NESTLE NIGERIA PLC. Vetiva Research 26 October Q3 10 Earnings Release. Organic Growth on Track. Fair Value Range N N426.

Similar documents
ASHAKACEM. Vetiva Research. Q3 10 Earnings Release. Margins under pressure? 4 November Fair Value Range N21.76 N24.05

VETIVA RESEARCH SELL. GUINNESS NIGERIA PLC Q3 sales hit 6 year low. Equity Research 25 April 2016

VETIVA RESEARCH

VETIVA RESEARCH BUY. SEPLAT PETROLEUM DEVELOPMENT COMPANY Outlook remains positive despite earnings miss. Equity Research 9 May 2018

LAFARGE WAPCO CEMENT PLC

VETIVA RESEARCH BUY. SEPLAT PETROLEUM DEVELOPMENT COMPANY Solid FY 18 operations in view. Equity Research 1 March 2018

UNILEVER NIGERIA PLC. Vetiva Research 08 September Q2 10 Earnings Release. Closing up unimpressively. Fair Value Range N17.50 N21.

Latest FY 16 result shows a percent YoY growth in Gross

SEVEN-UP BOTTLING COMPANY PLC

MONTHLY ECONOMIC NOTE APRIL 2011

LAFARGE CEMENT WAPCO NIGERIA PLC

FLOUR MILLS OF NIGERIA PLC

BERGER PAINTS NIGERIA PLC

SEVEN-UP BOTTLING COMPANY PLC

Earnings Update Guaranty Trust Bank PLC: Q Results

Nigeria Equities Financial Services August 23,

Unilever Nigeria Plc. Capital Bancorp Plc (Member of the Nigerian Stock Exchange) Passionately Eager to weather the storm. Investment Summary

Dangote Cement Plc. Improved Product Pricing Boosts Earnings. Nigeria Equities Industrial Goods April 3, 2018

Nestlé India Outlook Hazy; Valuations Prohibitive

Dangote Cement Plc. Higher Volume, Improved Pricing and Exchange Rate Benefit Impact Earnings. Nigeria Equities Industrial Goods May 18, 2018

Zenith Bank Plc. Earnings Below Expectation: Lower Provision for Loan Loss Saves the Day. Nigeria Equities Financial Services August 15, 2018

FDC Economic Bulletin

Fineotex Chemical Ltd

Equity Research

BERGER PAINTS NIGERIA PLC

Leveraging on Offshore operation to boost top line: DANGCEM not-toothe. Gained volume spike in Ex-Nigeria Sales: FY 2014 turnover growth was

Guaranty Trust Bank plc.

CADBURY NIGERIA PLC. Tough Operating Environment Remain Achilles heel of Nigeria s Top Chocolate & Confectionary Maker 21 OCTOBER, 2015

CMP (Rs) 775 Upside/ (Downside) (%) (1.4) Market Cap. (Rs bn) 11.4 Free Float (%) 35.0 Shares O/S (mn) 14.7

Cummins India Ltd Bloomberg Code: KKC IN

FIDSON PLC. Investment Summary & Highlight. Fidson PLC: a see-saw to the top? MorganCapital Research. July 10, 2013

Flour Mills of Nigeria Plc

Ahluwalia Contracts (India)

Guaranty Trust Bank Plc

Visaka Industries Ltd

Profitability remained weak

OANDO PLC. Oando PLC: to be or not to be? Investment Summary & Highlight. MorganCapital Research. July 3, 2013

Coal India. Source: Company Data; PL Research

Simplex Infrastructures

Unilever Nigeria Plc. Cost control remains a challenge. Nigeria Equities Consumer Goods July 24, 2015

Okomu Oil Palm Plc. Lower revenues, higher costs weaker profits. Equity Research PZ Cussons Nigeria. Nigeria Equities Consumer Goods December

Fee income offsets margin pressure

FORTE OIL PLC. FORTE OIL PLC: emergence of a new energy giant? Recommendation: HOLD FORTE OIL PLC FULL YEAR 2014:

Market Access. Company Note. M&A Securities. Nestle Malaysia Berhad. Steering Away From Turbulence. Tuesday, June 21, 2016 HOLD (TP: RM79.

CMP* (Rs) 336 Upside/ (Downside) (%) 21 Bloomberg Ticker. MOIL IN Market Cap. (Rs bn) 45 Free Float (%) 24 Shares O/S (mn) 133

FIRST BANK OF NIGERIA HOLDCO. (FBNH)

Bloomberg Code: ATA IN

SQS India BFSI Ltd HOLD. Impact of Macro Headwinds Still Hurting; Revenue from US May Pick up in FY18E

HCC BUY. Infrastructure April 10, QIP step in the right direction EVENT UPDATE. India Research. Bloomberg: HCC IN Reuters: HCNS.

Equity Research: Nestle Nigeria Plc

Honeywell Flour Mills Plc

ACCESS BANK RIGHTS ISSUE

EARNINGS UPDATE Nigerian Breweries Plc. February 2018

The Company for Cooperative Insurance Insurance TAWUNIYA AB 8010.SE

NATIONAL ALUMINIUM COMPANY LTD RESEARCH

BUY. White cement steals the show JK CEMENT. Target Price: Rs 1,220. Other highlights

Partnership Investment Company Limited: Offer by Private Placement

SIEMENS INDIA LIMITED RESEARCH

HOLD. Nestle. Good Performance Irrespective of GST Pangs. Target Price: Rs6,624. Institutional Equity Research. 2QCY17 Result Update July 27,2017

HOLD. Margins to improve from Q2 AMBUJA CEMENTS. Target Price: Rs 232. Other highlights

Equity Research: Nestle Nigeria Plc

Hindustan Unilever (RHS)

GUARANTY TRUST BANK PLC

Goodyear India ACCUMULATE. Performance Highlights. CMP Target Price `326 `374. 1QCY2012 Result Update Tyres. Key financials

Equity Research Report

Parag Milk Foods BUY. Performance Update CMP. `324 Target Price `410. 1QFY2019 Result Update Dairy Products. Investment Period 12 Months

Maruti Suzuki (RHS) BUY. Operationally In Line; Reiterate Buy. Automobiles October 31, 2014 RESULT REVIEW. Outlook & Valuation.

Weekly Stock Recommendations 20 Nov 2017

Rallis India NEUTRAL. Performance Highlights CMP. `237 Target Price - 1QFY2018 Result Update Agrichemical. Investment Period - 3-year price chart

Hindustan Media Ventures

Ambuja Cements NEUTRAL. Performance Highlights CMP. `155 Target Price - 1QCY2011 Result Update Cement. Investment Period - Key financials (Standalone)

Yamama Cement Company

PBT growth slightly ahead of FY guidance. 9th November 2015 EQUITY RESEARCH THE COOPERATIVE BANK 3Q15 RESULTS REVIEW

Weekly Stock Recommendations 13 Nov 2017

Graphite India BUY. Performance Highlights CMP. `93 Target Price `124. 4QFY2012 Result Update Capital Goods. Investment Period 12 Months

Gillette India. Institutional Equities. 1QFY18 Result Update

MRF BUY. Performance Highlights. CMP `9,407 Target Price `11,343. Company Update Automobile. Key financials

Nestlé India. Q2CY17 Result Update. Positives priced in; Downgrade to Hold. Sector: FMCG CMP: ` 6,786. Recommendation: HOLD

Bupa Arabia for Cooperative Insurance Co. Insurance BUPA ARABIA 8210.SE

Punjab National Bank

HOLD. Deleveraging story playing out RAMCO CEMENTS. Target Price: Rs 503. Q4 performance

Guinness Nigeria Plc. Revenue growth remains a challenge. Nigeria Equities Breweries November 22, 2013

Maruti Suzuki. Source: Company Data; PL Research

Cement Company of Northern Nigeria PLC

Half Year 2014 Results Presentation. to Investors and Analysts

Garware Wall Ropes ACCUMULATE. Performance Highlights CMP. `550 Target Price `618. 2QFY2017 Result Update Textile. Investment Period 12 months

BHARAT FORGE LIMITED RESEARCH

Is this Rally a Re-birth?

Graphite India BUY. Performance Highlights. CMP Target Price `88 `109. 1QFY2012 Result Update Capital Goods

UAC Nigeria Plc. New acquisitions bolster revenue growth. Nigeria Equities Conglomerate November 08, 2013

Equity Research Report. Nestle Nigeria Plc. Resilient in Turbulent Times. May 06, FSDH Research.

Q1 Q2 Q3 (QtD) YtD. Projected PAT (N' Billion) Projected EPS (N) ACCESS

Parag Milk Foods BUY. Performance Update CMP. `256 Target Price `330. 2QFY2019 Result Update Dairy Products. Investment Period 12 Months

CANARA BANK RESEARCH. Canara Bank. EQUITY RESEARCH July 29, 2008 RESULTS REVIEW

Cummins India. Source: Company Data; PL Research

Pidilite Industries Ltd

Net Profit 5,051 4,588 4,641 (8.1)% 1.1% 14,208 15, %

KEI Industries BUY. Performance Update. CMP Target Price `433 `508. 4QFY2018 Result Update Cable. Historical share price chart.

BUY Target Price, Rp 4,350 Upside 11,9%

Ambuja Cements NEUTRAL. Performance Highlights CMP. `184 Target Price - 2QCY2012 Result Update Cement. Quarterly results (Standalone)

Transcription:

Vetiva Research 26 October 2010 Q3 10 Earnings Release Organic Growth on Track We retain our Neutral rating on Nestle Nigeria Plc s (Nestlé), premised largely on recent price appreciation, although we note that increased capacity from its soon to be completed Sagamu plant is expected to come on stream in the first quarter of 2011. Nestlé s share price rallied earlier in the year, gaining 67.01% YTD, compared to the NSE YTD of 20.02%. Our fair Value range is between N394.16 - N426.52, implying a midpoint of N410.34 and a potential upside of 5.55%. We reiterate our positive outlook for Nestlé Nigeria Plc (Nestlé) primarily in anticipation of a spike in Sales in FY 11. Ramping-Up Capacity According to the management of Nestlé, the company has made massive investment in the construction of a new plant at Sagamu in order to increase its capacity and meet the surging demand especially in new markets and regions that were erstwhile unreached by the company s distributors. The new plant is the biggest investment Nestle has embarked upon in Africa; the plant is also expected to be twice the size of the Company s Agbara (current) plant, presently the company s only production site. In 2009, Nestle spent over N16billion in capital expenditure and 2010 CAPEX is expected to exceed this amount. The construction of the Sagamu plant is expected to be completed in the first quarter 2011. Locally sourced raw-materials boosts profits resilience. Nestle remains relatively insulated from external shocks that could be an offshoot of world commodity prices, which have spiked. Nestle makes use of agricultural produce such as Cocoa, Soya bean, maize e.t.c in its production process and according to the company over 75% of its raw material inputs is sourced domestically. This in our opinion significantly reduces the cost associated with production, especially as Nestle has adopted a more active approach by collaborating with agricultural research instituitons such as University of Agriculture, Abeokuta (UNAAB) and some local farmers, in a bid to increase output levels and crop yields. Strong Outlook and Prospects for the Confectionery maker. Our outlook for Nestle remains positive for reasons outlined above; we expect a strong increase in revenue growth over the next two years. In addition, earnings and margins are expected to improve significantly on the back of increased processes and efficiencies. Furthermore, the company has consistently delivered on earnings and paid both dividends for over the past 7 years. We would definitely be buyers of Nestle at a lower price, and recommend a hold where investors are already holding the stock. Key Headlines Q3'10 Q3'09 Chg 2010F Q3 as % NGNbn % NGNbn of 2010F Turnover 59.04 49.9 18.32% 83.69 70.55% PBT 13.28 10.04 32.27% 18.44 72.02% Tax -4.18-2.82 48.23% -5.89 70.97% PAT 9.11 7.22 26.18% 12.54 72.65% Source: Company fillings, Vetiva Research Analyst Adedoyin Adelakun a.adelakun@vetiva.com Stock Data Symbol: NSE Bloomberg Reuters: NESTLE VS F&B SECTOR VS NSE ALSI (YTD) Rebased 14/10/09 2.40 2.20 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 Fair Value Range N394.16 N426.52 NESTLE F&B SECTOR NSE ALSI Oct-09 Dec-09 Feb-10 Apr-10 Vetiva Capital Management Limited Plot 266B Kofo Abayomi Street Victoria Island Lagos, Nigeria Tel: +234-1-4617521-3 Fax: +234-1-4617524 Email: research@vetiva.com NESTLE NESTLE.NL NESTLE.LG Current Price (NGN): 387.95 Trailing EPS (NGN): 17.66 Trailing P/E (x): 21.96 2010 P/E (x): 20.44 Shares Outstanding (mn): 660.55 Market Cap (NGNbn): 256.25 Year High (NGN): 395.90 Year Low (NGN): 239.50 Share Price Performance 30 Days (%): 7.76 90 Days (%): 2.60 52 weeks (%): 77.63 Ownership Structure: Nestle CWA Ltd Ghana: 59.13 Nestle SA (%): 3.17 Others (%): 37.70 Source: NSE; Vetiva Research 1

Key Headlines Q2'10 Q2'09 Chg 2010F Q2 as % NGNbn % NGNbn of 2010F Turnover 39.18 31.3 25.18% 83.69 46.82% PBT 9.17 6.25 46.72% 18.44 49.73% Tax -3.14-2.11 48.82% -5.89 53.31% PAT 6.04 4.15 45.54% 12.54 48.17% Source: Company fillings, Vetiva Research Highlights of Q3 & Q2 Performance Notable Sales Growth YoY - Nestle has been exhibiting impressive growth in sales volumes majorly buoyed by its increased market penetration and expansion on the part of the company within the period. Nestle aggressively executes its advertising and marketing strategies, enabling it to discover and harness opportunities in new and potential markets. Nestle has been recording impressive growth in Turnover in the past 1 year and we are much more optimistic about its growth prospects in 2011/2012. We expect that Nestle would surpass these growth levels 2011/12 given the expected completion of its new plant in 2011. From the graph below the company expects a 17.45% growth in FY 2010 to N21.20 billion; we also note that Nestle has consistently surpassed its forecast for each of the quarters both in top and bottom lines. We note that Sales growth dipped by 8.58% to N19.86 billion in Q3 10 relative to sales of N21.56 billion as at Q2 10. TURNOVER GROWTH (Q1 Q3 ACTUAL; FY 10 FORECAST) Billion Naira 90 80 70 17.45% 60 6.77% 50 40 25.97% 30 20 24.20% 10 0 Q1 10 Q2 10 Q3 10 FY 10F Source: Vetiva Research; NSE 2

Profitability Margins Improve YoY - In Q3 10, the Company s profitability margins increased to 22.50% (PBT) and 15.42% (PAT) from 20.12% and 14.47% as at Q3 09 respectively. QoQ, PBT margin slowed down to 20.69%, while PAT margin rose to 15.46% from 15.18% as at Q2 10 respectively. In Q2 10, profitability margins also increased YoY to 23.41% (PBT) and 15.41% (PAT) from 19.98% and 13.25% as at Q2 09 respectively. However on a quarterly basis, margins slowed down marginally to 23.18% and 15.18% from 23.70% and 15.68% as at Q1 10 respectively. We partly attribute this to the volatility in food commodity in the course of the year, although Nestle sources the bulk of its input locally, the company still remains c.25% exposed to volatility in global commodity prices. We observe that Nestlé s profit margins dropped YoY in 2009 majorly due to loss incurred on its foreign currency denominated loans. According to the Company, we do not expect this to reoccur, hence we expect higher profit margin in FY 2010. Earnings Continue to Improve - Nestle s earnings has been improving both YoY and QoQ, the company has surpassed its Sales and Earnings forecast of N18.44 billion and N2.05 billion; N17.56 billion and N2.27; N19.50 billion and N1.86 billion respectively for the first three consecutive quarters of 2010. After Tax Margins also increased relative to Nestle s forecast, inspite of higher tax rates in Q1 and Q2. The company expected PAT margins to dip to 11.12% (Q1), 14.30% (Q2) and 9.52% (Q3), its effective tax rate was an average of 34.17% in Q1 and Q2 quarters but fell to 25% in Q3 10. Metrics Dangflr DSR Nestle NBC FMN Current Price (N) 16.00 16.80 387.95 31.00 70.06 Trailing EPS (N) 1.33 1.08 17.66 1.64 10.53 PE (x) 12.03 15.56 21.97 18.90 6.65 DPS (N) 0.80 1.00 12.55 0.50 2.00 DY (%) 5.00% 5.95% 3.23% 1.61% 2.85% Payout Ratio (%) 71.93% 91.01% 84.73% 8.26% 20.16% ROAE (%) 12.78% 35.52% 99.96% 30.66% 38.76% ROAA (%) 4.71% 19.27% 26.65% 13.39% 11.40% Outstanding Shares(mn) 5000 12,000 661 1309 1,708 Source: Vetiva Research & NSE Forecast (N'mn) 2008A 2009A 2010E 2011E 2012E Turnover 51,742 68,317 83,688 127,206 165,368 PBT 11,862 13,783 18,435 27,184 38,374 Tax (3,531) (4,000) (5,899) (8,971) (12,663) PAT 8,332 9,784 12,536 18,214 25,710 Absolute Dividend 8,289 8,289 10,655 16,939 24,425 Earnings per share (N) 12.61 14.81 18.98 27.58 38.90 Dividend per share (N) 12.55 12.55 16.13 25.65 36.95 Net Assets per share (N) 13.67 15.96 18.82 20.75 22.68 P/E (x) 30.76 26.19 20.44 14.07 9.97 Source: Vetiva Research & NSE 3

Nestle remains unaffected by the prevailing slower consumer spending - In our opinion, the company s Sales and Earnings remain intact in spite of the slower consumer spending; this could be attributable to its effective market penetration and market discovery efforts; locating new markets and ensuring smooth and seamless distributions to both old and new markets. Following from above, Nestle has retained its position of having one of the highest margins in the Food and Beverage sector over the years, after NASCON and Dangote Sugar. HIGHEST PROFIT MARGINS (Q1 10 Q4 09) Percent (%) 0.30 0.25 Q1'10 Q4'09 DSR s profit margin was impacted by higher input prices in 2009 0.20 0.15 0.10 0.05 0.00 Nascon DSR Nestle Source: Vetiva Research; NSE 4

Outlook and forecast Our short to long-term growth prospect still on course: As earlier stated, majority of the growth Nestle is currently experiencing is organic. Nestle embarked on generating demand for its product especially Maggi which contributes the highest to the overall turnover of the company. Based on a market survey carried out by the company to discover new markets for its products, Nestle is currently undergoing expansion of its production capacity, the result of which is expected to double current production capacity, in order to satisfy the demand in newly discovered markets thereby further penetrating the Nigerian market and expanding its market share. In our opinion, Nestle s growth will likely be both volume and price driven in the coming years. Value Proposition for Consumer Goods remains strong: The investment case for the Fast Moving Consumer Goods (FMCGs) sector are :- o Favorable demographics provide a sustainable demand for products of FMCGs. The increasing population in the country signals a robust market for consumer goods coupled with increasing adoption of the western diet especially amongst the younger population which make up a major part of the Nigerian population structure. o Defensive Nature of Products is also one of the key drivers of demand for Consumer Goods. In our opinion, the necessity nature of consumable products further strengthens the investment case for these companies. Nestle has carved a niche for itself especially in the baby food, beverage and seasoning product segments. o Aggregate Demand also seems to be picking up, relative to the previous year (aggregate demand declined in 2009). This majorly on the back of a recovering economy, increasing disposable income and moderate inflation levels which has the ability to increase the real wage of consumers. We therefore expect demand to pick up gradually in the coming months and to continue to impact positively on consumer spending. 5

Valuation In valuing Nestle, we applied the Discounted Cash Flow Method; we have assumed a WACC of 15.05% which is composed of Cost of Equity of 14.50%, Cost of Debt of 7.53%, Beta of 0.51, and Equity Risk Premium of 6% and a Terminal Growth Rate of 4.50%. Using Sensitivity Analysis to vary the discount factor and growth rate, we derived a Fair Value range of N392.52 - N426.43. Nestlé Nigeria Plc is currently trading at a PE multiple of 21.96x and a forward P/E multiple of 20.44x, relative to a sector and market average of 11.65x and 16.15x. Our FY 11 forecast for Turnover and PAT stands at N83.69 billion and N12.54 billion respectively; our FY 10 EPS and DPS estimate stands at N18.71 and N15.90 respectively. Valuation and Market pricing Further to the release of Nestle s Q1 2010 results and indicative timelines for the coming on stream of its near completed Sagamu Plant, we had forecast an increase in product volumes of about 50% on its 2010 figures, and further to this we had revised our valuations upwards placing an Accumulate weighting on the stock. However, further to the release of our report, Nestle has rallied 67% YTD, with the market pricing in the ramp up in production capacity, sales and profits, expected to accrue next year. Risks to Our Valuation The major risks to our valuation for Nestle could be the following: 1) Rising input costs, which could be higher than we have modeled into our forecast 2) Fall in disposable income resulting in lower demand for company s products 3) Adverse movement in exchange rate leading to losses on foreign currency denominated loans. Interest payment on its US$94 million loan (the inter-company has a moratorium of 2 years which expires in 2010) commences in March 2010 and January 2011. This could impact negatively on the company s profitability margins. 6

Appendix: Nestle Nigeria Plc Financial Model INCOME STATEMENT (N'Mn) 2007 2008 2009 2010F 2011F 2012F Income Turnover 44,027 51,742 68,317 83,688 127,206 165,368 Cost of Sales (27,805) (31,301) (39,957) (45,950) (55,140) (65,066) Gross Profit 16,222 20,442 28,360 37,738 55,328 72,468 Distribution & Admin Expenses (7,826) (6,059) (9,389) (10,879) (22,419) (27,523) Management Fees (2,479) (3,239) (4,211) (6,371) (9,179) Core operating profit 8,396 11,904 15,732 22,648 43,276 63,600 EBIT 8395.6 11903.6 15731.9 21,032 30,532 42,471 Finance Cost (67) (2,046) (2,597) (3,347) (4,097) Interest Income 67.6 26 97 Profit from operations 8463.3 11862.2 13783 18,435 27,184 38,374 Profit before taxation 8,463 11,862 13,783 18,435 27,184 38,374 Taxation (3,021) (3,531) (4,000) (5,899) (8,971) (12,663) PAT 5,442 8,332 9,784 12,536 18,214 25,710 BALANCE SHEET (N'Mn) 2007 2008 2009 2010F 2011F 2012F Assets Employed Fixed Assets 10,436 13,817 25,405 33,026 41,283 49,539 Current Assets Stocks 5,226 6,415 10,698 11,981 14,378 16,103 Debtors & Prepayments 2,299 4,304 3,403 4,151 5,064 6,178 Due from related companies 284 123 28 129 135 142 Foreign currencies purchased 672 856 827 1,002 896 1,049 Cash and bank balances 2,336 3,643 1,764 3,898 4,873 6,091 Advance payment to contractors 2,127 27 76 3,392 Total Assets 21,252 29,159 44,250 54,214 66,705 82,494 Due within one year 8,237 11,094 19,011 26,981 37,420 50,892 Due After one year 6,779 9,035 14,695 14,801 15,577 16,609 Net Assets 6,237 9,030 10,544 12,432 13,707 14,993 Capital and Reserves Share capital 330 330 330 330 330 330 Share premium 32 32 32 32 32 32 Revaluation Reserves 186 186 186 195 195 195 Retained Earnings 5,687 8,482 9,995 11,875 13,150 14,436 Shareholders' Equity 6,237 9,030 10,544 12,432 13,707 14,993 7

Key financial ratios and forecasts RATIOS 2007 2008 2009 2010F 2011F 2012F GROWTH RATES 2007 2008 2009 2010F 2011F 2012F Turnover growth 15% 18% 164% 23% 52% 30% Growth in Core Operating profit 7% 42% 32% 44% 91% 47% Growth in PBT 3% 40% 203% 34% 47% 41% Growth in PAT -4% 53% 226% 28% 45% 41% PROFITABILITY 2007 2008 2009 2010F 2011F 2012F Return on Equity 86% 109% 100% 109% 139% 179% Return on Assets 27% 33% 27% 25% 30% 34% Return on Invested Capital 30% 35% 28% 31% 36% 41% Growth rate (g) 0% 1% 15% 16% 10% 9% MARGINS 2007 2008 2009 2010F 2011F 2012F EBIT/Sales 19% 23% 23% 25% 24% 26% Gross Profit Margin 37% 40% 42% 45% 57% 61% Pretax Income/Sales 19% 23% 20% 22% 21% 23% Net Profit Margin 12% 16% 14% 15% 14% 16% 8

INVESTMENT RECOMMENDATIONS Vetiva uses a 5-tier recommendation system for stocks under coverage: Buy, Accumulate, Neutral, Reduce and Sell. Buy/Overweight +25% expected absolute price performance Accumulate +10% to +25% expected absolute price performance Neutral/Hold +/-10% range expected absolute price performance Reduce -10% to -20% expected absolute price performance Sell/Underweight -20% expected absolute price performance Definition of Ratings Buy/Overweight recommendation refers to stocks that are highly undervalued but with strong fundamentals and where potential return in excess of or equal to 20% is expected to be realized between the current price and analysts target price. Accumulate recommendation refers to stocks that are undervalued but with good fundamentals and where potential return of between 10% and 20% is expected to be realized between the current price and analysts target price. Neutral/Hold recommendation refers to stocks that are correctly valued with little upside or downside where potential return of between +/- 10% is expected to be realized between current price and analysts target price. Reduce recommendation refers to stocks that are overvalued but with good or weakening fundamentals and where potential return of between -10% and - 20% is expected to be realized between current price and analysts target price. Sell/Underweight recommendation refers to stocks that are highly overvalued but with weak fundamentals and where potential return in excess of or equal to -20% is expected to be realized between current price and analysts target price. 9

Disclosures Section Analyst Certification The research analysts who prepared this report certify as follows: 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 Vetiva Capital Management Limited or any of its affiliates (collectively Vetiva ) 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 Vetiva may have in companies or securities discussed in this report are herein disclosed: Vetiva may own shares of the company/subject covered in this research report. Vetiva does or may seek to do business with the company/subject of this research report Vetiva may be or may seek to be a market maker for the company which is the subject of this research report Vetiva or any of its officers may be or may seek to be a director in the company which is the subject of this research report Vetiva may be likely recipient of financial or other material benefits from the company/subject of this research report. Disclaimer This research report is based on public information which the research analyst(s) consider credible and reliable. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Vetiva, including the investment banking team, as Vetiva has established information barriers between its Research team and certain business groups. Whilst reasonable care has been taken in preparing this document, no responsibility or liability is accepted either by Vetiva, its officers or any of its employees for any error of fact or opinion expressed herein. No reliance should be placed on the accuracy, fairness or completeness of the information contained in this report as it has not been verified by the research analyst(s) involved or the companies whose securities have been referred to except as otherwise disclosed. Neither Vetiva nor any of its officers or employees including the research analyst (s) warrant or represent the accuracy or completeness of information set out in this report. Any ratings, forecasts, estimates and opinions set forth in this report constitute the analyst(s) position as at the date of this report and may not necessarily be so after the report date as they are subject to change without notice. It is also instructive to note that a company s past performance is not necessarily indicative of its future performance as estimates are based on assumptions that may or may not be realized. The value, price or income from investments mentioned in this report may fall as well as rise due to economic conditions, industry cycles, market indices, operational or financial conditions of companies or other factors. Thus, Vetiva and its officers and employees shall not accept liability for any loss arising from the use of this report or its contents in making investment decisions or recommendations. 10

This report provides general information only. It is not intended to provide personal investment advice and does not take into account the specific investment objectives, financial situation and the particular needs of any specific person. Investments discussed in this report may not be suitable for all investors and the reader(s) should independently determine their suitability and evaluate the investment risks associated with such investments. All investors are solely responsible for their investment decisions. Any decision to purchase or subscribe for securities in any offering must be based solely on existing public information on such security or the information in the prospectus or other offering document issued in connection with such offering, and not on this report. Vetiva, through business units other than Vetiva Research, may have issued and may in the future issue trading ideas or recommendations that are inconsistent with, and reach different conclusions from, the information presented in this report. Such ideas or recommendations reflect the different time frames, assumptions, views and analytical methods of the persons who prepared them, and Vetiva is under no obligation to ensure that such other trading ideas or recommendations are brought to the attention of any recipient of this report. To the extent this report discusses any legal proceeding or issue, it has not been prepared as nor is it intended to express any legal conclusion, opinion or advice. Information relating to the tax status of companies whose securities are discussed in this report is not intended to provide tax advice or to be used by anyone to provide tax advice. By accepting this research report, you agree to be bound by the foregoing limitations. Vetiva Capital Management Limited is registered with the Securities & Exchange Commission to conduct Financial Advisory, Fund/Portfolio Management, and Trusteeship business in Nigeria. This document is for information purposes only and for private circulation. No portion of this document may be reprinted, sold or redistributed without the written consent of Vetiva Capital Management Limited. Vetiva research report is disseminated and available primarily electronically, and, in some cases, in printed form. Additional information on recommended securities/instruments is available on request. 2010 Vetiva Capital Management Limited. All rights reserved 11