Bloomberg News

Guinness Nigeria Climbs to 10-Week High on Valuation Bets

March 12, 2012

Guinness Nigeria Plc (GN), the country’s second-biggest beer-maker, climbed to the highest this year as investors took advantage of its price-to-earnings ratio compared with that of Nigerian Breweries Plc (NB), Stanbic IBTC Bank Plc (IBTCCB) said.

The stock rose 5 percent to 241.50 naira by the 2:30 p.m. close in Lagos, the commercial capital, its highest level since Dec. 30.

“This is as we have been expecting, as investors are taking advantage of the arbitrage and trading down on Nigerian Breweries and going into Guinness,” Esili Eigbe, Lagos-based analyst at Stanbic IBTC, said by phone today. The historical disparity between the one-year forward price-to-earnings ratio of the two stocks is 15 percent, but last week, Guinness traded at a discount of about 35 percent to Nigerian Breweries, Eigbe said. The rise in the price of Guinness is expected to continue until this disparity is reduced to its historical level, he said.

Nigerian beer output is expected to grow 10 percent in 2012, driven by rising income levels and prices, Stanbic IBTC said in a research note e-mailed to clients on Jan. 18. Nigeria, with more than 164 million people, is the continent’s most populous country and is attracting investment from global beer- makers seeking to expand market share. Nigerian Breweries, the country’s biggest beer-maker by market value, last year acquired Sona Systems Associates Business Management Ltd. and Life Breweries Co., to expand its capacity and extend its brands. Guinness (GN) Nigeria, a unit of distiller Diageo Plc (DGE), said on March 11 that it will spend $336 million to expand brewing capacity in the country.

Nigerian Breweries Plc was unchanged at 98 naira by 2:30 p.m. in Lagos. The stock has risen 3.8 percent this year, while Guinness has fallen by 3.4 percent, compared with an increase of 1.7 percent in the Nigerian Stock Exchange All-Share Index over the same period.

To contact the reporter on this story: Vincent Nwanma in Lagos at

To contact the editor responsible for this story: Dulue Mbachu at

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