Guinness Nigeria, the second-biggest brewer in the country on market capitalisation, fell to a seven-year low Thursday as investors sold the stock on concerns that the company’s full-year result could under-perform last year’s financial position.
The stock fell 10 percent in Lagos trading to close at N48.60 after a 2-day flat performance at N54. Total volume traded on Thursday stood at 6.05 million shares.
The stock on Thursday grossly underperformed consumer’s staple sector which fell 0.89 percent and consumer products industry which dipped 1.29 percent.
Nine-month net profit declined 16 percent to N4.25 billion from N5.08 billion during the corresponding period a year earlier, as stated in Guinness financial statement released on the Nigerian Stock Exchange Thursday. The company’s financial year ends in June.
Also quarter-on-quarter, profit declined marginally by four percent from N1.74 billion in Q2 2018.
In the last three quarters, Guinness has grown its profit at an average quarterly growth rate of 26 percent; hence, based on our analysis, we estimate full year earnings at N2.10 billion.
Our estimates shows that at a 26 percent growth rate, Guinness profit is likely to fall below prior full-year performance of N6.68 billion by N4.57 billion.
“Guinness has not been doing well in recent times, and the stock is dominated by foreign investors,” Paul Uzum, a Lagos based stockbroker on the NSE, told BusinessDay.
Share price of Guinness has been on a downward trend since June 2018, resulting to a 48.8 percent plunge in the value of investors’ holdings, losing a whooping sum of N101.6 billion since the inception of current fiscal year of the company.
This is despite the rights offered by Guinness of 684,494,631 ordinary shares of 50 kobo each at N58 per share to existing shareholders to rise about N39.7 billion in 2017.
“Having sold at that low level, they created room for more investors to come in. However with recent financial performance, investors are reacting negatively to the stock,” Uzum explained further.
“I do not think they will meet up with their full year performance in the last financial year; however price falling below N58 is just for the short term,” Uzum concluded.
Year to date analysis of Guinness Nigeria shows that as at Thursday, the stock was down 32.5 percent losing N51.24 billion in market value.
Other benchmark period has also shown that returns to investors on their holdings have been negative.
According to data collated from Bloomberg, the last five years have seen investors lose a whooping N287.37 billion in market value.
Analysts further explained that outlook for the company as well as its sector looks bleak on the back of excise duties which currently weigh down on the company’s top line.
“Although prices are low now and multiples are indicating the stock is cheap, the big question is the future of their earnings amidst challenges currently facing the beer industry,” Gbolahan Ologunro, research analyst at CSL stockbrokers limited, said.
“My stock recommendation is neutral for the company,” he added.
DAVID IBIDAPO
