The Nigerian stock exchange is not as deep as many of us will want to considering that we only have about 202 companies quoted on the exchange compared to thousands that you can find on somewhere like the NYSE. This therefore entails that we are careful about the stocks that we purchase. I will be looking at the Brewery sector and highlight why the following stocks should be avoided at least for now, if YOU RELY ON FUNDAMENTAL ANALYSIS.
Golden Guinea – This company has been in existence since the 1960 and was set up by the administration of Dr Michael Okpara the premier of the defunct eastern region of Nigeria. The company was quite popular as it employed thousands of Nigerians in the region and had popular beer brands. It has however been on a slide in recent years as successive governments in Abia state has abandoned it. The company is still mainly owned by the Abia State Government.
The company was recently delisted from the Nigerian stock exchange because it had yet to file its annual returns. However, it filed its March 2013 returns recently and recorded no turnover and posted a loss of about N14million. It had total assets of N2.39billion and Net assets of N992million. They also have a market cap of N217,728,000 and currently has a market price of 80kobo 13% higher than its year low of 71kobo. This is not a stock you want to own as a retail investor except you are speculating and betting that maybe news of a takeover by some foreign entity may just suddenly swing momentum back into the stock. However, based on fundamentals this is one stock you should avoid.
Champion Breweries – This company has 4 major share holders Raysum Nigeria Ltd (57%), Asset Management Nominee 13.36%, Union Trustees Ltd (9%), Akwa Ibom Investment (8.39%). That is a total 87.7%. Raysum is owned by the Heineken Group. The company just concluded its rights issue and currently trades at N12.35 per share and 50% above its year low. It gained 10% last weekIt’s capital appreciation has got nothing to do with the company fundamentals considering that is just reported a N1billion loss in its 2013 results and reported another N884million loss in the first half of this year. Capital appreciation for this stock is basically speculation and if you decide to buy be ready to have a hold out period.
Jos International Breweries – This company was delisted earlier in the year for failing to declare its results. Last year it was one of the wonder stocks of the year as it at some point appreciated by 436% to N9 per share. Today it trades at N2.12 and is yet to publish any latest results. The company was bailed out by the Plateau State Government last year. This company lacks strong fundamentals and can only be driven by speculation for now.
Premier Breweries – This is perhaps one of the better performers in terms of capital appreciation this year. It has gained 471% this year. This company has also not released any results this year yet it’s share price has been rallying. The last result I have seen was in March 2012 Audited accounts and the company posted a loss of N554.5million. It posted no revenue. This stock is being driven by very few buyers as the shares traded average 100,000. It could be that someone is trying to acquire the company by mopping up shares gradually or that someone is manipulating the stock. Whatever the case is, you can only make money from this stock by speculating and hoping that your bets do work. Some have made money that way. If, however, you are into fundamental analysis then this stock has none that I see.