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Guinness Plc - Q3 March 2011 Result – FSDH Reduce Rating




Thursday, June 30, 2011 FSDH Research
Guinness is involved in brewing, packaging and marketing of alcoholic and non-alcoholic drinks. 
The company’s product line include: Guinness Foreign Extra Stout, Guinness Extra Smooth, Harp Lager, Satzenbrau, Gordon’s Spark, Smirnoff Ice, Top Malt, Armstrong Dark Ale and Malta Guinness. Guinness Stout, Harp Lager and Malta Guinness command strong demand in the market. The Turnover of Guinness increased in the current financial year as a result of its investment in its brands and production capacity. This led to its increased marketing drive both nationally and regionally through increased distribution of all its brands to meet increasing demand.
The leading threats are: poor infrastructure (relevant transportation and electricity); current financial crisis leading to unwillingness of banks to lend credit to the real sector, while the available credit commands high interest rates; availability of sub-standard imported products and weak purchasing powers of customers.  These factors have limited the growth of the manufacturing sector in the country, despite the huge market potentials within and in the neighboring countries.
Using Discounted Free Cash Flow Method (DCF) and Discounted Future Earnings Method (DFE) we arrived at a fair value of N186.14 per share.
The 2011 forward earnings yield at the current market price is 4.94%, while the dividend yield at the current price is 3.95%. These yield levels are considered low in view of the current market situation. We therefore place a REDUCE rating on the shares of Guinness Nigeria Plc at the current market price.
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Source: Research & Strategy, FSDH Securities Limited, 1/5 Odunlami Street UAC 8TH Floor, D/L: 234-1-2702887, Tel: 234-1-2702881-2, Email:
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