Renaissance Capital has downgraded its recommendation on Guinness Nigeria Plc to sell from hold.
The investment bank’s analyst, Adedayo Ayeni, lowered the target price (TP) to N59.90 from N94.50, implying a 14 percent decrease from its last close.
Guinness Nigeria average target price is NGN74.70 from 13 analysts who had 2 buys, 7 holds and 5 sells on the beer maker previously.
The analysts lowered their consensus one-year target price for the stock by 15 percent in the past three months, with the forecasts ranging from N59.20 to N141.89.
Guinness Nigeria Plc released its Q1 2019 results in October 2018, which were largely boosted by lower finance charges, amidst weak operating performance driven by heightened competition, the negative impact of the recently implemented excise tax and weak consumer spending.
As a result, PBT margin grew by 424 basis points (bps) year-on-year (y/y) to 4.4 percent, as the 83.5 percent (y/y) decline in net finance cost offset the 226bps (y/y) contraction in gross profit margin amidst relatively flat opex to sales ratio.
Guinness revenues fell 6.1 percent y/y to N28.1 billion as beer sales remain weak.
Management in its FY 2018 conference call was largely optimistic on its spirit brands, which was said to have contributed about 15 percent to FY 2018 topline, thus further supporting the view that beer brands are the laggards in Q1’s topline weakness.
In the same vein, on a quarter-on-quarter (q/q) basis, topline contracted by 25.1 percent, mainly due to the same reasons highlighted for its (y/y) performance.
Investors who followed Ayeni’s recommendation received a 0 percent return in the past year, compared with a negative 29 percent return on the shares, according to Bloomberg data.
