Nigerian Bottling Company Plc (NBC)
company and a sole franchisee of the
Coca-cola Inc. Spanning over six decades of operation, NBC is
a market leader in the production of non
• A softer than expected macro economic environment has
posed challenges to the manufacturing sector of which NBC, as
an integral part, has to come to grips with to stay ahead of the
pack. Major challenges facing the industry include weak
infrastructural support facilities (especially power), unfair
competition from cheaper imported products and rising cost of
fund among others.
• An analysis of the financial strength of NBC reveals an
above-par performance in 2007. H
retrospect, we observed abysmal operational
results in 2006. This was however reversed in 2007 with 13.91
percent ROE and 201.69 percent growth in PAT.
• Due to the FYE 2006 performance, NBC exhibited a very
risky financial profile, (based on Altman’s Z score). However, it
scaled through the gray areas to a health
2007 with a Z-score above the 4 year average. Q1 2008 results
show, respectively, turnover and PAT growth of 10.2 percent
and 11.7 percent. Our forecasts for FYE 2008
percent and 5.0 percent for turnover and PAT respectively
• In valuing NBC, we employed both the Discounted Cash
Flow (DCF) and relative valuation methodologies. We obtained
N13.57, N12.12 and N23.19 respectively from the Discounted
Dividend Method, Present Value of Growth Opportunities and
Residual Income valuations. Our relative v
of Price to Earnings (P/E), Price to Book Value (PBV) and
Price to Sales (P/S) yielded N55.75, N97.82 and N176.12
respectively.
• Attaching appropriate weights to each of the methodologies,
we arrived at a fair price of N65.77 with a dis
of 14.39 percent and an upside potential of 16.81 percent.
Nigeria Equity Research
August 6, 2008
M e r i s t e m R e s e a r c h
Nigeria Equity Research
August 19, 2008
Current Price (N): 49.92 Fair Price
52-Wk H/L (N): 70.00/40.00 Premium/ (Discount):
Volatility (β): 0.48 Upside/ (Downside):
Nigerian Bottling Company Plc (NBC) is an indigenous
and a sole franchisee of the international brand;
Spanning over six decades of operation, NBC is
a market leader in the production of non-alcoholic beverage.
A softer than expected macro economic environment has
posed challenges to the manufacturing sector of which NBC, as
, has to come to grips with to stay ahead of the
pack. Major challenges facing the industry include weak
infrastructural support facilities (especially power), unfair
competition from cheaper imported products and rising cost of
of the financial strength of NBC reveals an
par performance in 2007. However, in a 4-year,
operational performance
reversed in 2007 with 13.91
percent ROE and 201.69 percent growth in PAT.
Due to the FYE 2006 performance, NBC exhibited a very
risky financial profile, (based on Altman’s Z score). However, it
scaled through the gray areas to a healthy financial status in
score above the 4 year average. Q1 2008 results
show, respectively, turnover and PAT growth of 10.2 percent
for FYE 2008 are 13.25
percent and 5.0 percent for turnover and PAT respectively
employed both the Discounted Cash
Flow (DCF) and relative valuation methodologies. We obtained
N13.57, N12.12 and N23.19 respectively from the Discounted
of Growth Opportunities and
Residual Income valuations. Our relative valuation techniques
of Price to Earnings (P/E), Price to Book Value (PBV) and
Price to Sales (P/S) yielded N55.75, N97.82 and N176.12
Attaching appropriate weights to each of the methodologies,
with a discount to valuation
of 14.39 percent and an upside potential of 16.81 percent.