NIGERIAN BREWERIES PLC
BACKGROUND REPORT
NB Plc was incorporated in Nigeria as a limited liability company on 16th November, 1946. The name of the company was changed to Nigerian Breweries Plc in 1990 and the shares were listed on the floor of the Nigerian Stock Exchange
The company is a subsidiary of Heinekan N.V of Netherland. It currently has authorised share capital of 8 billion ordinary shares of 50 kobo each and 7.56 billion shares are fully paid.
BOARD OF DIRECTORS
| Names | Designation |
| Chief K.B. Jamodu | Chairman |
| M.J Herkemij | Man. Director |
| O.S. Adebanji | Director |
| Dr. O.O. Ajayi | Director |
| Prof. Mrs J.O.Akande | Director |
| P. Hamers | Director |
| E. E. Imoagene | Director |
| L. Le Couedic | Director |
| Th. A. de Man | Director |
| E.J.Van Willegen | Director |
| L.E. Yamson | Director |
OWNERSHIP STRUCTURE
| Shareholders | % |
| Nigerian Citizen & Association | 45.9 |
| Heineken N.V. | 54.10 |
The table shows the summary of holdings in the company. We noted that greater percentage of the shares are in the hand of the parent company. The other Board members and Nigerian citizen own the remaining 45.9%
NB Plc has a technical service agreement with Heineken International B.V., Heineken Supply Chain B.V., Heineken Brouwerijen B.V., Premium Beverages International B.V. and Fayrouz Manufacturing and Technology Centre GMBH.
The management enjoys international affiliations; hence, there is prospect for improve performance.
BUSINESS AND SERVICES
The principal activities of the company is brewing, marketing and selling of larger, stout, non-alcoholic malt drinks and soft drinks.
BUSINESS ANALYSIS AND FINANCIAL SUMMARY
The performance of the company increased consistently in most of the indices (i.e both balance sheet and profit and loss) during the period under review.(2004-2008) See the attached analysis.
PRICE VALUATION
The price of the company was valued using PE Ratio,and Discount Factor Model) The average value is N49.71.
The current stock market price of company is N45.01when compared with the valued price of N49.71 there is potential for price appreciation..
The 52 weeks high and low market price is N55.90 and N47.05.
Comparative indices with Market Leader in the Industry.
|
NBL PLC |
Guinness Plc |
||||||||
|
2008 |
2007 |
2006 |
2005 |
2004 |
2009 |
2008 |
2007 |
2006 |
2005 |
| Turnover N= b | 145,462 | 111,748 | 86,322 | 80,131 | 73,594 | 89,148 | 69,173 | 62,265 | 53,652 | 46,859 |
| PAT N=b | 25,701 | 18,943 | 10,900 | 8,254 | 5,086 | 13,541 | 11,860 | 10,691 | 7,440 | 4,859 |
| SH'Funds N=b | 32,229 | 43,183 | 36,249 | 34,724 | 31,279 | 31,524 | 36,862 | 31,639 | 25,668 | 21,767 |
| EPS (N=) | 3.40 | 2.50 | 1.44 | 1.09 | 0.67 | 9.18 | 8.04 | 7.84 | 6.31 | 4.12 |
| DPS(N=) | 4.85 | 1.59 | 1.20 | 0.65 | 0.55 | 12.80 | 4.50 | 3.46 | 3.00 | 5.25 |
| Price (year end) | 40.85 | 49 | 37.25 | 38.8 | 42.8 | 129.00 | 124.00 | 126.55 | 108.90 | 87.00 |
| P/ER | 12.01 | 19.60 | 25.87 | 35.60 | 63.88 | 14.05 | 15.42 | 16.14 | 17.26 | 21.12 |
When NB Plc was compared with company of similar size in the sector, we discovered that the company can compete favourably with the leader of the sector. The lower market price and book value of Nigerian Breweries is due to large number of shareholders which is currently 7.56 billion compared to 1.47 billion for Guinness Plc. The consistent increase in NBL profit level may likely impact positively on the company and move the price closer to Guinness Plc.
KEY INVESTMENT CONSIDERATIONS
Strong Fundamentals.(financials and technical).
The fundamental of the company is strong. The books show consistent growth in most of its P&L and balance sheet figures in the last five years.
PAT grew by 405% from 2004-2008. Total Assets grew by 31% in 2004-2008. The EPS also grew by 405% from 2004-2008 and the the current third quarter EPS and PER Ratio of the company is put at N=3.76 and 15.25 respectively.
There is consistent payment of dividend in the last five years. The bonus policy of the company is good.
The current market value of the stock is N45.01. The company was also valued at N=49.71 using Discounted Flow method and PE Ratio. The resultant value shows reasonable correllation on both values. We expect the price of the stock to appreciate because of good performance, good return policy and the market perception of the company that is good.
The 52 weeks high and low values of N60.70 and N=34.03 show that there is opportunity for capital appreciation.
The consistent launching of new products by the company is expected to impact positively on the bottom line. The capital base is sound and the management is aggressive for superior performance.The international affliation of the parent company (Heineken N.V.0 is impacting positively on the performane of the company. NB Plc will continue to ride on the technical service know-how agreement of its parent company which will impact positively on the on the company.
The expansion programme embarked by the company to meet the expected rise in demand and competition will continue during the financial year. This is expected to increase its market share with resultant increase in bottomline.
RECOMMENDATION
Based on above, we project NB Plc with BUY rating and a target price of N60,00 per share within the next six months. The expected total return would be over 35%.
NIGERIAN BREWERIES PLC FIVE YEAR FINANCIAL SUMMARY YEAR END 31, DECEMBER 2008 2007 2006 2005 2004 % change N='000 N='000 N='000 N='000 N='000 FIXED ASSET 17.15 63,787,224.00 50,617,027.00 50,739,852.00 53,822,322.00 54,448,027.00 CURRENT ASSETS 44.60 40,625,416.00 39,931,255.00 24,917,210.00 18,576,447.00 28,095,950.00 TOTAL ASSETS 26.49 104,412,640.00 90,548,282.00 75,657,062.00 72,398,769.00 82,543,977.00 STOCKS 14.44 20,741,461.00 16,156,788.00 12,671,803.00 12,342,741.00 18,124,961.00 CURRENT LIABILITIES 22.80 54,775,451.00 29,413,531.00 23,875,475.00 25,967,953.00 44,606,971.00 TOT.ASS. LESS CUR LIAB. 30.84 49,637,189.00 61,134,751.00 51,781,587.00 46,430,816.00 37,937,006.00 LONG TERM LIABILITIES 79.78 17,408,008.00 17,951,709.00 15,532,194.00 11,706,575.00 9,683,062.00 NET ASSETS 14.07 32,229,181.00 43,183,042.00 36,249,393.00 34,724,241.00 28,253,944.00 MINORITY INTEREST SHARE CAPITAL 0.00 3,781,282.00 3,781,282.00 3,781,282.00 3,781,282.00 3,781,282.00 SH. FUNDS 14.07 32,229,181.00 43,183,042.00 36,249,393.00 34,724,241.00 28,253,944.00 TURNOVER 97.68 145,481,762.00 111,748,297.00 86,322,075.00 80,130,968.00 73,594,134.00 COST OF SALES 98.29 74,561,945.00 52,563,937.00 41,990,004.00 40,293,428.00 37,601,705.00 INTEREST CHARGE -95.09 265,895.00 26,117.00 525,526.00 2,598,233.00 5,413,879.00 PBT 310.13 37,519,114.00 27,876,336.00 16,436,255.00 12,897,746.00 9,148,139.00 PAT 405.28 25,700,593.00 18,942,856.00 10,900,524.00 8,254,557.00 5,086,403.00 DIVIDEND PROPOSED 1112.50 36,678,428.00 12,024,474.00 9,075,075.00 4,915,666.00 3,025,025.00 ORDINARY SHRES ('000) 0.00 7,562,564 7,562,564 7,562,564 7,562,564 7,562,564 MKT PRICE -4.56 40.85 49.00 37.25 38.80 42.80 PERFORMANCE PROFIT MARGIN % 155.60 17.67 16.95 12.63 10.30 6.91 RET ON EQUITY 342.96 79.74 43.87 30.07 23.77 18.00 RET ON NET ASSET 342.96 79.74 43.87 30.07 23.77 18.00 UTILISATION NET ASSET TURNOVER -42.30 22.15 38.64 41.99 43.33 38.39 STOCK TURNOVER -2.60 4.04 3.65 3.36 2.64 4.15 LIQUIDITY CURRENT RATIO 17.75 0.74 1.36 1.04 0.72 0.63 ACID TEST 62.40 0.36 0.81 0.51 0.24 0.22 LEVERAGE DEBT RATIO 37.40 0.35 0.29 0.30 0.25 0.26 DEBT /EQUITY RATIO 57.60 0.54 0.42 0.43 0.34 0.343 STOCK MARKET EARN/SHARE 405.28 3.40 2.50 1.44 1.09 0.67 P/E RATIO -81.11 12.02 19.56 25.84 35.55 63.64 DIV. YIELD 1170.38 11.87 3.24 3.22 1.68 0.93 DIV/SHARE 1112.50 4.85 1.59 1.20 0.65 0.40 CAPITALISATION -4.56 308,930,739 370,565,636 281,705,509 293,427,483 323,677,739