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News Update (September 15, 2009 02:59 PM...)

Guinness Nigeria, others get favourable rating

Guinness Nigeria Plc, Guinness Ghana Breweries Ltd. and Mauritius’s Phoenix Beverages Ltd. were rated “outperform” by CSL Stockbrokers Ltd., which said African beer stocks are cheap compared with the prospects for economic growth and consumption.

“The breweries sector in Africa represents an excellent play on the improvement in gross domestic product per capita and the growing power of the consumer,” analysts led by Ian Furnivall wrote in a research note. The companies “trade at significant discounts both to their peers in other emerging markets and to the global majors themselves,” said the note initiating coverage of the stocks.

GDP per capita in Nigeria, Africa’s most populous nation, will advance 2.1 percent this year and growth will accelerate to 8 percent in 2011, CSL said. Sales for the three beer companies should increase 13.5 in 2009, resulting in average net earnings growth of 15.4 percent, according to projections by CSL, part of the First City Group, the parent of Lagos-based First City Monument Bank Plc, a Nigerian lender.

The average price-to-earnings ratio for the five African brewery stocks covered by CSL is 10.8 times estimated earnings, compared with 14.1 times for the global peers, and 22.1 times for the average of brewers in other emerging markets, according to the note.

An “outperform” rating means investors should hold a larger proportion of stocks than is represented in benchmarks.

CSL set its price estimate for Guinness Nigeria, at N165, compared with N130.99 at the close of trading Monday; Guinness Ghana at 1.5 cedi, versus yesterday’s 1.3 cedi close; and Phoenix at 161 Mauritian rupees, after the stock closed at 138 rupees.

CSL named Guinness Nigeria its “top pick.” It also initiated coverage of Nigerian Breweries Plc and East African Breweries Ltd., based in Nairobi, Kenya, with “neutral” ratings.

In March, Renaissance Capital initiated coverage of Guinness Nigeria Plc and Nigerian Breweries Plc with “buy” on speculation beer consumption in Nigeria will catch up with other emerging markets.

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