It is better late than never for investors who have not bought Guinness Nigeria stocks, and for those oblivious of the beer maker’s stellar performance on the NGX ASI, it is time to shine your eyes.
The shares of Guinness Nigeria Plc (Guinness) has appreciated by 129.7 percent since the low of N29.6/share and 74.4 percent year-to-date (YTD).
Guinness has outperformed the NGX ASI, the NGX 30, and the NGX Pension Index that returned 10.3 percent, 1.7 percent, and 4.7 percent YTD.
The company has effectively used investments in fixed assets to generate sales, while deploying the resources of its shareholders in generating higher profit.
Fixed asset turnover jumped to 1.14 as at half-year June 2022 from 0.77 as at half-year June 2021, according to MoneyCentral calculations.
Return on average equity increased to 11.20 percent in the period under review as against a negative figure of 0.4 percent as at December 2020.
“We maintain our BUY rating on Guinness and upgrade our earnings forecasts and our 12M TP to N86.35 from N40.98 previously,” said analysts at Chapel Hill Denham Limited.
“Our revised TP implies a FY-23E EV/EBITDA of 4.0x vs. 5.7x for the Middle East and Africa markets,” said the analysts.
The launch of innovative products that are fast making an inroad into the Nigerian market and across Africa is majorly responsible for the strong growth in beer volumes and revenue.
Also, the reopening of the economy and successful roll out of vaccines that strengthened consumer demand and price increases across product lines helped add impetus to earnings.
The Nigerian economy grew by 3.98% yoy in the last quarter of 2021. Compared to 5.01 percent yoy in the third quarter (Q3) -2021 and 0.11 percent yoy in the last quarter (Q4)-2020, the performance of the economy in Q4-2021 represented a mixed stance.
The manufacturing sector real GDP closed the year positive, rising by 3.35 percent y/y in 2021 from a contraction of 2.75 percent y/y in 2020.
Guinness revenue spiked by 50.38 percent to N109.12 billion as at December 2021 from N72.35 billion the previous year.
It is worthy to note that the company recorded strong growth in all its strategic categories with the stout brands and mainstream spirits rising by 33 percent year on year (yoy) and 38 percent (yoy) respectively. Premium spirits, malts & RTDS, and standalone RTDS grew by 59 percent yoy, 149 percent yoy, and 80 percent yoy respectively.
The uptick at the top line (revenue) has a positive impact on profit margins even amid inflationary pressure, foreign exchange crisis, and decrepit infrastructure.
Gross profit margin increased to 33.46 percent as at half-year 2022, from 33.46 percent from 25.69 percent the previous year.
Of course, Guinness is increasing its share of the Nigerian alcoholic market with its “spirits” business, and other companies are only playing catch up.
Every bar, either the local ones by the roadside or five-star hotels have Orijin Spirit Mixed Drink, Orijin Bitters, Smirnoff Ice Double Black with Guarana, Smirnoff Vodka, Orijin Zero and Orijin Herbal Drink, Baileys Delight, Gordon Moringa, McDowells, among other.