How much should you pay for Prestige?

PRESTIGE began operation as a Nigerian branch office of The New India Assurance Co. Limited in 1952. It was incorporated as a wholly-owned subsidiary of The New India Assurance Co. Limited in January, 1970 and named The New India Assurance Company (Nig.) Limited.

It enjoys the financial, research and technical support of The New India Assurance Co. Limited, an insurer established in 1919 with strong presence in Asia and Africa.  The experience of PRESTIGE in the Nigerian insurance sector spans over six decades.

Earnings growth has been unstable. And the company has been accumulating losses since 2012. The value of accumulated losses at the end 2017 financial year stood at NGN347.3 million (2016:NGN776.5 million, 2015:NGN991.9 million).  This halted dividend payment. Consequently, the management has succeeded in seeking approval to write off the accumulated losses in 2018 so as to pave way for payment of dividends to shareholders.

Company's performance has started getting better since 2016. Gross premium written profit improved by 7.6%, underwriting profit was NGN254.1 million compared to an underwriting loss of NGN422.3 million of 2015. Profit After Tax (PAT) was NGN222 million when compared to NGN145.3 million loss after tax of 2015.

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It is time to fire your adviser!

Many investors are dissatisfied with the services they receive from their advisers despite the bogus claims the advisers often make. You should look beyond the excellent sales presentation and hype. If he does not ask you about your goals and other factors that will determine the suitability of the product for you, your insurance agent may probably be only interested in making his commission. Furthermore, a stockbroker may coax you into buying shares of a company with a streak of losses. He makes money no matter how much you lose. If you buy shares that have proven to be bad investment, your stockbroker makes money twice when you buy and when you sell. A lot of investors are of the opinion that many advisers cannot justify the fee they collect from their clients.

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Champion Breweries Plc is fairly priced

CHAMPION, a brewery, domiciled in Akwa-Ibom State, Nigeria was incorporated on 31st July 1974 as South East Breweries Limited. It was later renamed Cross River Breweries Limited. The company became Champion Breweries Plc on September 1, 1992 and its shares were quoted on the Nigerian Stock Exchange a year later.

Champion Lager Beer, its flagship product was launched in 1976. The company also produces Champ Malta, a non-alcoholic malt beverage. CHAMPION was shut down in 1990 due to working capital problem. It, however, resumed operation in 2001.

CHAMPION raised capital through rights issue and paid off its debts. Though it is debt free, the company's accumulated losses stood at NGN8.6 billion at the end of 2017 financial year. This prompted it to seek approval to write off its accumulated losses. We expect the company to resume payment of dividend soon and attract more investors.

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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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