BUA Foods is witnessing an immense rally as a result of its consolidation in the consumer goods market.
This was attested to by Opeoluwa Dapo-Thomas, a global markets analyst, who was a guest on Nairametrics’ On the Money show on Clubhouse which was held today, Saturday, January 15, 2021.
Dapo-Thomas said that the consumer goods company seems to be taking advantage of their customer segmentation and reducing costs which makes the stock of the company attractive to investors, hence, the rally around the shares of the newly listed company.
He also stated that BUA Foods has benefitted from the factors that led to the performance of the Consumer Goods sector surpassing the Banking sector in 2021.
He said, “Last year, we saw how the consumer goods index performed better than the banking sector index so basically there were a lot of things that hindered the banking sector but nevertheless it never affected what actually triggered or posed the catalyst for the consumer goods index.
“So, BUA Foods is basically a beneficiary of that. There’s been loads of demand, money in circulation and inflation, but BUA Foods has found a way to consolidate itself in the consumer goods market.”
Olumide Adesina, a financial analyst who also spoke on the show, gave his opinion on whether shares of the company should be bought. According to Adesina, the shares of BUA Foods is a premium which he would not advise retail investors to purchase as drawdowns are expected towards the end of the first quarter (Q1 2022) after which he believes the fair value of the stocks would be revealed.
He said, “If we look at numbers, for me, it is a premium, something that I would not advise a retail investor to jump into and the reason is not farfetched. We are expecting drawdowns at the end of Q1, we are going to see a lot, for the fact that we are entering into the election year and the fact that foreign investment in that sector is already drying up, and at some point, investors will have to sell.”
Furthermore, Adesina explained that stocks in the consumer goods sector, according to recent statistics often drawback in share price in a span of 1-2 years as a result of the growing insecurity and high inflation. He said the case might not be so different for BUA Foods considering that the company has key exposure in the Northern part of Nigeria.
What you should know
Week-on-Week, BUA Foods Plc appreciated by 24% from N53.20 per share in the previous week, to N66.00 per share at the end of the trading week.
The rally in the shares of the consumer goods company raised the market capitalization past N1 trillion during the week, making BUA Foods part of the classification of the SWOOTs, i.e, Stocks Worth Over a Trillion.
Conclusively, during the week, the market cap grew from N957.60 billion to N1.19 trillion, to gain a total of N230 billion.
