Guinness Nigeria Plc

Company Overview

GUINNESS is a subsidiary of Diageo Plc, a famed brewer of long-running brands with strong presence in 180 markets across   the world. It boasts of leading brands such as Guinness Foreign Extra Stout, Malta Guinness, Harp Lager Beer, McDowell's, Smirnoff Ice and Origin Spirit Mixed Drink. Diageo Plc controls 58% of the company.

Product relaunches and quality improvement assisted by Diageo Group have helped it carve a niche for itself in the Nigerian market. Besides, management has been unrelenting, continuously innovating and creating brand awareness through robust promotional campaign and strong community presence. 

Investment Thesis

GUINNESS acquired the right to market the brands of its parent company (Diageo Plc) such as Baileys, Gordons, Captain Morgan and Johnnie Walker in Nigeria. This has broadened its product portfolio and is expected to improve its earnings going forward.

Earnings growth has been unstable over the past seven years. Turnover appreciated by 6.5% while Profit After Tax (PAT) depreciated by 4.8% on a 3-Year CAGR basis. Marketing and distribution expenses jumped from NGN25.3 billion to NGN26 billion, representing a 2.9% hike.  

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PBC LIMITED

PBC Limited emerged from Produce Buying Division, a department of the Ghana Cocoa Board. Ghana Cocoa Board is responsible for the production, processing and marketing of cocoa, coffee and sheanut. Produce Buying Division was incorporated as a limited liability company in 1981 and became a wholly-owned subsidiary of Ghana Cocoa Board. It was rechristened Produce Buying Company two years after incorporation.

Having completed its retooling, PBC Shea Limited would enhance earnings of PBC once it is fully operational. Golden Bean Hotel has yet to contribute positively to bottom line after three years of operation. Although it produced GH 10 million revenue in 2017, the hotel had a net loss of GH 2 million compared to GH 1.7 million of the year before.We are of the opinion that Golden Bean Hotel would benefit from being located in Ashanti, the most populous region in Ghana, which boasts of tourist attractions such as Centre for National Culture and Lake Bosomtwe.

Nigerian Breweries Plc

Company Overview
In 1863 Gerard Adriaan Heineken, against all the odds, decided to purchase a brewery at a time when the brewing industry in Amsterdam was witnessing a declining fortune. What began in the 19th century as a small family business has been transformed into a world-class company. Heineken N.V. has seen it all- two world wars, crises, boom, slump, decline and growth. Having been on the global stage for about one and a half centuries, Heineken N.V. is, undoubtedly, one of the most viable and well-run businesses in the world. Sales and marketing expertise, quality manufacturing skills which are important distinguishing core competencies of Heineken N.V. have reinforced its leading brands which have been around for more than a hundred years.

The Heineken Group controls about 56% of the largest brewing company in Nigeria, Nigerian Breweries Plc (incorporated in 1946). NB prides itself on the brewing and marketing of lager beer, stout and non-alcoholic malt and soft drinks. Its brand portfolio includes Star, Star Radler, Gulder, Maltina, Heineken, Fayrouz, Legend Extra Stout and Amstel Malta.

Investment ThesisNB has a well-established distribution chain. The company generates positive cash flow and high returns for the shareholders. Return on Equity (RoE) reached a 14-year average of 38.7% and dividend yield amounts to 3.1%.

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Neimeth International Pharmaceuticals Plc

Company Overview 

NEIMETH prides itself on the manufacture and sale of pharmaceutical and animal healthcare products such as Pyrantrin, ncp, Pancemol, Ciklavit and Neiva Stress.  The company commenced manufacturing and distributing Pfizer brands of pharmaceutical and veterinary products in 1957. Following the management buy-out of the 60% equity stake of Pfizer Inc.( New York, USA) in Pfizer Products Plc in 1997, the company was renamed Neimeth International Pharmaceuticals Plc.  The divestment of Pfizer Inc. paved way for the launch of its own brand of healthcare products.

Investment Thesis

Management has transformed NEIMETH from being a licensee of Pfizer Inc.  to developing its own brands. Brands such as Pyrantrin, ncp and Pancemol are well patronised in the market. Its relationship with Pfizer Inc and other international brands will help bolster product portfolio and boost revenue.

Recommendation: Hold

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Investment Report on Accelerate Property Fund (Updated)

AFP has a portfolio of 67 properties worth R12.3 billion. We believe that Fourways Mall development would improve shareholders' value when completed. Fourways, Johannesburg, has a good transport network and capacity to attract  office and retail accommodation tenants. South Africa accounts for 89.4% of gross leaseable area and 91.7% of turnover of AFP.

The European operation made revenue of R100.1 million at year end (March 31, 2018) which translates to 8.6% of total revenue in the year under consideration.

Revenue has been growing by 18.4% in the past three years. Investors enjoy tax benefits as they are exempted from capital gains tax and they do not have to pay securities transfer tax whenever they buy and sell their shares.

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How to recognise your investment emotions

The most critical factor that determines your investment success is the ability to control your emotions. Emotions becloud your judgement and make you biased if you fail to contain them. 

Pride

This prevents you from acquiring the requisite knowledge before committing your money into an investment. You may believe that you can never make mistake. Pride goes before a fall! Even successful investors have to do research before investing in any asset class because past events do not guarantee future success.

Recency bias

When you use short-term information to invest over the long haul, you are bound to fail. The fact that a stock has been rising in price in the last three months does not justify long-term investment in the stock. You have to dig deep to determine whether the price is as a result of market sentiments or improved performance of the underlying company.

Wanting to belong

Every human being wants to belong. But jumping on the bandwagon by buying popular stocks without doing your home-work first is a sure-fire way to investment fiasco.

Analysis paralysis

Fear of losing money or fear of being wrong may prevent you from taking advantage of opportunities in time. You keep analysing time and again. In other words, you over-analyse. Once your investment criteria are met, grab the stocks.


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Investment Report on UBA

Company Overview

In 1949 the British and French Bank Limited, a subsidiary of Banque Nationale de Crédit (Paris), began operation in Nigeria. It was against the backdrop of Nigeria's independence from Britain that British and French Bank Limited metamorphosed into UBA in 1961. UBA became a company quoted on the Nigerian Stock Exchange in 1970.

Investment Thesis

It has a large distribution network in Nigeria from where it derives roughly 75% of its revenue and 73% of its Profit After Tax (PAT). Total deposits have grown at a 3-year compound  annual rate of 9% compared to 5% of a year ago. However, loans are expanding faster than deposits which has pushed total debts to over NGN500 billion. 

Financial Overview

The bank's turnover has increased at an average of 18.9% over the past six years due to a steady rise in interest income. Interest income has been growing at compound rate of 19.2% in the last six years.

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