Yesterday, Nigerian Breweries hit a 5 year low of ₦78.3 per share in the first trading session in 2019. The stock opened at ₦85.50 and closed at ₦78.30, down 8.42%.

The Nigerian Breweries stock had briefly dipped to ₦78 in intraday trading yesterday. It was also the worst performing in yesterday’s trading session.

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Key drivers behind the drop 

The decline in share price is both due to the wider market being bearish, as well as company-specific issues. The Nigerian Stock Exchange closed down last year and began yesterday’s trading session on a sharply negative note, shedding 1.15%.

Approaching elections in February and the usual sell-off that occurs in the first month of the year may have also contributed, as retail investors sell off their holdings to meet key expenses.

Company-specific issues  

In the company’s results for nine months ended September 31,2018, revenue fell from ₦270 billion in 2017 to ₦254 billion in 2018. Profit before tax dropped from ₦34.4 billion in 2017 to ₦22.4 billion in 2018. Profit after tax also dropped from ₦24 billion in 2017 to ₦14.7 billion in 2018.

On a quarterly basis, first, second, and third quarter results also showed a year on year decline in terms of profit after tax.

How low will it go?  

While the stock is trading at a 5 year low, it could dip much further. Nairametrics had covered Nigerian Breweries stock late last year and predicted that it would fall lower than the ₦84 at which it was trading then.

The stock market in Q1 2019 may continue to be bearish, in view of the factors enumerated above.

The stock is also trading at a price-earnings ratio much higher than the average PE on the Nigerian Stock Exchange. Guinness Nigeria, its peer, is trading at a price-earnings ratio of 19.3 times earnings.

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