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Nigerian Breweries should be trading at N100 · Green Ticker Tales

• 0:00
  Good morning. Here's a walkthrough numbers, Q1 numbers for the brewery space. So I'm going to be looking at numbers from Nigerian breweries, Guinness, Nigeria, Champion breweries and international breweries. So let's get right into it. I'll start off with Nigerian breweries, which is the biggest player.
• 0:25
  I'm not too happy with the revenue growth, rather weak revenue growth, even though profit after tax is up due to lower taxes, lower finance costs and all that. So a revenue of 413 billion Naira up 7.6% year on year and a profit after tax of 55.9 billion Naira up 25.5% year on year.
• 0:54
  i'll drill down and then you end up with a learning space share of one naira 80 180 copper now let's go look at the efficiency side of things you have the slight increase in both return on asset return on equity you're not quite where i want to be but you're close and there's progress being made i return on equity of 9.08 so for every hundred in equity invested you get a return of nine naira
• 1:21
  I'd like to see these double digits, ideally, because if you're going to do what's an ideal return of equity or return on equity, what's an ideal return on equity, you should have it 20%. So at 9%, you see some way to go. At some, I wouldn't say 25%, 30%. But I think if you go with 20%, you're fine. So at 9.08% return on equity, it has improved.
• 1:48
  compared to q1 last year q1 last year was 7.95 so i hope this improves in the coming quarters a return on assets of 4.92 percent it's up 17.7 percent a q1 last year had a return on assets of 4.18 so return on asset is improving we're almost there i'd like to see somewhere between five percent to ten percent so i guess we should get there things continue the way they're moving and we should get there sometime within the year
• 2:17
  uh so all in all a pretty good set of numbers revenue was sluggish but let's see how it goes uh in q uh two so international bruises international breeze had even slower revenue growth and there was a dip in profits due to a sharp increase in income tax so 178.7 uh billion naira in revenue up 2.9 percent year on year
• 2:47
  uh 19.6 billion profit after tax down 33.2 percent uh year on year and that's due to a a more than um a 263 percent increase in income tax and then you have an energy share of 12 uh couple so you have that deep and unfortunately the notes don't really explain what led to this deep
• 3:14
  a what led to the the sharp increase in in taxes i hope that and this is why we keep saying companies need to do calls imagine if this company had had a call and that's where people would have known what led to this and if it's a one-off thing if it's a backlog of taxes and they can then work out your models you can then decide to adjust the uh adjust the tax and see what it would have been without this spike in taxes so that's that's why
• 3:43
  one of the reasons one-on-one reasons why companies need to do cause i return on assets it's still quite low this this is the player that's just behind nigerian breweries so i'm not impressed with these numbers i mean even if you look at q1 last year's return on assets on an equity report return on assets as i kill 126 2.5 percent so for every 109 assets you generated a return of less than three naira that's not good i return an equity of 3.78 percent
• 4:13
  and that's also poor because for every hundred and equity you're getting a return of 3.7 naira that's not good enough uh so let's see hopefully if your qt should have lower lower taxes and that means you can see these numbers accelerate to guinness nigeria and i must say guinness nigeria has some of the best uh efficiency numbers our revenue 122.
• 4:44
  7 billion naira in revenue, up 3.75% year-on-year. Profitability tax of 10.3 billion naira, up 47.9% year-on-year. So it's a really stellar set of numbers from Guinness, Nigeria. In terms of return on assets, 4.36%. I think, let's see, just behind...
• 5:11
  just behind nigerian breweries and i'm sure this probably accelerates so for every 109 assets you get 4.36 percent uh in returns return on equity this is the best return on equity among all the brewers 19.35 so for every 109 equity invested you get a return of 19.3 naira um this is the best among all the brewers and i hope they can accelerate it a bit more let's just push to 2025
• 5:38
  that's a really comfortable zone because if you are looking at your um what you what should be your benchmark uh figure for return on equity you probably be looking at maybe 20 25 i mean if inflation is mid teens you train maybe six seven percent for your equity risk premium then you're probably looking at almost 22 25 that should be your ideal return on equity but all in all it's a good set of numbers
• 6:08
  uh from guinness nigeria international uh no champion breweries ladies and gentlemen champion is the smallest of all these players even though i think it's been just a rate following this player transaction i seems like the bullets and numbers have been integrated here because if you look at the balance sheets it's it's way and it's way bigger asset side um of teens so what's what do we see here um 14.3
• 6:39
  Billionaire in revenue, up 78.5% year-on-year. So, revenues grew quite well. Profit after tax, 881 million Naira. Last year, Q1 last year, they made a loss. So, in some ways, comparison doesn't kind of make sense here. Ending spread share of 59 Coba. So, yeah, pretty decent. But when I'm looking at the margins, net profit margin of 6.14%. International Breweries has...
• 7:08
  Net profit margin of almost 11%. Nigerian breweries, 13.5% net profit margins. Guinness with 8.46%. So I think Guinness needs to work on its margins. I like to see at least 10% net profit margins. Ideally 15 to 20% is a comfortable zone for me. So both Champion Breweries and...
• 7:38
  diners nigeria need to work on their net profit margins they're below 10 that's not that's not good that's not good it should be better about back to champion breweries return on assets at 0.67 return on equity at 1.29 that's poor that's really really poor we need to see these numbers accelerate um it's quite poor yeah because if you're going to be strict you have been yes there is there is a bullet transaction
• 8:07
  acquired this firm we probably should give them some time i guess we'll have to let's let's check back in the next maybe by year and let's see where champion breweries is if we don't see material acceleration um then i guess one would have to put this company on the back burner but looking at q q 1226 um for all of them and if you analyze the the profit divide
• 8:37
  um by or divide the market cap by the net profit and realized it seems like uh what you see here and jamborees is probably the cheapest of all the firms trading at 10.8 times earnings uh champion breeze is most expensive trillion at 41.7 times earnings yes big faster growth and all that uh but i think nigerian blue is ideally should reread
• 9:05
  higher because at standpoint eight times a needs for a company of this size and i think that these net profits q3 q4 tend to be really really strong quarters for companies in the brewery space because of preparation stocking up ahead of the festival period and then the festive period itself where you have higher consumption um i think that uh we should see nigerian breweries um issues in nigerian breweries kind of uh we rate higher
• 9:36
  ideally maybe you should see this firm probably trading i mean if the green earnings at 25 even though yes you'd say lower finance calls help with that but if you even put it at a 15 times multiple which is conservative uh you should easily uh easily see nigerian breweries trading at a hundred and two hundred and five night i think at some point in time we're going to get there
• 10:03
  I expect that we're going to see that happen. 10.8 times earnings. It has to be low. That's a bit low. That's a bit low. Really, in one case scenario, you can maybe say 12 times earnings or 13 times earnings. Yeah, but this is low. And it's the cheapest of all the brewers, which doesn't make sense because it's the biggest by size. To put it into context, this is a firm.
• 10:32
  with a market cap of 2.43 uh trillion naira and if you uh analyze what the revenue is you're probably going to be looking at revenue full year revenue of 1.6 to 1.8 trillion naira so if i'm with forward revenues of maybe 1.6 1.8 trillion i shouldn't be drilling at 2.4 uh trillion lira market cap ideally
• 11:01
  it probably should be um trading at two times its market cap so i think hundred now at some point in time we should see this stock rerates 200 and i share uh from the 78.7 where nigerian brewers is at the moment i thank you uh for listening the video will come up maybe by midday um yeah so you get the video by midday and they love where's the video where's the video you get it by uh midday um
• 11:30
  trying to sort out a few things on the back end but just thought to give you the audio version while you get you know get on with your day so by midday you get the video i thank you for listening and see you in the next um audio