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.
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.
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.