My stock pick today: Chams Holding Company

Chams Holding Company PLC (NGX:CHAMS) presents a compelling investment opportunity characterized by strong growth ambitions, financial resilience, and technical momentum amid short-term challenges. Trading near ₦2.85 with a market capitalization of approximately ₦13.38 billion in mid-August 2025, Chams has experienced significant price volatility, ranging between ₦1.85 and ₦3.65 in the past year, attractive to momentum investors but requiring risk tolerance.

Technical indicators support a bullish medium-term outlook: the stock’s 20-, 50-, 100-, and 200-day moving averages suggest a positive trend, confirmed by bullish MACD (0.08) and Stochastic Oscillator (61.4) readings, although short-term selling pressure is evident. Important near-term price support resides at ₦2.41–2.48, with resistance near ₦2.56.

Financially, Chams has shown robust topline expansion and improving operational performance, albeit with margin pressures. For the six months ended June 30, 2025, Chams recorded revenue of ₦9.84 billion and cost of sales of ₦7.92 billion, yielding a gross profit around ₦1.92 billion. Operating expenses and finance costs, however, weighed on net profitability, resulting in a net loss for the period of around ₦202 million. This compares with a profit after tax of ₦148.9 million for Q1 2025 and a full-year 2024 net profit exceeding ₦1.2 billion, reflecting increased investment in growth initiatives. Finance costs surged to ₦436 million in H1 2025 from ₦69 million the previous year, driven by loan financing for new projects, impacting net margin.

Chams’ balance sheet remains stable with total assets of approximately ₦21 billion and total liabilities of ₦10.7 billion as of Q1 2025. Equity attributable to owners stands near ₦5.7 billion, supported by a conservative debt-to-equity ratio of about 0.18. Liquidity measures are healthy, with a current ratio of 1.33 and quick ratio of 1.20, providing adequate short-term solvency. The company’s cash and cash equivalents increased from ₦1.29 billion to ₦1.43 billion in Q1 2025, reflecting disciplined working capital management.

Recent company developments are pivotal. Chams secured shareholder approval for a ₦7.65 billion hybrid capital raise, combining Rights Issue and Private Placement, aimed at funding a state-of-the-art EMV card personalization plant, upgrading switching infrastructure, and expanding cross-border digital payment services in West and Central Africa. These initiatives position Chams for scalable growth in a high-potential fintech market. However, the near-term impact includes margin compression and elevated finance costs as Chams invests heavily in technology and geographic expansion.

Why is Chams a buy? First, its revenue growth of 42% in 2024 (to ₦14.9 billion) and tripling of operating profit demonstrate robust business momentum and market acceptance of its diversified fintech solutions. Second, the strategic capital raise provides financial muscle to deepen technological capabilities and expand pan-African footprints, enabling capture of significant market share. Third, valuations remain reasonable with a price-to-book ratio near 1.1 and a price-to-earnings ratio in the mid-30s, representing fair value in light of growth prospects. Fourth, technical indicators signal continued upside potential for patient investors. Lastly, Chams operates in a sector with strong secular tailwinds—from increasing demand for digital identity services to regulatory pushes enhancing financial inclusion and cashless ecosystems across Africa.

In summary, Chams offers a balance of high growth potential and calculated risk. Its solid financial foundations, visionary management, aggressive growth investments, and favorable technical setup recommend it as a tactical buy for investors seeking exposure to Africa’s transformative fintech wave. While margin volatility and capital deployment risks remain, the company’s expanding revenue base, capital adequacy, and strategic positioning position it well to deliver attractive returns over the medium to long term.