According to Renaissance Capital , Operators of the Fast Moving Consumer Goods (FCMG) industry in the country may have to be on the alert, as the sector has been predicted to record barely marginal improvements in in 2014.
The report pointed out that following a challenging year like 2012 and 2013, consumer companies are not expected to advance into full recovery in 2014, with just a minimal improvement possible in the year ahead.
“Our outlook for 2014 is for only a marginal recovery in the consumer environment,”
Renaissance Capital identified Nestlé as its top pick among the Nigerian consumer companies, stating that its choice of Nestle was due to its stronger and more consistent earnings track record and its superior access to foreign management practices.
According to the forecasts, Nestlé, Unilever Nigeria and Cadbury Nigeria are currently trading on very similar Price-Earning ratios (P/E ratios), with Unilever at a premium to Nestlé.
“We use a forward exit P/E of 30x to derive a TP for Nestlé of NGN1,320 (previously NGN1,100). We value Unilever at a 10 percent discount to Nestlé. On an exit P/E of 27x, we derive a TP for Unilever of NGN55 (previously NGN64),” it said.
” We value Cadbury at a further 10% discount to Unilever, given the lack of access to management and visibility around earnings. We are concerned that the current margins are unsustainable. On a forward exit P/E of 24x, we derive a TP of for Cadbury of NGN91 (after the consolidation of shares), vs NGN48 previously (NGN80, adjusted for the consolidation of shares),”