WHY NESTLE NIGERIA IS HIGHEST PRICED EQUITY IN NIGERIA

By the close of business last Friday, Nestle Nigeria was quoted at N1251.03 per share although it touched day high of N1251.05 earlier. This price was about N40 short of year high N1290 yet even at that, no other quoted company in Nigeria could boast of half that price per share.

The closest on the same day was Seplat Petroleum, the indigenous crude oil exploration company that promises good return on its efforts but is yet to really deliver on these promises. It was quoted at N490 per share and what is more, it had no stated price earnings ratio and so, it mustl be hard for the average investor to check, through comparison, if it was over priced.

Nestle Nigeria on Friday had price earnings ratio of 41.43 and other equities with top most prices alongside officially stated PE Ratio were  Total Nigeria and Dangote Cement both quoted at N230 per share each on Friday but with PE ratio of 7.46 and 15.92 respectively.

This seems to suggest that compared to Total Nigeria and Dangote Cement, Nestle Nigeria is overpriced since PE ratio indicates how long any investor who puts his money at the stated price will earn his investment back in full based on current earnings after tax or distributable profit.

However, this may not be correct because  Nestle Nigeria's nine months figures to September released last October more than explains the equity's price leap in recent times and why for years now it has been the highest priced equity in the Nigerian market even though last financial year it struggled to stay liquid. The figures paint a picture of very good performance.

From the figures, Nestle Nigeria which by September 2016 made profit after tax of N4.18 on every income it earned, earned N18 on the same income by September this year.

This was mainly because practically, in spite of the tough times in Nigeria, nothing seemed to have gone wrong in Nestle Nigeria. Its total income grew by 45.5% to N191.52bn; well ahead of the rise in all cost heads including cost of sale that rose by 41% to N109.36bn as core revenue grew by 43.1% to N185.24bn. Marketing and distribution cost increased by 27% to N25.26bn and administration expenses increased by only 12.7% to N7.63bn.

What could have thrown some tiny stones into the brew was finance costs given that in 2016, Nestle Nigeria had to do some battle to stay liquid. But it did not as it closed the nine months at N14.88bn; down 32.3% on the level by September in 2016. Besides, with more money to play with, finance income more than doubled to N6.28bn from N2.12bn.

The liquidity battle had been won as by nine months of this year, Nestle Nigeria boasted of N5.85bn working capital surplus compared to N23.29bn deficit previously.

Sure, some days in recent trading, like on October 20 an d November 14 Nestle Nigeria had gone down by leading Naira drops in the market but take them as exceptions to the trend because one year ago, Nestle Nigeria was traded at only N570 per share.

Besides, not many of its shares are available for trading which means that  ready buyers are always waiting patiently for sale offer thus adding more pressure to the price at the market place.

Comments

Post a Comment

Popular posts from this blog

2018: TWO BLOWS TO UNITED CAPITAL PLC.

When a child who in a previous examination scored 80%, comes home with a new report in which he now scores 67.2%, the parents have a right to sit him down and ask how come. So it must be between Nigeria's United Capital Plc and its discerning shareholders since the release of the company's 2018 audited figures. In 2018, all said and done, says the annual report, United Capital ended with 67.2 % profit margin compared to 80.2% in 2017. How come? What comes across from the figures was that the company received 2 blows to the jugular in 2018: Sharp drops in Investment income and fair value gain. Investment income dropped by 10.8% to N4422.8m from N4965.2m while fair value on financial assets plunged by 79.7% to N6.173m from 2017's N30.387m. In view of both drops, the group's gross earnings grew by only 33.9% to N9259.4m despite strong growths in net trading income, and net operating income leap to N757.5m from N143.5m  Other income streams ended with single digit increase....
Read more

KENYA AUCTIONS Ksh 13.84bn Treasury Bonds.

The Central Bank of Kenya (CBK) will from Tuesday December 18 to 27th 2018_ auction Ksh 13.84bn worth of fixed income Treasury Bonds with issue date December 17, 2018. According to official statement from the Director of Financial Markets Irene Njiru on Monday December 17, auction will continue throughout the stated period or close once the target money to be raised is reached, whichever comes first. Bid value will be paid for at most by 2pm December 31, 2018 while auction results will be made public on December 28, 2018 after the scheduled closing date. The bonds are being issued at 12.502% fixed interest at an adjusted average price of Ksh 100.468 for Ksh 100 bond. However, price payable after auction results publication will be average of successful bid prices based and allotment will be on first come first served basis. Meanwhile, the monetary operations and debt management department has released the interest payment schedule for 13 Treasury Bonds due January and February 2019. Th...
Read more

NAIROBI SE's HIGH PRICED EQUITIES.

In the wake of Nigeria's high priced quoted companies posted in this blog a while ago, Henates took a look to at Nairobi Securities Exchange June 23 official list to identify its high priced equities and the outcome was interesting too. Of the 66 companies quoted on the market by June 23, 15 or 22.7% were valued averagely at above 30 times nominal value. A word of caution though: There are two clear differences between the Nigerian stock market list and that of Nairobi: In the Nigerian one most listed companies have par or nominal value of N0.50 as is there is an implied agreement on this. On the other hand, at Nairobi most of the equities do not share common par value, they differ greatly. Then another thing, Nigerian equities are not valued below par, Nairobi ones can and many are so valued. Of the top 15 high priced equities at the Nairobi market, Safaricom topped with because by June 23, at 23.25 Ksh average price, it was valued 465 times its nominal value of just 0.0...
Read more