20 February 2013

Nigeria: Nestle Inches to N1, 000 As Market Rebounds

Nestle Nigeria Plc led the price gainers Tuesday as the Nigerian equities market rebounded after days of profit-taking slowed the market momentum. The fast moving consumer goods (FMCG) company's shares rose by N50 to close at N910 per share, N90 shy of a record N1, 000.

Despite the high price of the Nestle , analysts at Renaissance Capital, who met with management of the company last week said they still preferred the shares of Nestle to others in the same FMCG category.

According to them, Nestle appeared to be executing better than its competitors in market.

They stressed that Nestlé had most pricing power while its price increases also remain well under inflation.

"Continuing penetration of smaller towns and strong Milo growth has enabled Nestlé to continue reporting revenue growth of 20 per cent in 2012, We believe a key differentiator for Nestle is that it provides 20-day credit to its distributors. Nestle dispatches to the warehouses of its distributors, but has a system of keeping track of stock levels, and replenishes when the stock falls below a certain level," the RenCap analysts said.

Total Nigeria Plc closed as the second highest price gainer with N2.99 to close at N140.00 per share. Cadbury Nigeria Plc trailed with N1.69, just as Ashaka Cement Plc and Dangote Cement Plc chalked up N1.25 and N1.20 respectively.

These price gains, among 29 others, bolstered the Nigerian Stock Exchange (NSE) All-Share Index by 0.25 per cent to close at 33,335.11. Similarly, market capitalisation added N27 billion to close higher at N10.667 trillion.

Conversely, Guinness Nigeria Plc, which reported a decline in profit for half year (HI) ended December 2012, led the price losers with N9.00 to close at N280 per share.

Based on the H1 decline in profit, analysts at RenCap have already put sell rating on the shares of Guinness with a target price of N216.

According to them, they preferred Nigerian Breweries to Guinness Nigeria based on our expectation of Nigerian Breweries' more resilient performance in 2012 and its dominant market positioning.

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