Download Spotlight Nigerian Breweries Plc 07-01-09

NIGERIAN BREWERIES PLC (NB)
Company Description
Nigerian Breweries Plc has established itself as a market leader in the breweries industry. The company produced its first beer under the brand of Star and since then has
grown to own six brewery plants with the latest addition in 2006 in Ama Enugu State.
The company, which is 54% owned by the Dutch brewer Heineken N.V. is committed to
delivering the highest quality brands for its consumers in Nigeria. Some of its products
include: Heineken Lager, Star Beer, Amstel Malt, Maltina and Legend Beer.
The company is particular about corporate social responsibility, hence it is a foremost
sponsor on a number of community related initiatives, and has established an educational trust fund scheme that aims at supporting education in Nigerian.
In December 2008 they declared an interim dividend of N1.90k per share, this is apart
from an interim dividend of N1.00 per share declared in September 2008 year.
Valuation Summary
Our target price for NB is based on two valuation methodologies; the Absolute Value
method and the Relative Value method.
On a relative value basis, NB is trading at 34.90% discount to its industry’s trailing 12month Price-to-Earnings (P/E) ratio of 20.40x yielding a price of NGN 61.27
January 07, 2009
RECOMMENDATION: BUY
CURRENT PRICE: NGN 40.10 (06/01/09)
12 Mth. TARGET PRICE: NGN 60.52
FISCAL YEAR END: DECEMBER
NSE symbol
NB
Sector
Breweries
2008 Return
-16.80%
Year High
N55.90
Year Low
N28.61
Year Average
N42.26
Shares Outst. (Thousands)
7,562,408.00
Market Cap. (Millions)
N303,252.56
Median Traded Volume
1,527,589
Recent Financials
Based on absolute value obtained from our Discounted Cash Flow (DCF) and Residual
Income (RI), we derive an average price of NGN 59.76.
Q3 2008
Q3 2007
% Change
Turnover
102.363
77.496
32.09%
PBT
26.045
17.959
45.02%
Taxes
8.334
5.926
40.63%
PAT
17.711
12.032
47.20%
Our target price of NGN 60.52 is an average of the two methodologies.
Outlook
Our recommendation is to overweight NB in a diversified portfolio of equities over a
one year investment horizon.
In the long run, substantial scope for enormous growth in the country’s beer market
and increased domestic demand mainly from Nigerian emerging middle class will boost
the company’s market share and value. The company’s consistent dividend payout policy will to a large extent impact positively on its share as investors are always guaranteed of returns on their investments.
However, NB Plc is faced with the risk that may arise from operational challenges due
to poor infrastructure in the country—power and road. Rising cost of raw materials and
keen competition from its closest peers in the brewery industry may also pose a threat
to the company. These factors combined may reduce the company’s margin going forward.
Ratios
12M EPS
3.02
12M P/E
13.28
12M P/BV
7.02
Current Div Yield
3.24
ROA
20.92%
ROE
43.87%
Page 2
Peer Analysis
NB PLC
GUINNESS
7UP
NBC
OPERATING PROFIT MARGIN
24.48%
22.85%
40.34%
37.69%
ROA
20.92%
14.89%
5.63%
6.60%
ROE
43.87%
33.79%
19.42%
13.88%
1.36
1.56
1.33
0.83
-
9.24
3.74
10.94
63.48%
62.08%
54.63%
12.38%
CURRENT RATIO
INTEREST COVERAGE
DIVIDEND PAYOUT
Nigerian Breweries Plc & NSE All-Share Index (Rebased)
60.00
50.00
40.00
NB
30.00
20.00
*NSE ASI
10.00
-
* NSE rebased
Disclaimer:
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market
conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The view and strategies described may not be suitable for all investors. Past performance is not indicative of future returns. The inclusion of
past performance figures is for illustrative purposes only. Indices do not include fees or operating expenses and are not available for actual investment. Indices presented are representative of various broad base asset classes. They are unmanaged and are shown for illustrative purposes only.
The analyst(s), who is( are) primarily responsible for this report, certifies(y) that the option(s) on the subject security(ies) or issuer(s) and any other views or forecasts expressed herein
accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in
this report.
Enquiries should be directed to Kenneth Brai, Charles Ujomu, Chike Obieme and Tochi Okoronkwo on [email protected] OR +234-1-2784130
©ZENITH C APITAL RESEARCH