦2454g₁=18.0 g₂=6.8
₦2529g₁=18.0 g₂=7.5
₦2612g₁=18.0 g₂=8.3
₦2704g₁=18.0 g₂=9.0
₦2553g₁=20.0 g₂=6.0
₦2628g₁=20.0 g₂=6.8
₦2710g₁=20.0 g₂=7.5
₦2800g₁=20.0 g₂=8.3
₦2900g₁=20.0 g₂=9.0
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 7.5% 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.