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Zenith Bank Plc

ZENITHBANK · NGX · Banking
MARKET PRICE
₦131.00
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NIGERIA MARKET CONTEXT
Risk-Free Rate (FGN 10yr)
14.85%
Equity Risk Premium
9.49%
Cost of Equity (Ke)
21.0185%
VALUATION SIGNAL
SELL
Our valuation prices Zenith Bank Plc below the current NGX market price. Adjust growth inputs if faster dividend growth is expected.
-59.6%
vs. fair value
CONSTANT GROWTH DDM
₦46.73
-64.3% vs NGX price
P₀ = D₁ ÷ (Ke − g) ₦5.85 ÷ (21.0185% − 8.5%) = ₦46.73
TWO-STAGE DDM
₦59.22
-54.8% vs NGX price
Stage 1: g = 17% for 5 years Perpetual: g = 8.5% Fair value: ₦59.22
COMPOSITE FAIR VALUE (AVERAGE OF BOTH MODELS)
₦52.98
OPPORTUNITY COST COMPARISON
Fair value
₦52.98
Current price
₦131.00
Signal
SELL (-59.6%)
T-bill alternative
22.52% risk-free
ZENITHBANK dividend yield
3.82% (₦5.00 / ₦131.00)
Gap to beat T-bill
+18.7% capital gains needed
For ZENITHBANK equities to beat T-bills at current prices, the stock must deliver 18.7% in capital appreciation on top of its 3.82% dividend yield — a total return of 22.52%.
Two-Stage DDM — Dividend Schedule
YearStageGrowthDividendDiscount FactorPresent Value
1Stage 117.0%₦5.850.8263₦4.83
2Stage 117.0%₦6.840.6828₦4.67
3Stage 117.0%₦8.010.5642₦4.52
4Stage 117.0%₦9.370.4662₦4.37
5Stage 117.0%₦10.960.3852₦4.22
TVPerpetuity8.5%₦11.890.3852₦36.60 (TV=₦95.01)
WACC Breakdown
Market Cap₦4,112.88B
Total DebtN/A (bank)
Equity Weight (We)100.0%
Debt Weight (Wd)0.0%
Cost of Equity (Ke)21.02%
WACC21.02%
Sensitivity Analysis — g₁ vs g₂
₦48g₁=13.0 g₂=7.0
₦49g₁=13.0 g₂=7.8
₦51g₁=13.0 g₂=8.5
₦53g₁=13.0 g₂=9.3
₦56g₁=13.0 g₂=10.0
₦51g₁=15.0 g₂=7.0
₦53g₁=15.0 g₂=7.8
₦55g₁=15.0 g₂=8.5
₦57g₁=15.0 g₂=9.3
₦60g₁=15.0 g₂=10.0
₦55g₁=17.0 g₂=7.0
₦57g₁=17.0 g₂=7.8
₦59g₁=17.0 g₂=8.5
₦62g₁=17.0 g₂=9.3
₦65g₁=17.0 g₂=10.0
₦59g₁=19.0 g₂=7.0
₦61g₁=19.0 g₂=7.8
₦64g₁=19.0 g₂=8.5
₦66g₁=19.0 g₂=9.3
₦70g₁=19.0 g₂=10.0
₦63g₁=21.0 g₂=7.0
₦66g₁=21.0 g₂=7.8
₦68g₁=21.0 g₂=8.5
₦71g₁=21.0 g₂=9.3
₦75g₁=21.0 g₂=10.0
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 8.5% 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.