Cadbury Nigeria Plc

[shamsideen]

Read in the papers that Cadbury is undergoing an internal audit by an independent auditor. It seems they have been overstating their accounts for some years now. What is the likely consequence for investors? Also saw an announcemnt by Cadbury Schweppes, the major shareholder. It seems they initiated the move. However, they are not pulling out. So, what do you guys think? I contemplating dumping my shares in the company.

[Stockbear]

Considering cadbury's recent scandal, which resulted in a price drop, does it not make sense to buy the shares now while prices are down?

Despite all, I would think the prices will rebound, which would make it an excellent buy?

[paragon]

hi there,
well if you have been monitoring the stock market, you would notice that cadbury gained about N4.00 last week. that the price have been falling does not mean it is a bad stock . the market is only reacting to the overstaement of result or the effect of bad management. the stock will definitely bounce back in the long term so you can buy now and hold. most of the people that are selling are individual investors and not institutional investors.

take that bold step if you are convinced about it.

[Stockbear]

@ paragon, thanks for your response.

My intention was to buy at the N27 range because I intended to sell within weeks, max a month. It wasn't possible to buy bcos no one had it on the market. It was been exchanged between individuals who already owned the stock.

[Stockbear]

What is your take on Cadbury?

Shares of CADBURY NIGERIA Plc Appears To Be on the Rebound

In one of my recent articles about the shares of Cadbury Nigeria Plc titled “How Low Can the Shares of Cadbury Decline?”. I noted that the shares were trading at N32.89 and had lost N37.11 or 53% from its 52 week high of N70. At the N32.89 price, the stock had violated most of its basic technical indicators (SMAs' 20, 50, 100, & 200), and violated two of the three Fibonacci targets (32 and 50%). I predicted that the stock would probably violate the Fibonacci 62% target of N26.66. However, the stock hit N27.90 on January 8, 2007 and bounced back up.

Since closing at the low of N27.90, the stock has gained N7.68 in 5 trading days closing at N35.58 on January 15, 2006. At the current price, it is trading above its 5 day SMA of N32.35 and 10 days SMA of N31.47.

The stock is looking like a buy candidate, but it has to hit N36.72, the 20 day SMA before it can be considered a true buy. Are the recent gains a reversal of the downtrend in the shares, or is it just exhibiting classic bottom fishing scenario by investors?

At the peak of Cadbury’s sell off, I only noted one day when trading volume exceeded 2 million shares. With the exception of the volume spike noted that day, the average daily volume during the sell off was about 500 thousand shares.



As the sell off continued, the average daily volume dropped to about 200 thousand shares. Considering that Cadbury has approximately 664 million shares outstanding, I am surprised that the sell off was not accompanied by heavier volume. In light of the uncertainty surrounding the company after financial misrepresentation was exposed, the sell off volume should have been heavier.

So what is responsible?

There are two factors that might have contributed to the lack of volume sell

· Most of the Cadbury shareholders were caught off guard by the news and subsequent precipitous decline in the stock price. Selling their shares would have meant losing a significant amount of their investment.



· Most investors in Cadbury stock have a long-term horizon and believe that the stock would recover.

The only reason I am skeptical of the recent price gains is that the sell off was not accompanied by large volume is indicative of investors complacency. My apprehension is that some of these investors who were not able to sell during the steep decline might begin to dump their shares as the stock edges higher above their purchase price.

Additionally, the revised financial statements have not been released by the company. Therefore the cloud around this stock has not dissipated.

Whatever the reason for the lack of volume in the sell off, it appears that the stock is experiencing some accumulation since the volume is beginning to increase as the price moves higher. I would not recommend the stock as a buy at this point because it has not traded above its 20 day SMA of N36.72. However, if the stock can stay above its 20 days SMA, then it would be a buy at that juncture.

The jury is still out on this stock, because some of the brokers and securities firms executive I spoke with are very skeptical about buying the stock at the current price. Most of the NSE brokers expected the stock to decline further. However, in trading we watch the chart trend and not human expectations. The current trend of the stock is up regardless of the experts’ expectations.

The company can help the market by giving access to information. As previously noted, I called Cadbury Plc to speak with the Corporate Affairs Manager last week, but was unable to reach him then. I should have better luck after January 18, 2007. Chukumah.Biosah



Soft Comments – Subscriber Enquiries

SELL NOW: This category of investors, mostly of a trading mindset, would have a justification to do so if they had not bought at the closing prices before the news, otherwise would have to wait and ‘turn to market makers’ to encourage an upward surge. Doing otherwise would mean a loss on returns.

The decision her would be heavily influenced by the results being expected for February 2007 and the projections thereafter.

BUY NOW: This is not supported by the analysis. However, if the decision is to hold on, then a buy decision now can be contextualized.

HOLD ON: This category of investors have a natural tendency for capital appreciation and would be more than happy to ‘take this challenge on the chin’ in the expectation that the market would correct itself once the company gets back on its footing. This will be based on the projections coming out of the company which will be more credible giving the recent problems they have had. Another decision criterion would be the outlook for the food, beverages and confectioneries sector in which Cadbury is playing in. The projections for the sector is that it should achieve moderate growth even as competition gets stiffer and margins drop due to increased cost of selling and distribution. Thus profits would be tight. With Cadbury, we expect that the additional investments expected from Cadbury UK would position it to address these market realities and position it for long term future gains. This position is for the investor with the long term view, conscious that the stock will come good and this might be a blip after all.


We should be in a better position to make sense of all this decisions once we get the financials from the company.

[Stockbear]

This is what probably might finally tip Cadbury shares over.

Group sues Cadbury over false accounts
Posted Monday, March 5, 2007

A leading stock broking firm and a group of share-holders numbering about 341 have taken Cadbury Nigerian plc to court over what they described as flagrant negligence and disregard to duty by the board and management of the company.

This development will turn out a landmark case that will keep board members and management of public companies on their toes in the institution and observance of corporate governance principles, as well as set precedence in the history of the Nigerian capital market.

In the suit filed February 28, 2007 in a federal high court in Lagos, the plaintiffs are alleging that the defendants made up of Cadbury and 16 of it officers, which includes Uduimo Justus Itsueli, chairman, Bunmi Oni, the former managing director, Ayodele Akadiri, the erstwhile director of finance, and the auditing firm of Akintola Williams Deloitte, and Pricewaterhousecoopers, failed or breached their duties and for which the plaintiffs suffered huge loss as a result thereof.

Specifically, they accuse the defendants of presenting incorrect, deceitful, and deliberate overstatement of financial position in the company’s annual reports and accounts for the financial year ended December 31, 2005. They aver that the defendants were aware that the said annual reports and accounts was a deliberate overstatement of the company’s financial position over a number of years to the tune of between N13 and N15 billion.

In the plaintiffs’ particulars of negligence, they allege that the defendants "failed to act bona fide in the interest of the company/shareholders; they did not act for proper purposes; they did not use every corporate opportunity, knowledge and information for the benefit of the company; they allowed a situation in which their personal and other interests conflict with their duty as directors; that they did not perform the duty owed to the plaintiffs by the defendants; that this duty has been breached; and that the plaintiffs have suffered a huge loss as a result thereof.

The investors claim they have lost over 94.0 percent in capital gains as the price of the stock fell from N54.15 per share as at December 12, 2006 to N27.90 per share as at January 9, 2007, following the disclosure of the issue of financial misfeasance in the company.

Based on the foregoing, the plaintiffs are making a 10-point demand, seeking against the defendants jointly and severally for, among other things, a "declaration that the Annual Reports and Accounts of the Company for the year ending December 31, 2005 as prepared by Cadbury is incorrect, deceitful, and deliberate overstatement of the financial position intended to deceive the investors as to the true position of their investments".

They also plead that the court set aside the said annual report and accounts as it does not reflect the true financial position of the company; that the defendants release the correct annual report and accounts of the company; that the court direct the defendants to publish the report of Messrs PriceWaterHouseCoopers, the independent auditors that investigated the alleged overstatement of the financial position of the company. They further demands that the defendants return all the monies paid as taxes on the basis of the overstated financial position of the company as it was based on erroneous reports.

They are also claiming special damages in the sum of N5.0 million being the solicitors’ fees/charges paid by the plaintiffs.

BusinessDay last week exclusively reported of the move by some shareholders to sue Cadbury for publishing falsified figures in their 2005 annual reports and accounts. The move had been put on hold following the intervention of some notable individuals who promised to mediate on the matter. But the eventual filing of the case indicates an apparent failure of the mediation efforts.

Some capital market lawyers who spoke to Business Day say they are looking forward to seeing the outcome of the matter in the courts, being that this is the first time such a case is coming up in the country.

Bernard Okwor, an Enugu based lawyer said: "This is an interesting development and those us who hold some stakes in the capital market would love to see the outcome. It is a practical demonstration of the level of expectation that shareholders and investors have on the corporate leadership. It is not just a verbal expression of corporate governance but we have to see it work."

A capital market lawyer who on prefers of anonymity said, "this matter will set the precedence on which future and similar matters would be settled. I tell you that this is a major fallout of the rapid growth of the capital market which we have been witnessing and it is good for the market, it is good for the investing public. In the English law, the matter is covered under the misfeasance law; and we do not have that yet in the country. Lets hope it will alert the authorities on such legislation."

According to a shareholder, "our market is growing and the shareholders are becoming increasingly aware of their rights. And from now going forward, we will continue to demand for these rights as it affects the capital market." - BusinessDay

[c kenneths]

I think the most interesting set of people as investors are the people i will like to call 'bad news investors' they rush any stock having a bad time, but with potential for the rebound, they rush in after the price hits bottom and ride the tide and get off when it returns up.

[dotunk]

i love those investors too and am trying to be one but its been hard cos you have to be stable before you start playing with money you dont have or cant afford to loose.

[Geeman]

Originally Posted by Stockbear

Considering cadbury's recent scandal, which resulted in a price drop, does it not make sense to buy the shares now while prices are down?

Despite all, I would think the prices will rebound, which would make it an excellent buy?

Lymbic3

Stockbear,
I do not share in the sentiments expressed here. I have had my fingers burnt with Cadbury shares. I bought a sizeable number in 2005 at N47 and look at where we are now!
Even when the current scandal was not public knowledge, the stock was not doing well.
I think caution should the the watch word.

[dotunk]

sorry man... sorry!!!

[Avocado]

Cadbury is low, but, hey, it's going lower. the feeling isn't good: on the street, with the company, everywhere. Stockbroking firms have a SELL-SELL for Medium-Long terms. What to do? Well, I bought some when I thought it was low, now, it's going even South. If you haven't bought Cadbury, now is not the time to buy. Let it drop; it appears the worst isn't just over yet.

.

[olusolakemmy]

for medium to long term investors cadbury might be good at N25, i dont mind if it goes below.

the meaning of overstatement shld not be overlooked by investors, it means the management of cadbury lead by Mr bunmi oni,have been deceiving people, now, we dont know the true state of matters, but if someone have money that can be invested for long term purpose, well cadbury might be a good buy.

What cadbury management did is call fraud, if it happen in develop world, the man can end up in jail.

[johncabin]

I think it's a good buy for now if you are investing for a long term purpose

[Avocado]

What's "long term"?

And, on what basis would you think it's a "good" buy?

.

[dotunk]

cadbury is good for long term basis at current price.

possibilty of the company reaching its previous price will take some time.

[compengr]

First of all thank God this site is back!!!! I sure missed it. I kept on checking and checking. Apart from the contributions posted on this site, I love the format.

I just bought some cadbury. In my opinion it's a good share to buy NOW and it's products are things that are consumed everyday. Secondly if you look at the chart where cadbury went to the second lowest (at N31.00) on 24-May-2007, Looking at the volume chart, you'll notice that AT THAT POINT THE VOLUME OF TRADE WAS VERY HIGH (>5M). This shows there was a stiff battle between the bulls and the bears, and then the bulls won and the stock started going upwards. What are we to learn from this? That support point was one that is VERY STRONG - marked by a high volume of trade. If the trend went lower than that then a new strong support will have to be created. But it did not go lower instead it has started trending upwards.

How do you define a graph that is trending upwards?? When subsequent support points are higher than the previous supports(e.g N32 > N29) - even though the graph is going up and down (which is the normal graph movement for any traded stock).

Also notice that the subsequesnt supports have recorded lower trade volumes. This indicates that they are not supports that are stoo strong.

This same analyses could be carried over to resistances.

Other factors to consider with regards to determining the strenght of this support is the length and height. Lenght - from May 24th to today is more than 2-months is substantial.

The volume of trade when it was lowest this year (at N27.90) was not much - 714,259. Hence I wouldn't say that was a strong support.

This stock has taken 2 MAJOR HITS. 1. The overstatement and 2. The lawsuit, and it had a strong support of N31.00. Not to mention the IPOs and POs currently on the market. It calls for some thought as to the fundamentals of the company - which in my own analyses is good. These are the kind of news that would have buried some stocks.

FINALLY - SOMETHING FOR THOUGHTS. That of CADBURY has come and gone, with the bad eggs in management removed, WHAT OF THOSE WE DO NOT KNOW!! When there's happen (if they do), will the company stand????

My advice to myself and as many as will listen - INVEST IN COMPANIES WITH GOOD FUNDAMENTALS!

SEE LINKS BELOW.