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Sector update

Equity Research
19 March 2015
Beverages
Nigeria
Omair Ansari
+234 (1) 448-5329
OAnsari@rencap.com

Nigerian brewers
Cash is king
After conducting distribution and channel checks in Nigeria
recently, we came away with a more cautious view on volume
and pricing growth. With the worsening macro and expected
tighter rate environment, we raise our WACC assumptions and
compare Guinness Nigeria (GN) with Nigerian Breweries (NB) on
their cash positions. As a result, NB is still our preferred play in
Nigeria, but we downgrade our rating to HOLD (from Buy) and
lower our TP to NGN138/share (from NGN162). We maintain our
SELL rating on GN, but lower our TP to NGN99/share (from
NGN103).
Worsening macro
Investors are familiar with Nigerias current problems, but with inflation edging
upwards and another devaluation on the cards, we believe the operating
environment will become even tougher in 2015. Yvonne Mhango, our SSA
economist, forecasts core inflation of 13% with real wage growth moving further into
negative territory. Beyond core inflation eating into consumers disposable income,
the Nigeria Labour Congress (NLC) is now contemplating reducing the minimum
wage as it believes the level is unsustainable with current oil prices.

3Ds: Devaluation, distribution and debt


This year, the lack of pricing power at the brewers will likely hit operating cash-flow,
which we think will face pressure on the back of the devaluation. Furthermore, with
subdued demand, the credit facilities that the brewers provide to their distributors
could lead to a longer cash-conversion cycle. NBs negative cash-conversion cycle
places it in a stronger position than GN. NB also has minimal debt vs GN whose
borrowing has increased 3x in 1H FY15 vs FY14.

GN to cut dividends
We analyse the funding requirements in FY15 for both GN and NB and conclude that
GN will have to cut its dividend pay-out ratio or come to the market to raise equity as
it faces a funding gap of ~NGN14.3bn, whilst NB has excess cash and will be able to
maintain its pay-out ratio, in our view.

Olaloye Oyawoye
+234 (1) 448-5328
OOyawoye@rencap.com

Summary sector ratings and target prices


Nigerian Breweries
Bloomberg
NB NL
Target price, NGN
138
Previous TP, NGN
162
Current price, NGN
130
Upside potential
6%
Previous rating
Buy
Rating
HOLD
Guinness Nigeria
Bloomberg
Target price, NGN
Previous TP, NGN
Current price, NGN
Upside potential
Previous rating
Rating

GUINNESS NL
99
103
125
-18%
Sell
SELL

The pricing date in this report is as of close 17 March.


Source: Bloomberg, Renaissance Capital

Figure 1: NB: Summary valuation and financials


Dec-YE
2013 2014 2015E* 2016E
Net revenue, NGNbn 268,614 266,372 319,136 362,058
EBIT, NGNbn
69,171 66,861 69,007 82,958
Net income, NGNbn 43,080 42,520 50,615 58,152
EPS, NGN
5.70
5.62
6.36
7.31
DPS, NGN
4.50
3.50
4.44
5.10
EV/EBITDA, x
13.54 10.97 10.75 8.97
P/E, x
28.58 23.12 20.44 17.79
Div yield, %
2.76
2.69
3.41
3.92

*combined entity estimates


Source: Company data, Renaissance Capital estimates

Figure 2: GN: Summary valuation and financials


Jun-YE
2013 2014 2015E 2016E
Net revenue, NGNbn 122,464 109,202 114,553 135,157
EBIT, NGNbn
20,614 16,123 10,615 14,321
Net income, NGNbn 11,864 9,573 5,951 9,098
EPS, NGN
7.93
6.36
3.95
6.04
DPS, NGN
3.20
3.16
5.14
6.54
EV/EBITDA, x
13.68 8.35
6.78
5.75
P/E, x
31.65 29.73 31.88 20.86
Div yield, %
2.79
1.69
2.51
4.08

Source: Company data, Renaissance Capital estimates

Downgrading TPs, but still prefer NB


We downgrade NB to HOLD (from Buy) with a lower TP of NGN138/share
(previously NGN162), and maintain our SELL rating on GN and lower our TP to
NGN99/share (previously NGN103), on the back of higher WACC assumptions. We
believe 2015 will be one of the toughest years for the consumer in Nigeria and only
those companies with strong balance sheets and cash positions will be able to
weather the storm. As a result, NB remains our preferred brewer in Nigeria.
Important disclosures are found at the Disclosures Appendix. Communicated by Renaissance Securities (Cyprus) Limited, regulated by the Cyprus Securities & Exchange
Commission, which together with non-US affiliates operates outside of the USA under the brand name of Renaissance Capital.

Investment summary

Renaissance Capital
19 March 2015
Beverages

Consumer continues to struggle


We believe that 2015 will be one of the toughest years for Nigeria from a macro
standpoint, and even more so for the consumer. Yvonne Mhango, our SSA economist,
forecasts core inflation of 13% with real wage growth moving further into negative
territory. Beyond core inflation eating into consumers disposable income, the NLC is
contemplating reducing the minimum wage as it believes the level is unsustainable with
current oil prices. The minimum wage stands at NGN18k/month (~$80). Furthermore,
after speaking to some public sector employees, we found that wages have not been paid
so far this year for many people. Thus, we continue to believe the down-trending by
consumers will continue.
Figure 3: Nigerian inflation

Source: Nigerian National Bureau of Statistics

New hurdles
We understand that the struggling consumer story is not new in Nigeria; however, after
spending time with management and distributors, we believe that further hurdles will be
faced this year. Pricing strategy will of course remain a key focus, and unlike in 2009
when the devaluation in the naira was passed onto the consumer, we do not believe this
will be possible this time round. We forecast for price-mix gains of 0.2x CPI as a bestcase scenario without sacrificing the already subdued volumes. In addition, distributor
credit terms will have to be a key focus. Successful brewers and fast-moving consumer
goods (FMCG) companies in Nigeria are only able to achieve efficient and maximum
market penetration by providing credit facilities to their key distributors. Average credit
terms are between 45-60 days; however, we see a risk of this extending further this year.
Thus, the cash-conversion cycle becomes important for 2015 and NB appears to us to be
in a stronger position.
Figure 4: Cash-conversion cycle, days
GN

200

NB

150
100
50
0
-50
-100
-150

2011

2012

2013

2014

2015E

2016E

2017E

Source: Company data, Renaissance Capital estimates

Renaissance Capital
19 March 2015
Beverages

Devaluation in 2009
Although the devaluation in 2009 was passed onto the consumer, we look back to see
which company was able to better sustain margins in that environment. We believe NB
leads once again.
Figure 5: Operating profit margin

Figure 6: Net profit margin


GN

35%

NB

30%

NB

20%

25%
20%

15%

15%

10%

10%

Source: Company data

*Naira devaluation occurred in 4Q08

4Q10

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

3Q08

2Q08

4Q10

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

3Q08

2Q08

1Q08

*Naira devaluation occurred in 4Q08

0%

1Q08

5%

5%
0%

GN

25%

Source: Company data

Not a year you want debt


Given the likely subdued operating income for 2015, we do not believe there will be any
unordinary capex; however, we believe GN will face pressure, given its high debt burden,
where borrowings tripled from ~NGN3bn in FY14 to ~NGN10bn in 1H FY15. Thus,
looking at interest coverage at GN vs NB, we see that NB is much better placed.
Figure 7: GN interest coverage

Figure 8: NB interest coverage

73.4x

520.7x

205.1x

26.1x
14.5x

2010

2011

2012

5.3x

3.6x

4.5x

2013

2014

2015E

Source: Company data, Renaissance Capital estimates

2010

2011

*In 2016E and 2017E, we project no debt

7.1x

10.0x

12.4x

10.7x

2012

2013

2014

2015E

Source: Company data

Funding gaps to emerge


With these issues on debt, devaluation and distribution we analysed the cash positions at
NB and GN along with their expected expenditures based on our estimates. The outcome
is clear to us: GN will face a funding gap this year, thus the possibility for its pay-out ratio

Renaissance Capital
19 March 2015
Beverages

to be cut is high from its average pay-out ratio of 75%. We believe that GN will either
need to raise equity to finance its debt obligations or cut dividends substantially. NB, on
the other hand, has sufficient cash to meets its obligations and maintain its historic payout ratio of 70%.
Figure 9: NB funded gap, NGNmn
36,759
34,037

5,973

150,907

80,801

114147
66,805

35,321
38,816

Interest
Income

Cash & cash


equivalents

Cash from
operations

Cash
available

Funded gap

Total
obligation

Debt

Capex

Dividend

Other

3,301

Source: Company data, Renaissance Capital estimates

Figure 10: GN funding gap, NGNmn

27,097

6,461

4,819

4,442

42,819

14,352
28,287

16,515
10,124

Cash & cash


equivalents

Cash from
operations

Other

Cash
available

Funding gap

Total
obligation

Interest

Dividends

Capex

Debt

6,291

Source: Company data, Renaissance Capital estimates

Still prefer NB over GN


This makes our case even clearer for our preference of NB over GN. However, given the
rising rate environment in Nigeria we have raised our risk free rate assumptions to 15%
from 13%, thus increasing our WACC for both companies. However, given the higher
proportion of debt for GN, our DCF is only slightly affected vs NB. Thus, we downgrade
NB to a HOLD (from Buy) with a revised TP of NGN138/share (from NGN162) and
maintain a SELL on GN with a TP of NGN99/share (from NGN103).

NB summary financials

Renaissance Capital
19 March 2015
Beverages

Figure 11: NB key ratios


Key growth ratios
Revenue growth
Gross profit growth
EBIT growth
EBITDA growth
Net profit growth
Total asset growth

unit
%
%
%
%
%
%

2013
6.3%
8.8%
7.1%
9.3%
13.2%
-0.3%

Proforma 2013
19.7%
19.9%
10.1%
-70.6%
15.8%
35.9%

2014
-0.1%
-1.6%
-4.2%
291.4%
0.5%
1.3%

2015E
5.6%
0.0%
1.2%
-1.1%
14.3%
12.1%

2016E
13.4%
16.3%
20.2%
18.4%
14.9%
6.2%

2017E
14.3%
15.7%
17.8%
16.9%
19.7%
8.3%

2018E
15.9%
17.5%
19.8%
18.8%
20.8%
9.4%

2019E
15.3%
17.0%
19.3%
18.3%
20.4%
9.9%

Margins
Gross profit margin
EBIT margin
EBITDA margin
Net profit margin

unit
%
%
%
%

2013
50.8%
25.8%
33.8%
16.0%

Proforma 2013
49.7%
23.5%
8.1%
14.6%

2014
48.9%
22.6%
31.6%
14.7%

2015E
46.4%
21.6%
29.6%
15.9%

2016E
47.5%
22.9%
30.9%
16.1%

2017E
48.1%
23.6%
31.6%
16.8%

2018E
48.8%
24.4%
32.4%
17.5%

2019E
49.5%
25.3%
33.2%
18.3%

Per share ratios


EPS
EPS growth
DPS
Dividends pay-out
Dividend yield
Year-end price
Cash per share

unit
NGN
%
NGN
%
%
NGN
NGN

2013
5.70
13.2%
4.50
79.0%
2.8%
162.8
1.26

Proforma 2013
5.68
12.8%
4.50
79.3%
2.8%
162.8
1.39

2014
5.57
-2.0%
3.46
62.2%
2.7%
130.0
0.72

2015E
6.36
14.3%
4.44
69.8%
3.4%
130.0
4.62

2016E
7.31
14.9%
5.10
69.8%
3.9%
130.0
5.66

2017E
8.75
19.7%
6.11
69.9%
4.7%
130.0
7.80

2018E
10.57
20.8%
7.40
70.1%
5.7%
130.0
10.80

2019E
12.72
20.4%
8.94
70.3%
6.9%
130.0
14.54

Balance sheet ratios


RoE
RoA
Debt/Equity
Net debt/EBITDA
Working capital/ Sales
Capex/ Sales

unit
%
%
x
x
%
%

2013
41.9%
17.0%
0.08x
0.00x
11.8%
12.3%

Proforma 2013
33.2%
14.7%
0.14x
0.07x
NA
13.0%

2014
25.7%
12.8%
0.14x
0.11x
2.6%
11.7%

2015E
26.9%
13.7%
0.09x
-0.09x
2.2%
10.7%

2016E
27.3%
14.4%
0.07x
-0.14x
0.8%
10.2%

2017E
30.0%
16.1%
0.06x
-0.20x
0.8%
9.7%

2018E
32.9%
17.8%
0.05x
-0.27x
1.1%
9.3%

2019E
35.8%
19.6%
0.05x
-0.34x
0.9%
8.9%

Working capital
Days of inventory outstanding
Days of receivables outstanding
Days of payables outstanding
Cash conversion cycle

unit
Days
Days
Days
Days

2013
57
19
193
-117

Proforma 2013
61
33
193
-99

2014
59
33
190
-98

2015E
59
33
194
-101

2016E
60
34
196
-102

2017E
61
35
196
-101

2018E
61
35
197
-101

2019E
62
36
198
-101

Du Pont analysis
RoE
Net margin
Asset turnover
Gearing

unit
%
%
%
%

2013
41.9%
16.0%
106.1%
246.1%

Proforma 2013
33.2%
14.6%
101.1%
225.3%

2014
25.7%
14.7%
87.1%
201.7%

2015E
26.9%
15.9%
86.2%
196.9%

2016E
27.3%
16.1%
89.7%
189.5%

2017E
30.0%
16.8%
95.6%
186.5%

2018E
32.9%
17.5%
101.7%
184.7%

2019E
35.8%
18.3%
106.9%
182.8%

x
x
x
x

2013
28.6x
11.0x
4.6x
13.5x

Proforma 2013
28.7x
7.3x
4.2x
52.3x

2014
23.4x
6.0x
3.4x
11.0x

2015E
20.4x
5.1x
3.2x
10.8x

2016E
17.8x
4.7x
2.9x
9.0x

2017E
14.9x
4.3x
2.5x
7.5x

2018E
12.3x
3.9x
2.2x
6.2x

2019E
10.2x
3.5x
1.9x
5.1x

Valuation
P/E
P/B
P/S
EV/EBITDA

Source: Company data, Bloomberg, Renaissance Capital estimates

Renaissance Capital
19 March 2015
Beverages
Figure 12: Nigerian Breweries (Post merger): Income statement, NGNmn (unless otherwise indicated)
Income statement Dec-YE
2013
Proforma 2013
2014
2015E
Revenue
268,614
302,528
302,322
319,136
Change
6.3%
19.7%
-0.1%
5.6%
Cost of sales
(132,136)
(152,151)
(154,347)
(171,214)
Gross profit
136,477
150,377
147,975
147,923
Change
8.8%
19.9%
-1.6%
0.0%
Gross margin
50.8%
49.7%
48.9%
46.4%
Operating expenses
(67,306)
(79,219)
(79,773)
(78,916)
Operating profit
69,171
71,158
68,202
69,007
Change
7.1%
10.1%
-4.2%
1.2%
Operating margin
25.8%
23.5%
22.6%
21.6%
Depreciation & amortisation
(21,740)
(24,428)
(27,409)
(25,531)
EBITDA
90,912
24,428
95,611
94,538
EBITDA margin
33.8%
8.1%
31.6%
29.6%
Interest (paid) received
-6,931
-7,486
-2,976
3,301
Transaction cost
-1,191
Profit before tax
62,240
63,672
64,036
72,307
Tax rate
30.8%
30.8%
30.8%
30.0%
Taxation
(19,160)
(19,615)
(19,739)
(21,692)
Attributable profit
43,080
44,058
44,296
50,615
Change
13.2%
15.8%
0.5%
14.3%
Ave shares in issue (mn)
7,563
7,761
7,960
7,960
EPS (NGN)
5.7
5.7
5.6
6.4
Change
13.2%
12.8%
-2.0%
14.3%
DPS (NGN)
4.5
4.5
3.5
4.4
Change
50.0%
50.1%
-23.2%
28.2%
Pay-out ratio
79%
79%
62%
70%

2016E
362,058
13.4%
(190,084)
171,974
16.3%
47.5%
(89,016)
82,958
20.2%
22.9%
(28,949)
111,907
30.9%
116
83,075
30.0%
(24,922)
58,152
14.9%
7,960
7.3
14.9%
5.1
14.9%
70%

2017E
413,806
14.3%
(214,760)
199,046
15.7%
48.1%
(101,299)
97,747
17.8%
23.6%
(33,069)
130,815
31.6%
1,713
99,460
30.0%
(29,838)
69,622
19.7%
7,960
8.7
19.7%
6.1
19.8%
70%

2018E
479,621
15.9%
(245,684)
233,937
17.5%
48.8%
(116,865)
117,073
19.8%
24.4%
(38,308)
155,380
32.4%
3,079
120,152
30.0%
(36,046)
84,106
20.8%
7,960
10.6
20.8%
7.4
21.1%
70%

2019E
552,791
15.3%
(279,089)
273,702
17.0%
49.5%
(134,028)
139,674
19.3%
25.3%
(44,128)
183,802
33.2%
4,988
144,662
30.0%
(43,399)
101,263
20.4%
7,960
12.7
20.4%
8.9
20.8%
70%

Balance sheet
PPE
Other non-current assets
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other current assets
Total current assets
Total assets
Deferred tax
Borrowings
Other non-current liabilities
Total non-current liabilities
Trade and other payables
Other current liabilities
Total current liabilities
Total equity
Total liabilities and equity

2016E
201,523
100,410
301,933
31,329
33,838
45,044
3,670
113,882
415,815
27,410
14,540
10,717
52,667
102,049
39,377
141,426
221,722
415,815

2017E
208,786
100,410
309,195
35,709
39,612
62,119
3,670
141,110
450,306
27,410
14,540
10,717
52,667
115,556
39,377
154,933
242,706
450,306

2018E
215,153
100,410
315,563
41,152
46,372
85,980
3,670
177,175
492,737
27,410
14,540
10,717
52,667
132,803
39,377
172,179
267,891
492,737

2019E
220,499
100,410
320,908
47,053
54,034
115,743
3,670
220,501
541,409
27,410
14,540
10,717
52,667
151,407
39,377
190,784
297,959
541,409

2013
153,366
54,108
207,474
20,643
14,212
9,529
901
45,285
252,760
21,830
9,000
9,275
40,105
69,833
30,463
100,296
112,359
252,760

Proforma 2013
176,999
100,410
277,409
25,428
27,447
10,758
3,670
67,303
344,712
27,154
23,540
10,277
60,972
80,499
31,123
111,622
172,118
344,712

2014
193,800
98,497
292,297
28,478
16,357
5,700
6,396
56,932
349,229
27,834
24,670
10,736
63,239
83,283
30,743
114,026
171,964
349,229

2015E
193,578
100,410
293,988
27,771
29,193
36,759
3,670
97,393
391,381
27,410
18,697
10,717
56,824
91,016
39,377
130,393
204,165
391,381

Source: Company data, Renaissance Capital estimates

Figure 13: Nigerian Breweries: Cash flow statement, NGNmn


Dec-YE
2013
Proforma 2013
NOPAT
47,863
Depreciation
21,740
Working capital
31,699
Capex
(33,125)
Operating FCF
68,177
Interest
Dividends
Debt
Other
FCF
Cash balance, bop
Cash balance, eop

2014
47,742
27,409
7,717
(35,482)
47,385
(2,976)
(27,544)
1,130
38,051
56,047
10,758
66,805

2015E
48,305
25,531
6,965
(34,037)
46,764
3,301
(35,321)
(5,973)
(38,816)
(30,046)
66,805
36,759

2016E
58,071
28,949
2,829
(36,894)
52,954
116
(40,595)
(4,157)
(35)
8,284
36,759
45,044

2017E
68,423
33,069
3,354
(40,331)
64,514
1,713
(48,638)
(514)
17,075
45,044
62,119

2018E
81,951
38,308
5,044
(44,675)
80,627
3,079
(58,921)
(924)
23,862
62,119
85,980

2019E
139,674
44,128
5,041
(49,474)
139,369
4,988
(71,196)
(43,399)
29,763
85,980
115,743

Source: Company data, Renaissance Capital estimates

GN summary financials

Renaissance Capital
19 March 2015
Beverages

Figure 14: GN key ratios


Key growth ratios
Revenue growth
Gross profit growth
EBIT growth
EBITDA growth
Net profit growth
Total asset growth

unit
%
%
%
%
%
%

2013
-10.8%
-8.5%
-21.8%
-3.1%
-19.3%
9.3%

2014
-8.5%
-13.7%
-22.4%
-20.1%
-19.5%
9.3%

2015E
4.9%
-6.3%
-34.2%
-35.6%
-37.8%
-7.8%

2016E
18.0%
22.2%
34.9%
29.2%
52.9%
3.4%

2017E
12.2%
12.7%
18.4%
16.5%
27.3%
5.1%

2018E
14.3%
14.8%
20.2%
18.5%
15.2%
7.3%

2019E
13.7%
14.3%
19.4%
17.8%
20.3%
7.8%

Margins
Gross profit margin
EBIT margin
EBITDA margin
Net profit margin

unit
%
%
%
%

2013
45.8%
16.8%
23.1%
9.7%

2014
49.0%
15.2%
19.9%
10.2%

2015E
42.0%
9.3%
14.0%
9.3%

2016E
43.5%
10.6%
15.3%
8.8%

2017E
43.7%
11.2%
15.9%
5.2%

2018E
43.9%
11.8%
16.5%
6.7%

2019E
44.1%
12.4%
17.1%
7.6%

Per share ratios


EPS
EPS growth
DPS
Dividends pay-out
Dividend yield
Year-end price
Cash per share

unit
NGN
%
NGN
%
%
NGN
NGN

2013
7.93
-17.7%
7.00
88.3%
2.8%
251.0
58.98

2014
6.36
-19.8%
3.20
50.3%
1.7%
189.0
60.75

2015E
3.95
-37.8%
3.16
80.0%
2.5%
126.0
61.09

2016E
6.04
52.9%
5.14
85.0%
4.1%
126.0
60.50

2017E
7.69
27.3%
6.54
85.0%
5.2%
126.0
62.05

2018E
8.86
15.2%
7.53
85.0%
6.0%
126.0
65.08

2019E
10.66
20.3%
9.06
85.0%
7.2%
126.0
68.54

Balance sheet ratios


RoE
RoA
Debt/ Equity (x)
Net debt/EBITDA
Working capital/ Sales
Capex/ Sales

unit
%
%
x
x
%
%

2013
25.6%
14.3%
0.26x
-0.11x
-2.7%
13.2%

2014
20.5%
7.5%
0.21x
0.39x
-8.9%
12.8%

2015E
13.0%
4.5%
0.16x
0.46x
3.6%
5.6%

2016E
20.0%
6.9%
0.10x
0.23x
0.3%
4.5%

2017E
25.2%
8.8%
0.10x
0.21x
0.2%
6.7%

2018E
27.4%
10.2%
0.06x
0.10x
0.3%
7.8%

2019E
31.8%
11.6%
0.06x
0.09x
0.2%
7.8%

Working capital
Days of inventory outstanding
Days of recievables outstanding
Days of payables outstanding
Cash conversion cycle

unit
Days
Days
Days
Days

2013
-68
50
-179
160

2014
-85
64
-194
173

2015E
-62
54
-167
158

2016E
-63
54
-171
163

2017E
-62
55
-172
164

2018E
-62
55
-173
165

2019E
-62
55
-173
166

Du Pont analysis
RoE
Net margin
Asset turnover
Gearing

unit
%
%
x
x

2013
25.8%
9.7%
1.0
2.6

2014
18.8%
8.8%
0.8
2.6

2015E
11.4%
5.2%
0.9
2.3

2016E
17.1%
6.7%
1.1
2.4

2017E
21.0%
7.6%
1.1
2.4

2018E
23.4%
7.7%
1.2
2.5

2019E
27.0%
8.1%
1.3
2.6

2013
31.7x
3.1x
3.1x
13.3x

2014
29.7x
2.6x
2.7x
13.7x

2015E
31.9x
1.5x
1.6x
8.3x

2016E
20.9x
1.4x
1.3x
6.8x

2017E
16.4x
1.3x
1.1x
5.8x

2018E
14.2x
1.2x
1.0x
5.0x

2019E
11.8x
1.1x
0.9x
4.3x

Valuation
P/E
P/B
P/S
EV/EBITDA

Source: Company data, Bloomberg, Renaissance Capital estimates

Renaissance Capital
19 March 2015
Beverages
Figure 15: Guinness: Income statement, NGNmn (unless otherwise indicated)
Income statement Jun-YE
2013
2014
Revenue
122,464
109,202
Change
5.2%
-10.8%
Cost of sales
(66,385)
(57,869)
Gross profit
56,078
51,333
Change
1.6%
-8.5%
Gross margin
45.8%
47.0%
Operating expenses
(35,464)
(35,210)
Operating profit
20,614
16,123
Change
-5.9%
-21.8%
Operating margin
16.8%
14.8%
Depreciation & amortisation
6,123
10,620
EBITDA
28,244
27,368
EBITDA margin
23.1%
25.1%
Interest (paid) received
-3605
-4442
Profit before tax
17009
11682
Tax rate
-30.2%
-18.0%
Taxation
(5,145)
Attributable profit
11,864
9,573
Change
-16.5%
-19.3%
Ave shares in issue (mn)
1,496
1,506
EPS (NGN)
7.9
6.4
Change
-17.7%
-19.8%
DPS (NGN)
7.0
3.2
Change
-11.4%
-54.3%
Pay-out ratio
88%
50%

2015E
114,553
4.9%
(66,441)
48,112
-6.3%
42.0%
(37,498)
10,615
-34.2%
9.3%
5,957
17,621
15.4%
-2348
8267
-28.0%
(2,315)
5,951
-37.8%
1,506
4.0
-37.8%
3.2
-1.2%
80%

2016E
135,157
18.0%
(76,364)
58,794
22.2%
43.5%
(44,472)
14,321
34.9%
10.6%
7,028
22,766
16.8%
-1427
12894
-29.4%
(3,796)
9,098
52.9%
1,506
6.0
52.9%
5.1
62.4%
85%

2017E
151,642
12.2%
(85,374)
66,268
12.7%
43.7%
(49,311)
16,956
18.4%
11.2%
7,885
26,519
17.5%
-1376
15580
-25.6%
(3,996)
11,585
27.3%
1,506
7.7
27.3%
6.5
27.3%
85%

2018E
173,285
14.3%
(97,213)
76,072
14.8%
43.9%
(55,683)
20,389
20.2%
11.8%
9,011
31,416
18.1%
-760
19628
-32.0%
(6,281)
13,347
15.2%
1,506
8.9
15.2%
7.5
15.2%
85%

2019E
197,096
13.7%
(110,177)
86,919
14.3%
44.1%
(62,576)
24,344
19.4%
12.4%
10,249
37,000
18.8%
-728
23616
-32.0%
(7,557)
16,059
20.3%
1,506
10.7
20.3%
9.1
20.3%
85%

Balance sheet
PPE
Other non-current assets
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other current assets
Total current assets
Total assets
Deferred tax
Finance lease obligation
Other non-current liabilities
Total non-current liabilities
Trade and other payables
Borrowings
Other current liabilities
Total current liabilities
Total equity
Total liabilities and equity

2015E
91,188
805
91,993
11,370
16,834
1,862
30,066
122,058
13,938
5,678
3,029
22,645
30,407
2,484
20,270
53,161
46,252
122,058

2016E
90,298
805
91,102
13,145
20,132
1,862
35,139
126,241
16,445
3,681
3,029
23,155
35,877
1,610
17,983
55,470
47,617
126,241

2017E
92,632
805
93,437
14,596
22,739
1,862
39,197
132,634
18,451
3,541
3,029
25,021
40,252
1,943
16,064
58,259
49,354
132,634

2018E
97,203
805
98,008
16,506
25,985
1,862
44,353
142,361
21,085
2,117
3,029
26,230
45,998
1,161
17,616
64,775
51,356
142,361

2019E
102,403
805
103,208
18,774
29,555
1,862
50,192
153,399
23,982
2,044
3,029
29,055
52,318
1,388
16,874
70,579
53,765
153,399

2013
88,113
709
88,822
12,400
16,649
3,189
32,239
121,061
11,956
8,796
2,995
23,746
32,507
3,000
15,768
51,275
46,039
121,061

2014
90,683
805
91,488
13,469
19,218
6,291
1,862
40,840
132,328
12,559
27,430
3,029
43,018
30,724
3,149
10,376
44,248
45,062
132,328

Source: Company data, Renaissance Capital estimates

Figure 16: Guinness: Cash flow statement, NGNmn


Jun-YE
NOPAT
Depreciation
Working capital
Capex
Operating FCF
Interest
Dividends
Debt
Other
FCF
Cash balance, bop
Cash balance, eop

2013

(558)

2014
13,214
5,569
(9,749)
(13,952)
(4,918)
(3,605)
(10,849)
21,797
(321)
2,102
(558)
1,544

2015E
5,957
4,167
(6,461)
3,663
(4,442)
(4,819)
(27,097)
11,772
(20,923)
1,544
(14,632)

2016E
9,738
7,028
396
(6,138)
11,025
(2,348)
(4,761)
(17,503)
4,215
(9,373)
(14,632)
(9,373)

2017E
11,530
7,885
317
(10,219)
9,513
(1,427)
(7,733)
(9,180)
3,487
(5,340)
(9,373)
(5,340)

Source: Company data, Renaissance Capital estimates

Disclosures appendix

Renaissance Capital
19 March 2015
Beverages

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Nigerian Breweries Plc
RIC: NB.LG
Renaissance Capital is either a market maker or on a continuous basis has sold to/bought from customers on a principal basis the securities or related securities of the issuer at
prices defined by Renaissance Capital.
Guinness Nigeria Plc
RIC: GUINNES.LG
Renaissance Capital is either a market maker or on a continuous basis has sold to/bought from customers on a principal basis the securities or related securities of the issuer at
prices defined by Renaissance Capital

Investment ratings
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Renaissance Capital
19 March 2015
Beverages

Renaissance Capital equity research distribution of ratings


Investment Rating Distribution
Renaissance Capital Research

Investment Banking Relationships*


Renaissance Capital Research

Buy
Hold
Sell
Under Review
Restricted
Cov. in Trans.

123
38%
Buy
2
121
38%
Hold
1
74
23%
Sell
0
3
1%
Under Review
0
0
0%
Restricted
0
1
0%
Cov. in Trans.
0
322
3
*Companies from which RenCap has received compensation within the past 12 months.
NR Not Rated
UR Under Review

67%
33%
0%
0%
0%
0%

Guinness Nigeria share price, target price and rating history

Jan-15

Last Price

Feb-15

Nov-14
Dec-14

Sep-14
Oct-14

Target Price

Aug-14

Jun-14
Jul-14

Apr-14
May-14

Jan-14

Restricted

Feb-14
Mar-14

Nov-13
Dec-13

Under Review

Sep-13
Oct-13

Aug-13

Jun-13
Jul-13

Cov. in Trans.

Apr-13
May-13

Jan-13

Feb-13
Mar-13

Not covered

Nov-12
Dec-12

Sep-12
Oct-12

Sell

Aug-12

Jun-12
Jul-12

Hold

Apr-12
May-12

Jan-12

350
300
250
200
150
100
50
0

Feb-12
Mar-12

Buy

100%
80%
60%
40%
20%
0%

Source: Bloomberg

Nigerian Breweries Plc share price, target price and rating history

Jan-15

Last Price

Feb-15

Nov-14
Dec-14

Sep-14
Oct-14

Target Price

Aug-14

Jun-14
Jul-14

Apr-14
May-14

Jan-14

Restricted

Feb-14
Mar-14

Nov-13
Dec-13

Under Review

Sep-13
Oct-13

Aug-13

Jun-13
Jul-13

Cov. in Trans.

Apr-13
May-13

Jan-13

Feb-13
Mar-13

Not covered

Nov-12
Dec-12

Sep-12
Oct-12

Sell

Aug-12

Jun-12
Jul-12

Hold

Apr-12
May-12

Jan-12

Feb-12
Mar-12

Buy
250
200
150
100
50
0

100%
80%
60%
40%
20%
0%

Source: Bloomberg

10

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