Investors are valuing shares of Nestle SA and Unilever’s Nigerian units at about twice the level of their European parents, as faster growth in Africa’s most populous nation lifts consumer stocks to record highs, reports Bloomberg.
The 53 percent surge in Nestle Nigeria Plc this year, pushed shares to 33 times estimated profit, almost double the ratio for Zurich-listed Nestle and up from a discount last year. Guinness Nigeria Plc is trading at a 53 percent premium, relative to its parent, Diageo Plc. Unilever Nigeria Plc has a price-to-earnings multiple of 38, compared with 18 for Unilever which is based in London and Rotterdam.
While bulls say the gains in Nigeria are justified by the economic expansion in the country, Hermes Fund Managers Ltd. and Renaissance Asset Management see the valuation gaps as a signal shares are too expensive. All three units reported profit declines in the period ended March, as accelerating inflation and an Islamist insurgency in the north curbed spending by the nation’s 170 million citizens.
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