Guinness

[manemi]

Originally Posted by knightofdelta

For Nestle, I did a research on it and arrived at a fair value of N1000 in December 2010. So I am not one of them. You might ask why am I not in Nestle, it is simply because I am still young and I am not ready to invest in safe securities like Nestle as they come at a premium. 100% return over a time frame of 3 years is not for me. It is for fund managers and people close to retirement or retired.

And oh, I disposed 70% of my holdings in International breweries today after making about 350% in less than 30 months of holding.

KOD I wonder what your real return will be if you factor in costs such as fees, inflation, Naira devaluation during the period, and opportunity cost of using the money elsewhere.

[knightofdelta]

Hehe. Na wa o! E be like say na only the last paragraph for that very long post una read. Make I go delete am.

[Salida]

Originally Posted by knightofdelta

If I am looking for a defensive stock and I must hold a brewery stock, by all means give me Nigerian breweries.

There are lots of defensive stocks in the market and you just mentioned one which of course is in the same sector and in terms of valuation as at today, is better placed than Guinness.

Remember, the same way you bought International Breweries cheaply and spotted it early enough before the rally, there are some people that also bought Guinness early enough.

Also, as long as Guinness is still controlled by Diageo, some of the Shareholders of the stock will still have faith in the mangement irrespective of the present valuation .

There is no mincing of words for a well run company with management that follows global best practices.

[arostuff]

Originally Posted by knightofdelta

Okay sir. You should know me by now say I no dey joke with my SMN family as I always want the best of investment strategies for everyone because I know say even if I no get physical blessing, posterity go bless me for my open hands.

I must confess that five years ago, I did not know up to 1% of what I know now, as I was just fresh out of med school so I had no idea if Nestle was overvalued then or not. But in my sojourn, I have discovered a law that always holds no matter what. A stock cannot remain overvalued over the long run neither can a stock stay undervalued in the same time frame. They will always find their level.

If you are banking on Guinness staying overvalued because the holders of the stock will stay emotionally attached to them and the offspring they hand them over to will maintain the over-valuation till you hand them over to your children, I will wish you all the best.

But before I go, let me give you a small illustration.

There was a time First bank sold at a premium to all the other banks in the industry. This was not too long ago, just 2009. Investors maintained it between N14 - N18. I did my valuation and was not pleased with that fact. However, I noticed Guaranty selling at a deep discount at N8 and made my findings known on SMN. Zainabusman and I had a back and forth on this forum and we arrived at the conclusion that First bank was overvalued. It was around that time stockbrokers started selling stories of the kind of return First bank had generated since 1972. We know the story now and we know the kind of returns both banks have generated for shareholders between then and now including those that held First bank because of the "quality" and those that sold and bought Guaranty.

And yes, one more thing. Foreign investors are flocking into the country and they still account for over 60% of transactions on the exchange. Let's see if they are also emotionally attached to Guinness and will maintain the over-valuation, especially with the short selling that will soon come to be part of our market.

And, forgive me, one very last thing. I would love to wager with you, which one will provide a better return to shareholders over the next one year starting today between Guinness and Nigerian breweries. If Guinness provides a better return then you donate N1 million to my favorite charity and if it is the other way round I will donate N1 million to your favorite charity.

its now getting very interesting. oga KOD and Oga emman, sorry to buttonhole into this discussion, I was strongly pulled into it. I have always respected Guinness as a company and their vintage product, they have very good corporate governance and good quality products, i.e drinks. if you have posed this question about 3, or 4 years ago, i wont bait an eyelid before telling you that Guinness will surpass NBL in returns. but recently everywhere I go I have noticed how NBL has been strongly pushing their products, more adversistment, they have added several product lines, even now re branding star. they also have an expanded distribution network. so going forward from here I think NBL is now set to outperform Guinness in the coming years and I will place my bet on NBL.

Me I no get one million naira to donate oh!, man just dey struggle for this end

[nosa2]

everyone seems to be mistaking a good company with a good stock. Guinness and NB are both excellent companies but at current prices I think they're over valued. Remember that when you buy a company with a p.e of 20 it means that given current earnings it'll take 20 years for you to earn your money back. Obviously this doesn't factor in future growth but with companies the size of guinness how much growth can they possibly experience?

I guess the real question is are you willing to hold a stock at a price which you're not comfortable buying? For me its a definate no but different strokes for different folks

[Salida]

Originally Posted by nosa2

everyone seems to be mistaking a good company with a good stock. Guinness and NB are both excellent companies but at current prices I think they're over valued. Remember that when you buy a company with a p.e of 20 it means that given current earnings it'll take 20 years for you to earn your money back. Obviously this doesn't factor in future growth but with companies the size of guinness how much growth can they possibly experience?

I guess the real question is are you willing to hold a stock at a price which you're not comfortable buying? For me its a definate no but different strokes for different folks

Both NB and Guinness had aggressively tried to expand capacity in Nigeria alone in the last 1-2 years. Do you think that was a joke? That shows us an example of two companies that are perpetually in a competition to outsmart each other just as we have Apple and Samsung today. That is good for the industry. About the point on future growth, Innovation drives growth and sustainability and the last time I checked, both companies are not resting on their oars in terms of Innovation.

[goldsun]

Originally Posted by manemi

Oga KOD you de another level oo. You even get favorite charity? My own favorite charity is ME!!!

just as his favorite charity is KOD foundation

[knightofdelta]

Originally Posted by Salida

There are lots of defensive stocks in the market and you just mentioned one which of course is in the same sector and in terms of valuation as at today, is better placed than Guinness.

Remember, the same way you bought International Breweries cheaply and spotted it early enough before the rally, there are some people that also bought Guinness early enough.

Also, as long as Guinness is still controlled by Diageo, some of the Shareholders of the stock will still have faith in the mangement irrespective of the present valuation .

There is no mincing of words for a well run company with management that follows global best practices.

If you want to go down that route, remember that NB is controlled by Heineken, the number three brewe in the world. Diageo is not even in the top ten. Heineken did not get there by fluke.

The belief that because Guinness has been profitable and will remain profitable and should therefore not be sold even if it is overvalued regardless of how you look at it is called representative bias. It makes portfolio performance sub-optimal.

Guinness has an ROE of 36% and NB has an ROE of 52%. Guinness has a PE of 26.1x and NB has a PE of 26.8x, which is almost the same but the difference is stark in the return on equity.

This is not saying Guinness will lose money but the price will stay stagnant or move slowly while earnings catch up with the over-valuation. But the price is likely to catch up with the valuation of NB instead and the price has a chance of going up faster than that of Guinness.

And by the way, foreign investors are on the way and they are more likely to buy NB with a market cap of over N1 trillion and liquid enough for their portfolios than buy a Guinness with a market cap of less than N400 billion. These guys are going to change the way the market behaves in the future and you can learn their ways and run with them or play with the vestiges of old ways of sticking to a stock through thick (undervaluation) and thin (overvaluation).

[Salida]

Originally Posted by knightofdelta

If you want to go down that route, remember that NB is controlled by Heineken, the number three brewe in the world. Diageo is not even in the top ten. Heineken did not get there by fluke.

The belief that because Guinness has been profitable and will remain profitable and should therefore not be sold even if it is overvalued regardless of how you look at it is called representative bias. It makes portfolio performance sub-optimal.

Guinness has an ROE of 36% and NB has an ROE of 52%. Guinness has a PE of 26.1x and NB has a PE of 26.8x, which is almost the same but the difference is stark in the return on equity.

This is not saying Guinness will lose money but the price will stay stagnant or move slowly while earnings catch up with the over-valuation. But the price is likely to catch up with the valuation of NB instead and the price has a chance of going up faster than that of Guinness.

And by the way, foreign investors are on the way and they are more likely to buy NB with a market cap of over N1 trillion and liquid enough for their portfolios than buy a Guinness with a market cap of less than N400 billion. These guys are going to change the way the market behaves in the future and you can learn their ways and run with them or play with the vestiges of old ways of sticking to a stock through thick (undervaluation) and thin (overvaluation).

Good comparative analysis. Your analysis on profitability(as highlighted above) applies to both NB and Guinness. That still doesn't take away the fact that some people got into both stocks before the current valuation and their Investment objectives are different as I already highlighted before.
We will wait until others in the top ten comes to pitch their tent in Nigeria (like SAB-Miller is doing) and give both NB and Guinness a ride for their money.

[emmanuel ewumi]

Originally Posted by Salida

Which one be N8.00 per share dividend OR 1 for 33 Bonus?

This will be used by the foreign investors to increase their holdings in the company. They don't need the dividend, they would have made enough money from technical and management service fees, trade mark and patent rights

[emmanuel ewumi]

Originally Posted by knightofdelta

Okay sir. You should know me by now say I no dey joke with my SMN family as I always want the best of investment strategies for everyone because I know say even if I no get physical blessing, posterity go bless me for my open hands.

I must confess that five years ago, I did not know up to 1% of what I know now, as I was just fresh out of med school so I had no idea if Nestle was overvalued then or not. But in my sojourn, I have discovered a law that always holds no matter what. A stock cannot remain overvalued over the long run neither can a stock stay undervalued in the same time frame. They will always find their level.

If you are banking on Guinness staying overvalued because the holders of the stock will stay emotionally attached to them and the offspring they hand them over to will maintain the over-valuation till you hand them over to your children, I will wish you all the best.

But before I go, let me give you a small illustration.

There was a time First bank sold at a premium to all the other banks in the industry. This was not too long ago, just 2009. Investors maintained it between N14 - N18. I did my valuation and was not pleased with that fact. However, I noticed Guaranty selling at a deep discount at N8 and made my findings known on SMN. Zainabusman and I had a back and forth on this forum and we arrived at the conclusion that First bank was overvalued. It was around that time stockbrokers started selling stories of the kind of return First bank had generated since 1972. We know the story now and we know the kind of returns both banks have generated for shareholders between then and now including those that held First bank because of the "quality" and those that sold and bought Guaranty.

And yes, one more thing. Foreign investors are flocking into the country and they still account for over 60% of transactions on the exchange. Let's see if they are also emotionally attached to Guinness and will maintain the over-valuation, especially with the short selling that will soon come to be part of our market.

And, forgive me, one very last thing. I would love to wager with you, which one will provide a better return to shareholders over the next one year starting today between Guinness and Nigerian breweries. If Guinness provides a better return then you donate N1 million to my favorite charity and if it is the other way round I will donate N1 million to your favorite charity.

Fortunately i have both stocks in portfolio, they are defensive stocks and to an extent they are portfolio stabilizers.

As earlier said, i will not advice anybody to buy Guinness at the current price, and if holders of the stocks want to hold on the the stock at the current price good luck to them. The stock was bought for less than 2 Naira by my mum, and i have never used my money to buy a unit because of the high price of Guinness, but the units have grown in many folds over the last 28 years.
Investors have different reasons for having their stocks, this is one of the few stocks which i use as collateral whenever the need arises.

[emmanuel ewumi]

Originally Posted by bivins1

Egwo see money. 1 million bet for SMN. so wetin Waaan talk na true. anyway we get we get SMN charity fund . make una donate am to that one. E be like say KOD na our piers Morgan . Oga Emman , to be or not to be ? we dey wait for your response . Na today we go know who be ijebu man.

I don't bet.

I have Ijebu blood in my vein, because my mum is an Ijebu woman.

[emmanuel ewumi]

Originally Posted by arostuff

its now getting very interesting. oga KOD and Oga emman, sorry to buttonhole into this discussion, I was strongly pulled into it. I have always respected Guinness as a company and their vintage product, they have very good corporate governance and good quality products, i.e drinks. if you have posed this question about 3, or 4 years ago, i wont bait an eyelid before telling you that Guinness will surpass NBL in returns. but recently everywhere I go I have noticed how NBL has been strongly pushing their products, more adversistment, they have added several product lines, even now re branding star. they also have an expanded distribution network. so going forward from here I think NBL is now set to outperform Guinness in the coming years and I will place my bet on NBL.

Me I no get one million naira to donate oh!, man just dey struggle for this end

You can not take market leadership away from Nigerian Breweries. Some years back when talking about profitability, Guinness was more profitable in real term even though Nigerian Breweries made a higher profit.
But as it is i will agree with you that NBL is more profitable, giving a better return on capital etc. But that does not say i should sell my Guinness, since i have both in my portfolios.

[hispy99]

Guinness sees brighter profit outlook ahead

[hispy99]

...and SNAPP was unveiled! -The Punch - Nigeria's Most Widely Read Newspaper

[hispy99]

Guinness boss explains brand's long survival - The Punch - Nigeria's Most Widely Read Newspaper

[Salida]

Guinness, others unite in driving sustainable sourcing agenda

[Dicobody]

Guinness N52bn expansion drive begins to yields dividend

[Dicobody]

GUINNESS declares N1.8b PAT in Q1 '12 result,(SP:N265.00k) - Proshare

[emmanuel ewumi]

Originally Posted by hispy99

Guinness boss explains brand's long survival - The Punch - Nigeria's Most Widely Read Newspaper

When will we have a Nigerian brand that will last 100 years?