here’s to a “bud”-ing beer giant! - united capital plc · the nigerian beer market: a mirror...

International Breweries Plc [INTBREW]

Here’s to a “bud”-ing beer Giant!

13th April, 2018

Research Analyst:

Equity Research | Coverage Initiation

Research Analyst:

Ademuwagun Yinka

[email protected]

Wale Olusi

[email protected] Investment case

We are initiating coverage on INTBREW with ₦35.0 target price (TP),

implying a 10.4% upside from its current price. INTBREW merged with

INTAFACT and PABOD Ltd. Although, the stand-alone INTBREW has

historically underperformed the other two beer giants in Nigeria (NB

and GUINNESS) due to its smaller size, we are of the view that the

newly merged company is better positioned to give the other two

beer giants a run for their money. The brewer is expected to benefit

from a bigger operating capacity and the global management

efficiency of its new parent company, AB-InBev.

Core drivers of growth

We forecast FY18-FY22E revenue CAGR +15.0%, PAT +10.3%. Key

drivers include: (1) Improved operational capacity of the company

which is set to translate into increased production volumes and Sales;

(2) the possibility of a post-merger revenue-synergy should translate

into bottom-line growth (3) positive overall economic outlook which

bodes well for the sector.

Risks to the investment case

The risks to our overall outlook for the brewer include: (1) Integration

risk; (2) Political risk associated with the upcoming 2019 election and;

(3) Increased competition.

Valuation

Our TP of ₦35.0 is derived using the Discounted Cash Flow (DCF)

Methodology. We use a WACC of 14.8%. Thus, we computed the

Enterprise Value, then deducted net market debt to get the Equity

Value.

Risk Rating: High

Key Data

Price Performance Chart

Stock Rating

HOLD

Target Price

N35.0

Expected Return

10.4%

Last Price (₦) 32.0

Last Price ($) 0.1

52 week High/Low (₦) 69.4/ 30.5

1M Price Change (%) -19.9




YTD Change (%) -41.3

Beta 0.8

Market Capitalization (₦’m) 275,067.6

Market Capitalization ($’m) 760.9

Shares Outstanding. (Units’m) 8,595.9

Float (%) 71.0

Dividend Yield (%) 0

Note: Refer to disclosure appendix for complete description of risk rating

Valuation Statistics

Pre-Merger

12M-17

Post-Merger

9M-17 12M-18f

P/E (x) 51.0 327.8 43.9

EPS (N) 0.3 0.2 -0.2

P/BV (x) 3.8 11.1 7.1

Dividend Yield (%) 0.0 0.0 0.5

Sources: Bloomberg, United Capital Research Sources: Company Flings, United Capital Research Estimates

INTBREW

0

5

10

15

20

25

30

0 5 10 15 20 25 30

Ea

rnin

gs V

ola

tilit

y (%

)

Price Volatility (%)

0.0

1.0

2.0

3.0

Aug-17 Nov-17 Feb-18 May-18 Aug-18

INTBREW FMCGs NSE-ASI

10th August, 2018

International Breweries Plc (Bloomberg: INTBREW NL, Reuters: INTBREW.LG, NSE: INTBREW)

2

International Breweries Plc: Summary Financials

Income

Statement

(N'm)

Mar'17 Dec'17 Dec'18F Dec'19F Balance Sheet

(N'm)

Mar'17 Dec'17 Dec'18F Dec'19F

12'M 9'M 12'M 12'M 12'M 9'M 12'M 12'M

Revenue 32,711 36,528 91,320 105,017 Non-C/Assets:

COGS -17,547 -22,820 -51,643 -59,504 PPE 31,748 191,555 250,897 288,531

Gross Profit 15,164 13,708 39,676 45,513 Other LT Assets 1,275 22,213 31,096 35,760

OPEX Margin -7,182 -10,636 -26,591 -30,580 Total NCA 33,023 213,768 281,993 324,291

Other Income 102 123 215 283 Current assets:

EBIT 8,084 3,195 13,300 15,216 Inventories 3,835 16,205 22,685 26,088

Finance

Income 3 533 558 800 Receivables 6,939 15,750 22,049 25,356

Finance

Expense -5,196 -6,927 -16,728 -13,654 Cash 1,165 8,098 28,426 32,690

PBT 2,892 -3,200 -2,871 2,362 Total CA 11,939 40,053 73,161 84,135

Taxation -1,857 4,629 1,173 -965 Total Assets 44,963 253,821 355,329 408,628

PAT 1,034 1,429 -1,698 1,397

Ratios Mar'17 Dec'17 Dec'18F Dec'19F Non-C/Liabilities:

D/E 2.2 5.0 7.4 8.5 Deferred tax 4,386 24,454 33,998 39,441

Leverage 0.7 0.8 0.9 0.9 Borrowings 0 18,171 131,294 144,679

Asset Turnover 0.8 0.2 0.3 0.3 Employee benefits 510 794 3,216 3,203

Inventory

Turnover 5.2 2.3 2.7 2.4 Payables 137 147 760 784

ROA 2.3% 0.6% 3.7% 3.7% Total NCL 5,032 43,566 169,268 188,107

ROE 7.5% 3.4% -4.0% 3.2% Current Liabilities:

DPS 0.0 0.0 0.3 0.3 Payables 12,476 94,828 100,037 127,032

EPS 0.3 0.2 -0.2 0.2 Current tax 1,423 2,634 7,371 8,549

BVP 4.2 4.9 4.9 5.0 Employee benefits 165 545 1,179 1,245

Current Ratio 0.5 0.2 0.5 0.5 Borrowings 11,988 69,872 35,219 40,501

Cash ratio 0.0 0.0 0.2 0.2 Total CL 26,052 167,879 143,806 177,328

Quick ratio 0.3 0.1 0.4 0.3 Total Liabilities 31,084 211,445 313,075 365,434

Growth &

Margins (%) Mar'17 Dec'17 Dec'18F Dec'19F

Gross Margin 46.4% 37.5% 43.4% 43.3% Equity:

OPEX Margin 22.0% 29.1% 29.1% 29.1% Share Capital 1,647 4,298 3,177 3,177

EBIT margin 24.7% 8.7% 14.6% 14.5% Share Premium 6,161 6,161 4,555 4,555

Interest burden 0.4 -1.0 -0.2 0.2 Other Reseves 1,361 1,361 1,006 1,006

Interest

Coverage 1.6 0.5 0.8 1.1 Retained Earnings 4,710 30,557 33,516 34,456

Tax burden 0.4 -0.4 0.6 0.6 Total Equity 13,879 42,376 42,254 43,194


3

Table of Content

Industry Overview ····································································································· 4

A look inside the global beer market: The changing landscape ························································· 4

The Nigerian Beer Market: A mirror image of events in the global space ············································ 5

Strategy, Profile & Outlook ························································································· 9

Company Background ·················································································································· 9

The New International Breweries and AB-InBev strategy for Africa ···················································· 10

Brand Portfolio and Geographical Foot-print ················································································· 12

Financials ··············································································································· 14

Revenue and Earnings growth trends ···························································································· 14

Liquidity and Solvency ················································································································· 15

Return on Equity Analysis ············································································································· 16

Post-merger Analysis ··················································································································· 16

Earnings Outlook ························································································································ 16

Valuation Analysis ·································································································· 18

Price Target and Recommendation ······························································································ 18

Valuation Analysis ························································································································ 18

DCF Valuation Summary ·············································································································· 18

Comparable Analysis ··················································································································· 19

Key Risks ················································································································· 20

#1– Credit risk······························································································································ 20

#2 - Liquidity risk ·························································································································· 20

#3– Regulatory risk ······················································································································· 20

#4 - Economic risk ························································································································ 20

#5 - Competition risk ···················································································································· 20

#6 - Negative synergy risk ············································································································· 20

Appendix ················································································································ 20

Disclosure Appendix ································································································ 21


4

Industry Overview

A look into the global beer market: The changing landscape

Beer is the most widely consumed alcoholic beverage in the world and third most popular

type of drink after water and tea. Beer is made mainly from malted barley, hops, yeast

and water but comes in different flavor and type (Lager, Ale, Stout and Malt among

which, ale and lager are the two most commercially consumed beers) depending upon

the ingredients. Over the last 10 years, volume growth for top brewers has slowed

significantly, down 9.5% in 2016 amid weaker momentum across developed markets.

However, growth in Emerging Markets (EMs) has continued to trend up due to gradually

increasing consumption per capita.

The industry is heavily dependent on commodities such as barley, maize, wheat, rice and

aluminum, which are broadly susceptible to seasonal changes, unfavourable weather

and political uncertainties.

The global beer market is largely oligopolistic and extremely competitive. The industry is

predominantly a duopoly in the United States, Australia, Canada, Mexico and Brazil. Out

of the world’s top 40 beer markets accounting for 93.0% production, there are few

markets where the top three brewers have less than a 70.0% share in their home markets.

Thus, industry concentration ratio is traditionally high. Until recently, the global industry was

dominated by top four conglomerates, AB-InBev, SABMiller, Carlsberg and Heineken, who

earned close to 70.0% of the global beer market revenue. However, with AB-InBev

acquisition of SABMiller in 2016, the competitive landscape has now been trimmed to the

remaining 3-players with AB-InBev now the outright “Beer Giant.”

Exhibit 1: Top 4 brewers by global market share. AB-InBev maintains number 1 spot in the highly competitive global beer market industry.

Sources: Bloomberg, United Capital Research

AB-InBev’s acquisition

of SABMiller has

created a “beer giant”

which accounts for

almost a third of all

global beer volume. 27.3%

9.7%

6.1%

5.9%

26.8%

9.4%

6.0%

5.9%

26.2%

9.1%

6.0%

6.1%

0% 5% 10% 15% 20% 25% 30%

Anheuser-Busch InBev SA/NV

Heineken NV

China Resources Holdings Co Ltd

Carlsberg A/S

2014 2015 2016


5

Industry consolidation is by far the most remarkable trend driving growth and expansion in

the sector amid shifting preference for EMs by brewers. In the last two decades, the

industry has gone through continued and steady consolidation as players forge stronger

alliance to boost profitability and stay globally competitive. Over some decades ago the

global beer industry was highly fragmented with Anheuser-Busch's 8.5% market share

enough to make it the global leader. Since then, a steady process of consolidation via

M&A has taken place - often focused around cost-cutting opportunities (e.g. the $60.0bn

merger of Anheuser-Busch and InBev completed in 2008) or geared towards acquiring

attractive emerging market assets (e.g. Heineken's $24.0bn acquisition of Asia Pacific

Breweries completed in 2012). Ability to expand and possibly acquire less dominant

players is a major driving force in increasing market share and maintaining dominance.

In October 2016, the world’s top two brewers, Anheuser-Busch InBev (AB-InBev) and

SABMiller (SABM) agreed to one of the biggest mergers in corporate history following

SABMiller’s acceptance of over $100bn offer by AB-InBev. This granted AB-InBev (with

already strong presence in North and South America) an unfettered access to Africa and

large fast-growing Latin American markets such as Colombia and Peru where SABMiller

has hitherto dominated for most of the last decade. AB-InBev’s appetite for emerging

and frontier economies is driven by the stagnant or declining per capita consumption

across advanced economies where the brewer controls the largest market share, relative

to Africa and other emerging and frontier markets with growing middle class, low beer

consumption per capita, and huge potential for growth.

Top brewers look to

Emerging Markets

(EMs) for growth

opportunities amid

weaker growth in North

America and Europe.

50.3

24.7

13.9 13.811.0

9.4

4.4

10.7

41.4

23.0

11.0 12.1

4.9

9.3

4.3

16.9

40.6

22.8

9.912.1

3.6

9.7

4.5

23.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

AB

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He

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Asa

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Ca

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erg

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Ch

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Re

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s

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ers

2017 2016 2015

Sources: Bloomberg, United Capital Research

Exhibit 2: Total annual beer sales value ($’bn) by company. Since 2015, AB-InBev and Heineken accounts for more than 50.0% of the total beer sales in the global market.


6

The Nigerian Beer Market: A mirror image of events in the global space

Similar to the global market structure, the Nigerian beer market is a highly competitive

oligopoly. Industry concentration ratio, measured by Herfindahl-Hirshman Index (HHI) is

pegged at 4,686.4pts with Nigerian Breweries Plc (NB), a subsidiary of Heineken controlling

more than 60.0% of market share followed by Guinness Nig. Plc (GUINNESS), also affiliated

to Diageo, another global player, with over 25.0% market share. Until recently, Intafact

Breweries Ltd. (7.3%), International Breweries Plc (5.3%) and Pabod Breweries (2.7%), which

were all subsidiaries of SAB Miller before the merger with AB-InBev, occupied third, fourth

and fifth position by market share while Champion Breweries Plc. (CHAMPION) controlled

0.8%. Yet, this reflects the impact of series of mergers and acquisition that has seen the

industry evolve from several regional breweries into what is obtainable today.

NB has over the years acquired several regional breweries to stay dominant in the market,

with the most recent being the acquisition of Sona and Life Breweries Limited from

Heineken N.V., its parent company in 2011 and the merger with Consolidated Breweries

Plc, (CONSBREW) in 2014, giving the brewer national footprint across the 6 geopolitical

zones of the country, conferring a major competitive advantage on NB over rivals.

Given the foregoing, the industry has been broadly skewed in favour of NB which

dominates the sector in terms of geographical footprints, production capacity, revenue

size and cost leadership. However, the entry of AB-InBev, the largest beer company in the

world, into the Nigerian beer market, following the acquisition of SAB Miller, seems to be

pitching the two largest global players in the industry against each other. This follows the

recently completed merger of Intafact Breweries (INTAFACT), International Breweries

(INTBREW) and Pabod Breweries (PABOD) by AB-InBev, consolidating all its operations in

Nigeria into International Breweries plc. Thus, INTBREW has emerged as the third largest

player in the Nigerian beer market.

With HH-Index currently

far above 2,500 pts,

Nigerian brewery

industry more like its

global peers is highly

concentrated. Exhibit 3: Market Share and Industry Concentration Analysis Nigerian brewery industry is currently highly concentrated, as indicated by the HH-Index.

N.B: HHI is a common measure of industry concentration and the score is calculated as the sum of the squares of

the market shares of an industry's competitors. HHI levels of 1,500-2,500 is considered to be consistent with

moderately concentrated markets, and levels above 2,500 signifies high concentration.

Sources: Company Report, United Capital Research Estimates

The battle for market

share between the two

global beer giants (AB-

InBev and Heineken)

has gradually been

extended to the

Nigerian market.

NB 58.70% NB 63.50% NB 63.50% NB 64.30%

GUINNESS 24.10% GUINNESS 20.70% GUINNESS 20.70% GUINNESS 20.70%

CONSBREW 7.40% CHAMPION 0.80% CHAMPION 0.80% INTBREW 15.00%

CHAMPION 0.90% INTAFACT 7.30% INTBREW 15.00% TOTAL 100.00%

INTBREW 4.30% INTBREW 5.00% TOTAL 100.00%

INTAFACT 3.00% PABOD 2.70%

PABOD 1.60% TOTAL 100.00%

TOTAL 100.00% HHI 4686.4pts

2014 2016 2018E 2020F

Concentration Ratio

2018


7

Until the merger, INTBREW, PABOD, and INTAFACT had established strong footprints in

terms of mainstream value brands in the S/West, S/East, and S/South regions of Nigeria

respectively. Therefore, the consolidation of the three subsidiaries is expected to

challenge the continued dominance of NB in the market.

Competitive Analysis

Apart from intense competition, the bargaining power of suppliers is high due to huge

dependence on the global commodity market for malting grains such as barley, wheat,

sorghum, maize and rice. As such, production cost is heavily related to vagaries of the

Agric sector, with players investing heavily in fertilizers, farming, and R&D to boost

production. Bargaining power of the buyer is also strong as consumers can easily switch

from one brand to the other amid strains on disposable income and affordability. Hence,

guerrilla marketing is a common feature in the sector amid massive expenditure on

advertisement. Threat of New entrants is weak due to the high CAPEX required but the

threat of substitution is also growing amid increasing appetite for Spirit, Juice, and other

Ready-to-Drink mix.

A critical factor driving global interest in the local beer market is the demographic appeal

of the Nigerian economy. While Africa and other emerging markets remain the sweet

spots for growth amid weaker momentum in the advanced economy, Nigeria’s massive

consumer market is one of the most attractive. With a population size of roughly 200m

people, a growing middle class and significantly low beer consumption per capita

(BCPC) the payoff from investment in the sector is huge. Compared to average BCPC of

36.0 litres a year for peer economies, consumption is Nigeria is estimated at 11.0 litres a

year.

Despite the limited

threat of new entrance

the Nigerian Beer

Industry remains highly

competitive.

Exhibit 4: Nigeria Beer Industry Competitive Analysis Of all the Porter’s five forces, the threat of new entrants is the only weak competitive factor.

Sources: United Capital Research Estimates


8

However, the major challenges constraining growth in the sector include rising health

consciousness and traditional disapproval of alcohol consumption amid high level of

religiosity. Nigerians are highly religious people with Islam and Pentecostal Christianity

(both disapprove alcohol consumption) dominant in the North and the heavily

populated S/West regions respectively. Low sentiment in the north is further worsened by

protracted security crisis in the north/east, even as increased competition from

non-alcoholic beverages continues to constrain volume.

There is lot of potentials

for growth in Nigeria’s

brewery industry, given

the country

comparatively low

Beer consumption per

capita.

Exhibit 5: Comparative Beer Consumption Per Capita (liters') Relative to other peer African countries, Nigeria still has room for growth in beer consumption.

Sources: Euromonitor, Ab-InBev, Heineken, Bloomberg, United Capital Research

62

50

40

46

11 9

-

10

20

30

40

50

60

70

S/Africa Angola Kenya Namibia Nigeria Tanzania

BCPC Peer average Global average


9

Strategy, Profile & Outlook

Company Background

INTBREW is now the third largest brewer on the Nigeria Stock Exchange. Incorporated in

December 1971, the company commenced production of its flagship product, Trophy

Lager, in 1978 with an installed capacity of 0.2m hectolitres (mhl)/annum. In 1994,

INTBREW became a public limited liability company and was listed on the Nigerian Stock

Exchange (NSE) in 2005. After more than a decade of sustained losses, the company

renewed the drive for revenue growth in 2009 following an equity capital raise in 2008

alongside the implementation of a turnaround strategy that saw a rejuvenation of the

brewing plant in Ilesha, Osun State, where it currently operates from. This move has been

integral to the transformation, expansion and renewed profitability of the company in

recent time. The Company also operates depots in Ibadan, Lagos and Ilorin to facilitate

the re-distribution of its products in the wider urban area, especially the South Western

region of Nigeria. INTBREW’s product portfolio include Trophy Lager (currently a regional

premium brand with growing popularity among the south-western consumers), Castle

stout milk, Castle lager, Grand malt, Beta malt and Voltic water.

From SABMiller taker-over to the AB-InBev Acquisition

Until recently, ownership was divided between L.A. Pro Shares Limited which held 46.2%,

Brauhaase Intl Mgt GMBH with 46.0% and 8.0% is by the public. From a unit price of

87kobo in 2007, the company’s share price rose to N30 in January 2014, broadly driven by

the consolidation of Castel and SABMiller businesses in Nigeria and Angola. This resulted in

the takeover of operational control of INTBREW, by SABM in Jan-2012. SABM was the

second largest brewer in the world by volume, and largest in Africa with interests in 32

African countries. SABM had earlier ventured into Nigeria in 2009 with the purchase of a

controlling interest in Pabod Breweries in P/Harcourt Nigeria. In 2017, AB-InBev announced

the consolidation of all its operations in Nigeria into International Breweries plc (INTBREW),

bringing about a major reorganisation of the ownership structure of INTBREW and

positioning the brewer as the 3rd largest player in the Nigerian beer market.

Starting with just one

brand, Trophy Lager,

the brewer had since

introduced additional

10 brands of beer.

On announcement of

the scheme of merger

INTBREW became the

6th largest company

on the NSE by market

cap.

Exhibit 6: AB-InBev’s One Nigeria merger The combination is expected to deliver operational synergy for the enlarged INTBREW

PABOD INTBREW

INTAFACT

Post-merged INTBREW

Sources: AB-InBev, United Capital Research


10

Before the merger, INTBREW, PABOD, and INTAFACT had established a strong footprint in

terms of mainstream value brands in the S/West, S/East, and S/South regions of Nigeria

respectively. Therefore, the consolidation of the three subsidiaries is a strategic move by

AB-Inbev to challenge the continued dominance of Nigerian Breweries Plc (NB) in the

Nigerian market. Notably, INTBREW appreciated 194.6% on the floor of the Nigerian Stock

Exchange in 2017 following the announcement of a scheme of merger.

Until the merger, INTAFACT was incorporated in February 2007. The company’s principal

activities included the manufacture, distribution and sale of a variety of alcoholic and

non-alcoholic beverages. INTAFACT’s brewery is situated in Onitsha, Anambra State. In

August 2012, It completed the construction of a 500,000-hectolitre greenfield brewery in

Onitsha. As a result, production capacity was increased to 1.2mhl in 2013, and

subsequently the current 2.7mhl in 2014. INTAFACT’s product portfolio included Hero lager

beer (its flagship product), Eagle lager beer, Trophy lager beer, Castle Milk stout, Grand

Malt, Beta Malt, Chibuku, Miller Genuine Draft and Super Shake Yogurt drinks.

PABOD was incorporated in 1978 and situated in Oginigba, Port Harcourt, Rivers State. The

company engaged in manufacturing, distributing and selling a variety of alcoholic and

non-alcoholic beverages. Commissioned as a brewery in July 1983 by the Rivers State

Governor, Melford Okilo. After operating for about 7 years, PABOD Breweries became

non-operational for ten years from 1990 to 2000. In May 2000, a process of reviving the

brewery commenced, with Brewtech Nigeria Limited acquiring majority of the shares held

by the Rivers State Government. PABOD’s production capacity increased steadily

overtime. PABOD’s product portfolio included Grand Lager, Grand Malt, Grand Malt Zero,

Beta Malt as well as the distribution of Hero lager beer, Eagle Lager beer and Beta Malt,

Miller Genuine Draft, Betamalt, Redds, 1960 Rootz, and Voltic Water

INTBREW has over the

years built wining

beer brand portfolio.

Exhibit 7: Timeline of INTBREW’s Historical Share Price INTBREW has evolve from learning Nigeria’s operating environment, building capability and setting a base, to growth acceleration.

Sources: Bloomberg, AB-InBev, United Capital Research

-5

5

15

25

35

45

55

65

Ma

y-0

8

Ma

y-0

9

Ma

y-1

0

Ma

y-1

1

Ma

y-1

2

Ma

y-1

3

Ma

y-1

4

Ma

y-1

5

Ma

y-1

6

Ma

y-1

7

Ma

y-1

8

Grand lager, Grand

malt, Beta malt launch

Capital

raise

Trophy

launch

SAB Miller

takeover operational

control

Hero

launch

Castle Lite

launch

Eagle

launch

Budweiser

launch

Merger

AB-InBev acquires

SABMiller


11

Strategy and Outlook:

The New International Breweries and AB-InBev strategy for Africa

On completion of the scheme of merger, AB-InBev, now controls over 70.0% of the larger

INTBREW, with direct and indirect stake of 75.1%, representing the 47.4% held by SABMiller

Nigeria Holdings BV, and 27.7% held by Brauhaase International Management GMBH.

Also, Anambra State Government holds a 4.7% stake in the new company, while minority

holding amounts to 20.0%. With Ab-InBev in control, the consolidation is expected to

establish INTBREW as vibrant player in the Nigerian beer market in terms of geographical

footprints and production capacity, distribution network, brand portfolio and overall

market share. With growth in the largest markets in the US and the rest of the advanced

economies now weakening as drinkers shun mainstream lagers for craft brews and

cocktails, the Ab-InBev/SABM deal was targeted at boosting AB-InBev’s footprint across

the African continent.

The African beer market is projected to grow by more than 3.0x global beer market

growth over the next 10 years, driven by rise in the legal drinking age population amid

fast-growing urban population as well as upwardly mobile middle class which prefers

branded beer names to crude brews that have long been the culture across the

continent. From all indication, the merger of the three regional subsidiaries is a strategic

move by AB-InBev to develop a solid footprint in Nigeria, being the largest consumer

market in Africa. Thus, Ab-InBev’s drive to build the “First Truly Global Beer Company”

suggests that the brewer will apply its combined experience in developing global brands,

national icons and local brands, to fast track INTBREW’s growth in Nigeria over the next

5years.

The consolidation is

expected to establish

INTBREW as vibrant

player in the Nigerian

beer market.

Given the growth

potential in Nigeria, the

merger of the three

regional subsidiaries

gives AB-InBev a solid

footprint in Nigeria.

Exhibit 8: INTBREW’s Percentage Ownership Structure Ab-InBev, now the ultimate parent of INTBREW via direct and indirect stake in SABMiller Nigeria Holdings BV, and Brauhaase International Management GMBH.

Sources: Company Notes, United Capital Research


12

More capacity and products

AB-InBev established a $250mn mega plant in Shagamu, Ogun state, the fourth in the

country. According to management, the Shagamu plant is AB-InBev’s largest brewery in

Africa outside S/Africa. On launching, the brewing plant is expected to boost production

capacity from c.5.7mhl to c.7.7mhl and supply of the Trophy and Hero lager brand across

the Southern part of the country where it has established its geographical footprint.

Notably, the merger of the three regional breweries has pushed the combined install

production capacity of the new INTBREW to 5.7mhl, 0.2mhl ahead of GUINNESS with

5.5mhl capacity, although still well below Nigeria Breweries’ 19.1mhl.

Beyond the expansion of consumption base of the mainstream local brands (Trophy and

Hero), Annabelle Degroot, the Managing Director of INTBREW stated in a press briefing in

Nov-17, that AB-InBev would be widening its product portfolio in Nigeria by introducing

some of the global brands such as Budweiser (the Bud), Corona, Stella Artois into the

Nigerian market to give consumers a wider range of brands to choose from. Specifically,

the Budweiser brand, which received FIFA’s nod as the official sponsor of the World Cup,

was launched in April-18, as the beer maker leveraged on Nigeria’s qualification for the

Russia 2018 FIFA World Cup Tournament to capture the attention of sport loving Nigerians

during the quadrennial football event. Pointers from the new management, however,

suggests that focus will remain on local brands which have already gained domestic

acceptance.

Exhibit 9: Installed Capacity by Players in 2017 vs. Forecast (in million hector litres) INTBREW is estimated to be Nigeria’s second largest brewer, spurred by the investment in Sagamu brewery which commenced operation in 2018

Sources: Company Notes, United Capital Research Estimates

The Sagamu brewery is

expected to spur

INTBREW’s operating

capacity far above

GUINNESS

19.1

5.7 5.5

0.5

19.1

7.7

5.5

0.5

NIG. BREW INTBREW GUINNESS CHAMPION

2,017 2,018


13

Historically, Ab-InBev has utilized locally sourced raw materials to optimize production

cost. We observe that save for malting barley, which is locally unavailable, c.70% of

INTBREW’s raw materials such as Sorghum, Maize, Millet, Cassava and packaging

materials are sourced locally. Management also noted the possibility of increasing local

content from Sorghum and Cassava leveraging on experiences in many African

countries. With Nigeria being one of the world’s largest producer of Cassava, Sorghum,

and Millet with market share of 20.6%, 10.9%, and 5.2% respectively. The brewer’s

commitment to local content is expected to boost the productivity of emerging farmers,

accelerate the development of the sector, promote rural employment, and increase job

creation in Nigeria. Our thinking is buttressed by the observation of events in S/Africa

where AB-InBev is looking at investing R610m to develop the capacity of 800 new

emerging farmers and 20 new commercial farmers, to add 475,000 tons of barley to be

malted. This is expected to boost the country which was a net importer of 75,000 tons of

barley in 2015, thus, creating at least 2,600 new farming jobs in South Africa.

Save for malting barley,

which is locally

unavailable, c.70% of

INTBREW’s raw

materials are sourced

locally.

Exhibit 10: Brand Portfolio and Geographical Foot-print Local content strategy: Domestic sourcing to keep local content at 70.0% of raw materials.



14

Financial forecasts:

INTBREW operates via a regional route to the market. Major product portfolio is

concentrated in the lower end/value segment of the market, which currently drives

overall volume growth in the market.

Revenue and Earnings Growth Trends:

The financial profile of INTBREW over the last five years is reflected in two key line items;

Revenue and Earnings. Prior to the merger, INTBREW operated a 12 month financial

period, ending March and boast of an impressive 18.5% Compounding Annual Growth

Rate (CAGR) in turnover between Mar-13 and Mar-17.

However, it recorded a negative CAGR of 18.4% in Profit after taxation (PAT) over the

same period. The poor showing in the bottom-line is hinged on the high cost of financing

its debt obligations. Compared to other peer companies like NB (9.3%) and GUINNESS

(5.8%), the company’s Interest expense have skyrocketed over the years with a 5-year

CAGR of 126.4%. As of March 2017 FY result, INTBREW’s revenue increased 40.6%y/y to

N32.7bn while PAT contracted 61.0%y/y as interest expense continued to pressure profit,

growing by a massive 203.9%y/y. We see a continued double-digit organic growth trend

in revenue for INTBREW but our outlook for net organic growth is not impressive except in

the event of drastic cost restructuring.

Note: INTAFACT and PABOD were both a private company prior to the merger, making it

difficult for us to analyse their historical financial scorecards. However, based on capacity

of all the three companies, INTAFACT currently boast of the largest operating capacity of

2.7mhl, which likely means it also boast of higher revenue relative to the other two

companies.

While y/y sales growth

has been impressive

and consistent, Post-tax

profit has been largely

underwhelming.

Financials

Exhibit 11: Y/Y Growth in Sales revenue, Pre-tax and Post-tax profit or loss Steady growth in Sales revenue viz. declining bottom-line.

Sources: Company Filings, United Capital Research

6.4%

11.7% 12.7%

40.6%

10.3%

-28.2%

29.9%

-20.9%

-9.7%-7.4%

36.3%

-61.0%-70.0%

-50.0%

-30.0%

-10.0%

10.0%

30.0%

50.0%

Mar'14 Mar'15 Mar'16 Mar'17

Sales PBT PAT


15

Liquidity and Solvency

INTBREW’s current debt obligation have largely overshadowed its current assets. A 5-year

review shows that the brewer’s Current Ratio has deteriorated over the years with an

average of 0.6x and a high of 0.8x, dragged by its increasingly high Trade and other

Payables. The Company recorded a 5-year low Current Ratio of 0.2x in its recent 9M-17

result. Also, the brewer’s Quick Ratio exhibited a declining trend, averaging 0.3x in the last

5 financial years, compared to NB’s 0.4x and GUINNESS’ 0.7x. This means that INTBREW’s

readily available assets cannot cover all or more of its current debt obligations and on a

comparative basis, it’s underperformed peer companies. However, we believe INTBREW’s

Liquidity position will stabilize over time but remain relatively low as the company plans on

embarking on strategic working capital management.

INTBREW’s capital structure shows disparate levels of debt and equity financing. Total

Debt to Equity ratio spiked on consolidation, averaging 1.6x between Mar-14 and Mar-17,

and touched a high of 5.0x in its consolidated 9M-17 result. Also, the Interest Coverage

ratio which weighs the interest burden of the Company assumed a declining trend from

Mar-13 to Dec-17 (indicating a higher interest burden), and touched 0.5x in the recent

consolidated 9M-17. Also, a 5-year average of 2.4x compares unfavourably with NB’s

and GUINNESS’ average of 7.8x and 4.0x respectively over the same period. This shows

that the company is currently highly levered and has a much volatile earnings compared

to NB and GUINNESS.

Exhibit 12: Summary of key Financial, Liquidity and Return ratios.


INTBREW’s liquidity ratio

has underperformed

peers, in the last

5-years.

Mar'14 Mar'15 Mar'16 Mar'17 Dec'17

Liquidity Ratio

Current Ratio (x) 0.8 0.7 0.5 0.5 0.2

Quick Ratio (x) 0.5 0.5 0.3 0.3 0.1

Cash ratio (x) 0.1 0.1 0.1 0.0 0.0

Inv entory turnov er (x) 4.1 4.6 4.4 5.2 2.3

Financial Risk Ratios/Gearing Ratios

Debt to Equity Ratio 1.2 1.5 1.4 2.2 5.0

Total Liabilities to Total Asset Ratio 0.5 0.6 0.6 0.7 0.8

Interest Cov erage Ratio 4.4 2.5 3.0 1.6 0.5

Return on Investment Ratios

ROA 8.6% 6.5% 7.9% 2.3% 0.6%

ROE 18.7% 16.0% 19.0% 7.5% 3.4%


16

Return on Equity

A diagnosis of INTBREW’s Pre-Merger Return on Equity (ROE) over a 5-year horizon shows

appreciable performance even as growth in the company’s bottom-line has largely

tracked behind Revenue growth. ROE, though not stable, has averaged 12.9% over the

last 5-years. Despite a 38.2% y/y rise in Post-tax profit, recorded in 9M-17, ROE touched its

lowest in 5-years of 3.4% (as total equity value on consolidation grew by 205.3% y/y). We

note that INTBREW has historically matched GUINNESS return on equity, which also

averaged 12.9% over the last 5-years, albeit below NB’s 5-year average ROE of 28.5%.

A DuPont analysis showed the major source of the brewer’s pre-merger ROE is Net profit

margin as Equity multiplier and Asset turnover have been stable over the last five years,

averaging 2.7x and 0.8x respectively. Thus, greater margin improvement could serve as

key driver of ROE.

Post-merger Earnings Analysis

Following the successful approval to change INTBREW’s year end to December 31st from

the previous March 31st, the brewer published its audited consolidated 9M-17 results,

which captured just the previous nine months and the performance of PABOD and

INTAFACT from the date the merger was consummated by AB-Inbev on November 13,

2017 to December 31, 2017.

The 9M-17 result was largely characterised by slowdown in gross margin, increased OPEX/

sales ratio and a rise in net finance cost which more than outweighed the growth in top-

line against the previous comparable 12M period ending Mar-17. Consequently, INTBREW

reported a N3.2bn Loss Before Tax relative to a PBT of N2.9bn in the prior comparable

period ending March 2017. Nonetheless, we note that the PAT of N1.4bn recorded in the

prior year was driven by the increase in deferred tax assets on consolidation. Quarterly

results post-merger have been largely underwhelming, with earnings weighed down by

strong competition, rising administrative expenses and high borrowing costs resulting from

the company’s recent plant expansion. In its recent H1-18 earnings scorecard, the

company recorded further improvement in its top-line number as revenue grew by 2.1x to

N53.1bn (compared with N17.4bn pre-merger). Bottom-line numbers remained rooted in

the negative as it reported Pre-tax and Post-tax losses of N5.2bn and N2.8bn respectively,

amid ballooning costs on consolidation (following the debt it undertook to fund its

Sagamu plant expansion).

Earnings Outlook

Looking ahead, we expect the company to enjoy revenue synergy beyond 2018, due to

increased operating capacity post-merger, as well as the $250mn investment in new

capacity in Sagamu, which commenced operation in H1-18. In the near term, we are

likely to see the company’s performance supported by election spending in H2 -18. Also,

recent introduction of the Premium label Beer “Budweiser” of AB-InBev should be

supportive of the brewer’s top-line performance. However, we expect that the potential

improvements in the company’s performance to be capped by intensifying competition

Base on DuPont

analysis, Net profit

margin is the major

driver of INTBREW’s ROE.

Management may look

to restructure its current

capital structure by de-

levering the company’s

balance sheet via an

equity capital raise.


17

in the Brewery sector, as well as the recent change in excise tax on alcoholic beverages

which took effect from Jun-18.

Given the firm’s rising costs and stratospheric consolidated debts, we note that the

improvement in top-line might struggle to trickle down to the bottom lines. However, to

return INTBREW to profitability, management may look to restructure its current capital

structure by de-levering the company’s balance sheet via an equity capital raise.

We have not modelled this scenario as the current bearish equity market sentiments pose

as a key deterrent in our view.


18

We initiate with a target price of ₦35.0.

We valued INTBREW using a discounted cash flow methodology as our primary metric. The

brewer’s history of poor dividend payment, with preference for retaining a large chunk of

its profit, makes it inappropriate to value INTBREW using dividend discount model.

However, we believe that valuing the company using the Free Cash flow (FCF) model

gives a true reflection of the company's fair value.

As such, our valuation applies explicit medium term forecast for the next 5-years to

FY-2022E. We estimate 5-year revenue CAGR of 15.5% led by volume growth. We expect

INTBREW to deliver better operating performance than GUINNESS in the medium to long

term, as the brand gains scale. Post-merger, we estimate normalized EBITDA and PAT

margins of 13.0% and 10.3% respectively.

We applied a weighted average cost of capital of 14.8% and assumed a long-term

sustainable growth rate of 10.0%, in computing the firm’s terminal value. Thus, we

computed the Enterprise Value, then deducted net market debt to get the Equity Value.

On the basis of our DCF valuation, the fair value of INTBREW is computed at N33.0,

yielding a 12-months target price of N35.0, and indicating an upside potential of 10.4% to

Friday 10th of August market price.

Valuation

Exhibit 13: Valuation Inputs


We initiate coverage

on INTBREW with a Hold

recommendation and

a target price of N35.0.

Exhibit 14: DCF Valuation Summary


(N'bn) 2018f 2019f 2020f 2021f 2022f

EBIT 13.3 15.2 16.7 17.9 22.3

Adjusted EBIT 60.6 63.8 66.8 70.0 74.7

Tax 1.2 (1.0) (0.2) (0.8) (1.0)

Capital Expenditure (59.3) (37.6) (43.3) (49.8) (57.2)

Changes in Working Capital (2.2) 21.5 16.3 7.3 20.9

FCFF 0.3 46.7 39.5 26.8 37.3

Discount Period 0.50 1.50 2.50 3.50 4.50

WACC 12.8% 13.2% 13.5% 11.9% 11.2%

DCF 0.2 38.8 28.8 18.1 23.1

PV Terminal Value 360.5

Enterprise Value 469.5

Total Debt (194.3)

Cash 8.1

Equity Value 283.3

Shares (mn) 8,595.9

Fair Value (N) 33.0

12M TP (N) 35.0

Metric Value

Risk-free rate (%) 12.0

Market Risk Premium (%) 8.0

Beta 0.6

WACC (%) 14.8

Sustainable growth rate (%) 10.0

After-tax cost of debt (%) 10.8


19

Comparable Analysis

While we have valued INTBREW using the DCF valuation, we also did a comparable

analysis of the company to local peers. The peer set we have compiled for INTBREW

consists of domestic publicly listed brewers with similar operating capacity and

international affiliations. The peer set, showed INTBREW is currently overvalued with

current market P/E at 33.5x and modelled forward P/E at 43.9x, relative to an industry

average current and forward P/E of 26.8x and 27.0x respectively. We are of the view that

better valuation enjoyed by the brewer is an indication of the robust post-merger growth

outlook, which stoked investors appetite for the stock. However, current PE is lower

compared to forward PE of 43.9x, suggesting that the room for further uptick in price

remains enduring.

*NTM: Next Twelve Months *LTM: Last Twelve Months

Sources: Bloomberg, United Capital Research Estimates

We are of the view that

better valuation

enjoyed by INTBREW is

an indication of the

robust post-merger

growth outlook, which

stoked investors

appetite for the stock.

Exhibit 19: Peer group analysis

Trading

ComparableTicker Price (N) Sho (m) Net dbt (Nb) Mkt Value (Nb) Ent Value (Nb)

Nig. Breweries NB 103.0 7996.9 24.3 823.7 848.1

Guinness Nig. GUINNESS 94.0 2190.4 5.1 205.9 203.8

Int'l Breweries INTBREW 32.0 8595.9 111.1 262.2 281.4

Mean 76.3 6261.1 46.8 430.6 444.4

Trading

ComparableLTM NTM LTM NTM

NB 171.5 63.5% 80.2 88.9 336.2 351.5

GUINNESS 85.9 20.7% 25.8 23.7 141.5 138.5

INTBREW 39.5 0.2 12.3 24.6 80.2 91.3

Mean 98.97 0.3 39.4 45.7 186.0 193.8

Trading

Multiples

NB 2.9% 0.3 2.5 10.6 2.1 2.1

GUINNESS 2.5% 0.2 1.4 7.9 3.3 3.3

INTBREW 0.4 9.1 3.5 22.9 3.2 3.2

Mean 14.9% 3.2 2.5 13.8 2.9 2.9

Trading

Multiples

NB 29.6 18.5 9.5 2.4 23.9% 8.2%

GUINNESS 17.1 18.6 8.6 1.5 18.2% 6.8%

INTBREW 33.5 43.9 11.4 3.1 15.3% -3.5%

Mean 26.8 27.0 9.9 2.3 19.1% 3.8%

LTM Net Margin %

Book Value (Nb) Market Share

EBITDA (N'bn) Rev enue (N'bn)

N. dbt/EV (%) N. dbt/ EBITDA EV/Rev enue EV/EBITA BV/EBITDA BV/Rev enue

Current P/E Forward P/E EV/Forward EBITDAEV/Forward

Rev enueLTM EBITDA Margin %


20

#1. Credit risk: Credit risk encompasses all forms of counterparty exposure, i.e. where

counterparties may default on their obligations to INTBREW in relation to lending,

settlement and other financial activities. The brewer has a credit policy in place and the

exposure to counterparty credit risk is closely monitored.

#2. Liquidity risk: International Breweries‘ primary sources of cash flow have historically

been cash flows from operating activities, the issuance of debt, bank borrowings and the

issuance of equity securities. While the brewer believes that cash flows from operating

activities, available cash and cash equivalent and short term investments and access to

borrowing facilities, will be sufficient to fund capital expenditures and financial instrument

liabilities, we believe its financial indebtedness poses a downside risk to our estimate.

#3. Regulatory risk: The Nigerian beer industry is highly price sensitive and given the recent

government increments of excise duty on cigarette and beers, beer producers are likely

to pass on the effect of the indirect tax to their customers which could impact volumes

and margins adversely.

#4. Economic risk: Our outlook for the broader economy in the near-medium term is

positive. However, given the country exposure to the vagaries in the oil market, lower oil

prices may significantly affect consumer income growth and further increase the elasticity

of beer volumes to prices hikes .

#5. Competition risk: Given the nature of the Nigerian beer industry, a major increase in

competitive intensity from dominant players like NB and GUINNESS, poses a downside risk

to our estimate.

#6. Negative synergy risk: While the merger is expected to result in a revenue and cost

synergies, there is the risk that the Company may not be able to effectively integrate

additional businesses it acquires in the future i.e. the inability to integrate effectively the

operations, products, technologies and personnel of the acquired companies (most of

which are located in diverse geographic regions) and achieve expected synergies.

The brewer is faced

with a number of risk,

top of which is the

competitive and

regulatory risk.

The competitive

climate for brewers is

currently charged up

Key Risks


21

Appendix

Company Overview

Company Type: Public Company

Company Status: Operating

Website: www.internationalbreweriesplc.com

Primary Industry Classification: Brewers

Ticker: INTBREW(NSE)

Year Founded: 1971

Stock Quote and Chart (Currency: NGN)

Last Price 32.0 Market Cap (mm) 275,067.6

52 wk High/Low 69.4/ 30.5 Shares Out. (mm) 8,595.9

YTD Change (%) -43.1 Float (%) 71.0

Beta 0.8 Dividend Yield (%) 0.0%

Last Updated on August-10-2018 NGSE:INTBREW-Common Stock

Board of Directors

Name Title

Nnaemeka A. Achebe Chairman

Degroot, Annabelle Managing Director

Zuber Momoniat Finance Director

Sunday Akintoye Omole Non-Executive Director

Awomolo, Olugbenga A. Non-Executive Director

Peter Nwokike Anugwu Non-Executive Director

Michael Onochie Ajukwu Non-Executive Director

Abiye Tobin-West Non-Executive Director

Phillip Redman Non-Executive Director

Michael Daramola Member

Godwin Oche Member

Sequel to the merger of Intafact Beverages Limited and Pabod Breweries Limited with

International Breweries Plc “the new entity”, effective 13 November, 2017, it was deemed

that representatives of the merged Companies be reflected on the board of the new

entity. This necessitated a restructuring of the Board of Directors. The investing public and

esteemed shareholders are informed of the corporate changes to the Company as

follows:

Board of Directors set to be enlarged at the next AGM


22

Investment Rating Criteria and Disclosure

United Capital Research adopts a 3-tier recommendation system for assets under our coverage: Buy, Hold and Sell. These generic ratings are defined below;

Buy: Based on our valuation and subjective view (if any), the total return upside on the stock’s current price is greater than our estimated cost of equity.

Hold: Based on our valuation and subjective view (if any), the total return upside on the stock’s current price is less than the cost of equity, however, the expected total return on the

stock is greater than or equal to the Standing Deposit Facility rate of the Central Bank of Nigeria (which is currently MPR – 500bps; i.e 10%). We consider this as the minimum return

that may deserve our holding of a risk asset, like equity.

Sell: Based on our valuation and subjective view (if any), the total return upside on the stock’s current price is less than the Standing Deposit Facility rate of the Central Bank of Nigeria

(which is currently MPR – 200bps; i.e. 10%). We consider this as the minimum return that may deserve our holding of a risk asset, like equity, especially as we consider the average

4.5% total transaction cost for an average retail investor.

NR*: Please note that in addition to our three rating heads, we indicate stocks that we do not rate with NR; meaning Not-Rated. We may not rate a stock due to investment banking

relationships, other sources of conflict of interests and other reasons which may from time to time prevent us from issuing a rating on the shares (or other instruments) of a company.

Please note that we sometimes give concessional rating on stocks, which may be informed by technical factors and market sentiments.

Conflict of Interest: It is the policy of United Capital Plc and all its subsidiaries/affiliates (thereafter collectively referred to as “UCAP”) that research analysts may not be involved in

activities that suggest that they are representing the interests of UCAP in a way likely to appear to be inconsistent with providing independent investment research. In addition,

research analysts’ reporting lines are structured so as to avoid any conflict of interests. Precisely, research analysts are not subject to the supervision or control of anyone in UCAP’s

Investment Banking or Sales and Trading departments. However, such sales and trading departments may trade, as principal, on the basis of the research analyst’s published

research. Therefore, the proprietary interests of those Sales and Trading departments may conflict with your interests as clients. Overall, the Group protects clients from probable

conflicts of interest that may arise in the course of its business relationships.

Risk Rating

Our Risk rating assesses the likelihood of market price deviating significantly from valuation fair prices. Risk factors limit gravitation of market prices towards target prices or result in

significant decline in current price and thus swing buy/sell rating from positive to negative or vice versa. Risk factors are broadly grouped into systematic and unsystematic risk.

Systematic risk (also called market risk or un-diversifiable risk) captures uncertainties or volatilities inherent to the entire market. This also includes macroeconomic shocks emanating from

government actions or inactions, unanticipated policy pronouncements, external shocks and socio-political tensions which may swing market prices significantly away from targets.

Unsystematic risk (specific risk, diversifiable risk or residual risk) on the other hand captures company or sector specific uncertainties which can mostly be reduced by diversification.

These include labour union/industrial actions, corporate governance/management inefficiency, litigation, possible liquidation/winding-down of operation, internal labour unrest,

government action, policy missteps as well as disruptions resulting from innovation, technology and technical progress etc.

United Capital Research adopts a 3-tier risk rating for assets under our coverage: High, Medium and Low. The rating scale is ordinal and captures the diverse risks that we deem

applicable the company of focus. The ratings are defined below;

High: High probability of an imminent systematic risk or/and unsystematic risk

Medium: Slightly high (but lower compared to ‘High’) probability of an imminent systematic risk or/and unsystematic risk

Low: Low probability of an imminent systematic risk or/and unsystematic risk

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1. That all of the views expressed in this report articulate the research analyst(s) independent views/opinions regarding the companies, securities, industries or markets discussed in this

report.

2. That the research analyst(s) compensation or remuneration is in no way connected (either directly or indirectly) to the specific recommendations, estimates or opinions expressed in

this report.

Other Disclosures

United Capital Plc or any of its affiliates (thereafter collectively referred to as “UCAP”) may have financial or beneficial interest in securities or related investments discussed in this report,

potentially giving rise to a conflict of interest which could affect the objectivity of this report. Material interests which UCAP may have in companies or securities discussed in this report

are disclosed:

UCAP may own shares of the company/subject covered in this research report. UCAP does or may seek to do business with the company/subject of this research report UCAP may be or may seek to be a market maker for the company which is the subject of this research report UCAP or any of its officers may be or may seek to be a director in the company(ies) covered in this research report UCAP may be likely recipient of financial or other material benefits from the company/subject of this research report

Disclosure keys

a. The analyst holds personal positions (directly or indirectly) in one or more of the stocks covered in this report

b. The analyst(s) responsible for this report (whose name(s) appear(s) on the front page of this report is a Board member, Officer or Director of the Company or has influence

on the company’s operating decision directly or through proxy arrangements

c. UCAP is a market maker in the publicly traded equities of the Company

d. UCAP has been lead arranger or co-lead arranger over the past 12 months of any offer of securities of the Company

e. UCAP beneficially own 1% or more of the equity securities of the Company

f. UCAP holds a major interest in the debt of the Company

g. UCAP has received compensation for investment banking activities from the Company within the last 12 months

h. UCAP intends to seek, or anticipates compensation for investment banking services from the Company in the next 6 months

i. The content of this research report has been communicated with the Company, following which this research report has been materially amended before its distribution

j. The Company is a client of UCAP

k. The Company owns more than 5% of the issued share capital of UCAP

Disclaimer

United Capital Plc Research (UCR) notes are prepared with due care and diligence based on publicly available information as well as analysts’ knowledge and opinion on the markets

and companies covered; albeit UCR neither guarantees its accuracy nor completeness as the sole investment guidance for the readership. Therefore, neither United Capital (UCAP)

nor any of its associates or subsidiary companies and employees thereof can be held responsible for any loss suffered from the reliance on this report as it is not an offer to buy or sell

securities herein discussed. Please note this report is a proprietary work of UCR and should not be reproduced (in any form) without the prior written consent of Management. UCAP is

registered with the Securities and Exchange Commission and its subsidiary, UBA Securities Limited is a dealing member of the Nigerian Stock Exchange. For enquiries, contact United

Capital Plc, 12th Floor, UBA House, 57 Marina, Lagos. ©United Capital Plc 2016.*

Company Disclosure Dangote Cement Plc h Dangote Flour Plc h Dangote Sugar Plc h Diamond Bank Plc h FirstBank Holdings Nigeria Plc h Guaranty Trust Bank Plc h Guinness Nigeria Plc h PZ Nigeria Plc h Transnational Corporation of Nigeria Plc g, h United Bank for Africa Plc h

Disclosure Appendix

here’s to a “bud”-ing beer giant! - united capital plc · the nigerian beer market: a mirror...

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