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RenCap Forecasts Growth for Consumer Companies

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Story:  Obinna Chima

Renaissance Capital Limited (RenCap) has predicted growth for consumer companies operating in the country this year.

The Lagos-based financial advisory and research company, in a report, however pointed out that its long-term outlook for Nigeria remains extremely positive.
Nigerian consumer companies had faced challenging conditions in 2012 and 2013 and as a result had reported slowing growth.

But RenCap, in the report titled: “Nigerian Consumer- Investing for the Long Term,” noted that given the size of the country’s population, its GDP size, growth forecasts, coupled with the current low penetration of packaged food and beverages, “we see significant opportunities for consumer players.”

It noted that Nigeria still appears to be on the cusp of the ‘hot zone’, with many years of growth ahead.

The report added: “While competition has already increased, we believe this will intensify as the country develops. In our view, companies that are building solid bases today, including infrastructure and brands, will be ahead of the competition and stand to benefit for many years.

“Branded emerging market (EM) food producers re-rated further in 2013. From an average forward P/E of 26x at the beginning of 2013 they are currently trading on a forward P/E of 30x. The Nigerian consumer stocks have likewise re-rated further, from forward P/E multiples at the beginning of 2013 of 26.6x for Nestlé, 24.2x for Unilever and 19.1x for Cadbury.”

RenCap stated that Nestlé deserves to trade at a premium due to its superior earnings track record, more consistent growth profile and apparent greater pricing power.

In addition, it expressed belief that Nestlé had invested the most among its peers for the long-term growth potential that the country offers.

Nestle Nigeria’s share price on the Nigerian Stock Exchange (NSE) closed at N1, 111 per share yesterday, while Cadbury Nigeria’s share price closed at N79 per share

Article Credit: ThisDay newspaper

Updated 5 Years ago

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Tags:     Renaissance Capital Limited (RenCap)     consumer companies     emerging market