Champion Breweries has seen its stock price more than half over the past month after a fantastic run at the start of the year. Driven by the announcement of 1.9 billion additional share purchase at N2.6 in January, the stock which began the year trading at N0.86 rallied to a 4 year high of N3.76 on February 2, 2021 before descending to N1.68 as at market close on Friday.
This stock price collapse means the company has now lost a total market value of about N16 billion in the last one month, representing a 55 percent decline in market capitalization. Over the past week alone, the stock price has shed as much as 33.3 percent as market bears pulled the market capitalization down by one-third over the 5-day trading period.
Even though Champion Breweries finished the week as the worst performing stock on the Nigerian Stock Exchange, the stock remains one of the best performing stock in the market this year as year to date returns as at Friday was 95.34 percent compared with the Nigerian Stock Exchange All Share Index year to date return of -2.33 percent and the NSE Consumer Goods index which had a YTD return of -7.85 percent.
Behind Champion Breweries on the best performing stocks on the consumer goods index so far this year are Livestock (60.4%), McNichols (56.9%), Guinness Nigeria (21.1%). However, analysts are skeptical that Champion Breweries will continue to lead the industry on returns performance owing to its recent market rout.
Several analysts told MoneyCentral that they felt Raysun Nigeria, the majority investor in the company overpaid by acquiring the 1.9 billion shares in the company at N2.6 and were very skeptical that the stock could hold up that price sustainably.
“The company posted a net profit of around N60 million in the first 9 months of 2020 but was trading at a valuation of around N29 billion in early March, translating to an annualized price to earnings ratio of 362.5 in a market where the average market valuation is around 10-30 times earnings. Obviously the earnings performance can’t justify such valuation,” said Obinna Uzoma, Chief Economist at EUA Intelligence.
At the peak of the stock price rally, Raysun’s stake was worth nearly N25 billion but as at Friday, just one month later, the company’s stake had collapsed to N11.1 billion, translating to a market loss of around N13.8 billion.
Raysun Nigeria is a wholly owned subsidiary of Heineken Brouwerijen B.V. Heineken is also the majority shareholder of Nigeria’s largest brewers, Nigerian Breweries.