Company: NIGERIAN BREWERIES PLC
Rating: Hold
Price at Earnings Release: N75.00
Intrinsic Value: N75.03
Latest Cash Div: N1.83
By: Jeariogbe Tunde Segun (Equity Analyst)

Key Financial Tickers
• This report assesses the full year financial statistics of Nigerian Breweries Plc for the year ended 31st December, 2018. The result is, from time to time, compared with the corresponding report of 2017, to established growth/decline where appropriate.
•All key financial indices reported during the year stood below that of 2017
•Similarly, estimated ratios stemmed below previous year.
•This equally impacted investors’ take home for the year, with proposed dividend coming 41.53% below that of last year

Dividend Details
•Proposed Dividend: N1.83
•Qualification Date: March 6, 2019
•AGM Date: May 17, 2019
•AGM Venue: Shell Hall, Muson Centre, 8/9, Marina, Onikan Lagos State
•Payment Date: May 20, 2019

Nigerian Breweries Plc Strength
•NB is Nigeria’s largest brewing group, controlling over 60% of the country’s beer market.
• The group has a well-diversified product portfolio of 26 brands,
• It has a wide geographical footprint (with nine breweries and two malting plants across the country).
• A large distribution network and extensive customer base, run by an experienced management team.
• A further strength is the operational and strategic support from its parent company, Heineken N.V. Global, a major global brewing group, with operations in more than 70 countries.

Corporate Figures
•Nigerian Breweries Plc recorded a turnover of N350.22 billion through the 2018 financial year, which was 4.26% below the N365.79 billion posted in 2017.
•The amount reported as Excise Duty Expense is N25.837 billion, 21.47% above the N21.270 billion of 2017. Meanwhile, this year excise duty is 7.38% of the turnover.
•Operating Profit estimated for the year is same as N36.951 billion, which is 35.31% below the N57.121 billion estimated in corresponding year.
•Nevertheless, Finance Cost during the period reduced to N7.891 billion as against the previous year’s N10.663 billion. The difference between both figures is 25.99%.
•Profit before Tax estimated for the year is N29.421 billion, which was same as 36.90% below 2017 estimate of N46.630 billion.
•Similarly, Profit for the year is 41.18% below that of 2017, with reported profit at N19.437 billion, compared to the previous N33.048 billion.
•Total Comprehensive Income followed same trend, estimated for N17.967 billion as against N31.594 billion.

•Retained Earnings also dipped by 11.51% at the current value of N88.216 billion as against the N99.692 billion reported in 2017
•Non Current Assets inched marginally north by 2.46% at N301.978 billion compared to N294.735 posted in 2017.
•Meanwhile, Current Assets value inched south by 1.38% to stand at N86.284 billion compared to N87.492 billion last year.
•Showing an improved long term debt status, the Non Current Liabilities appreciated by 70.73% to stand at N81.738 billion against N47.876 billion. Nevertheless, it should be noted that the company may be accessing lower interest facilities as confirmed be the large reduction in the Finance Cost.
•Current Liabilities on the other hand, dropped be 10.48% to stand at the current N139.695 billion compared to the N156.052 billion reported in 2017 financial year.
•On the strength of the above, Net Asset value came lower by 6.43% at the reported N166.828 billion.

Liquidity/Risk Ratios
•Total Debt to Equity ratio has been estimated at 49.00%. Non Current Liabilities reported is same as 49% of Equity value.
•At below unity Current Ratio, the firm is sure to find it somehow tight in services its Current liabilities as and when due.
•Standing above unity, the estimated beta value of 1.05x confirmed favorable investors’ patronage of the shares of Nigerian Breweries Plc
•At 4.73 times Interest Coverage, we can safely conclude that Nigerian Breweries Plc will easily service its interest yielding liabilities as and when due. However, accessing more of such may not be advisable at the moment.

Profitability Ratios
•Cost of Sales Margin is currently estimated at 56.39%, this is 2.60% above the 54.96% estimated last year.
•Profit Before Tax margin is 34.10% below the 2017 estimates. The ratio is now estimated at 8.40% as against 12.75%. This is on the low side.
•Profit Margin estimated for the year is 5.55%, same as 38.57% below the 9.03% margin achieved in 2017.
•Return on Average equity is currently estimated at 11.65% below the 18.54% achieved in 2017.
•Return achieved on Average Assets is now 5.01% as against 8.65%.’

Efficiency Ratios
•To test the management efficiency, the Asset Turnover was gauged and the Ratio dropped marginally by 5.75% from 95.70% to 90.20%.
•Also tested was the Equity Turnover, currently at 209.93%, as against the 205.16% estimated in 2017.
•In other words, the equity was multiplied 2.33 times through 2018 financial activities, which is 8.56% below the 2.14 times multiples achieved in 2017.
•It was also estimated that Fixed Assets Turnover is same as 5.75% below the 95.7% estimated in 2017.

Investment Ratios
•Similar to the company’s earnings reported above (since shares outstanding remains same), the estimated Earnings per Share (EPS) is N2.43, 41.18% below the N4.13 estimated in 2017.
•The said earnings yielded 3.24% of the equity’s share price on the exchange as at release date.
•Price Earnings Ratio remained on the high side at 30.86x as against 31.80x.
•Showing an overpriced position, the Price to Book value ratio is 3.60% compared to the previously estimated 5.89%.
•Further confirming this position is the estimated Book Value of N20.86 per share.
•Operating Expenses Margin to Turnover is 5.55%, this is 38.57% above the 9.03% estimated in 2017 financial year.
•As noted above dividend proposed for the year is 41.53% below the N3.13 proposed last year.
•Meanwhile, Payout ratio remained same at 75.29% as against 75.74%.
•We have estimated the sustainable growth rate at 2.88%, a 35.97% drop from the 4.50% estimated last year.

Valuation
•While trying to value the share price of Nigerian Breweries, we put into consideration the unstable growth rate of the dividend, the poor performance which will surely reduce the expected future returns of the firm. Thus, we explore the Dividend Discount Model Valuation model using 2-stage H-Model.
•Thus, we have valued each units of Nigerian Breweries shares for N75.03 per share.