Originally Posted by billions
Proshare Articles
Nigerian Breweries Plc: Interim Results – Q2, 2008
Posted Tuesday, July 29, 2008
Equity Research Report:
Date: 28, July, 2008
Key Statistics
Sector Breweries
Date of Incorporation November 16, 1946
Date of Listing September 5, 1973
Year End December
No of Ordinary Shares 7,562,562,340
Capitalisation N 396,202,640,992.6
% of Market Capitalisation 3.86%
52‐Week High N 55.90
52‐Week Low N 39.10
YTD Return 4.08%
52‐Week Avg. Trade 3,363,053
Beta Value 1.51
Current EPS 3.01
Current PE 17.39
Fair Value: NGN 62.39
Current Price: NGN 52.39
Recommendation BUY
Gaining Grounds:
The unaudited Q2‘08 results of Nigerian Breweries Plc (NB) for the period ended 30 June, 2008 showed that its Turnover (TO) grew by 31.20% to N68.05bn, compared with N51.87bn in the corresponding period of 2007. Profit Before Tax (PBT) grew by 43.45% between 2007 and 2008 to N18.14bn from N12.65bn in the corresponding period of 2007. The tax provision which increased by 39.1% between 2007 and 2008 to N5.81bn from N4.17bn in 2007 brought about a Profit After Tax (PAT) of N12.34bn as against N8.50bn in 2007, representing a growth of 45.18%.
A cursory look at the company’s profit margins reveals a further improvement in the PBT margin in Q2 ’08 over Q2’07 and over the FY ’07 figure. The PBT margin increased marginally to 26.66% in Q2 ‘08 from 24.38% as at Q2 ‘07, and up from 24.95% as at the end of the financial year in December, 2007.
This shows that the company’s total cost as a percentage of TO stood at 73.34% slightly higher than 72.01% recorded as at in Q1 ’08, but down from 75.62% in the corresponding period of 2007. PAT Margin currently stands at 18.13% up from 16.39% in the corresponding period of 2007 and up from 16.95% as at FY ‘07.
The results also indicate that the percentage of the TO, PBT, and PAT in the Q2 ‘08 result to the Full Year Audited TO, PBT and PAT for the period ended December, 2007 are: 60.90%, 65.09% and 65.15%, respectively. This suggests that company has recorded improvements both in its top-line, and bottom-line in relation to the performance as at FY 07.
Looking at the Audited Accounts of NB in 2007, the cost of goods sold increased in 2007 over 2006 by 25.18% to N52.56bn. The increase was lower than the increase in TO which was up by 29.46% to N111.75bn, thereby leading to an increase of 33.50% in gross profit to N59.18bn. This resulted in a marginal increase in the gross profit margin from 51.36% in 2006 to 52.96% in 2007. The operating profit increased significantly by 61.41% in 2007 to N27.36bn. PAT increased significantly by 73.78% to N18.94bn from N10.90bn in the previous year. Both the capital employed and the shareholders’ funds increased by 18.06% (to N61.13bn) and 19.13% (to N43.18bn) respectively over the previous year. The Return on Capital Employed (ROCE) and Return on Equity (ROE) stood at 44.75% and 43.87% respectively in 2007. The company paid a total dividend of N2.50k as benefits to its shareholders for the 2007 financial year which was made up of 55kobo interim dividend and final dividend of N1.95k.
An analysis of the TO of NB in 2007 shows that its income of N111.75bn was derived from two major areas which are: Sales in Domestic Market (DM) and Sales in Foreign Market (EM). While DM accounted for a substantial 99.79% of the total income, EM accounted for an insignificant 0.21% of the income. The growth in TO was largely due to strong consumer demand, continuous improvement in product packaging and the launch of Star, Heineken and Amstel Malta in cans.
The company’s product line include: Star, Gulder, Heineken, Maltina, Amstel Malta, Legend Stout and Fayrouz.
Valuation/Analyst Recommendation
We maintain our forecast and valuation for NB as we are of the opinion that the company is in line with the forecast. In arriving at our fair value, we estimated TO, Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) and PAT for December 2008. We project a TO of N145.27bn, based on a growth of 30%, over the previous year.
We project EBITDA of N40.67bn based on EBITDA margin of 28% and a PAT of N24.63bn based on a PAT margin of 16.95%. We used 7.56bn Ordinary Shares which we expect to be in issue as at December, 2008. The Forward Earning Per Share (FEPS) generates N3.26.
We estimated the Dividend Per Share (DPS) of N3.09 (both interim and final) based on a dividend payout of 95%. Applying Enterprise Value EV/EBITDA multiple of 11.70x, a P/E multiple of 19x, we arrived at N62.92 per share using EV/EBITDA multiple and N61.87 per share using price earnings multiple. A simple average of the two values generates N62.39 which is our fair value. The forward earnings yield and dividend yield based on our fair value generate 5.22% and 4.96% respectively.
We therefore place a BUY on Nigerian Breweries Stock at the current market price both for capital appreciation and good interim and final dividends payment.
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