GSK Investors Record 56% Capital Gain in One Week

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By Goddy Egene

Investors in Glaxosmithkline Consumer Nigeria Plc (GSK) last week witnessed a record 55.6 per cent capital gain following a bullish trend at the stock market.

The shares gained N7.90, rise from N14.22 to close at N14.22 per share in a week that 40 stocks appreciated. Market operators said the renewed demand for GSK could be for speculative reasons.

The company is to divest its drinks bottling business that manufactures Lucozade and Ribena to Suntory   Beverages Nigeria Limited. The planned divestment followed the purchase of business by Suntory Beverages Japan from GSK United Kingdom, the parent firm of GSK Nigeria in 2013.

Explaining the divestment, an official of the company had said: “The drinks bottling used to be part of our business but we belong to a group, GSK which has  divested from that line of business and we need to maximise our potential. We are facing the direction our parent company is facing. Other subsidiaries have divested the drinks business but Nigeria was allowed to continue.  But the divestment will enable us release the assets to Suntory Beverages so that we can concentrate on those things we are good at,” an official of the company said.

The official said the divestment will give the company a lot of potential to grow its business, saying as a forward looking company it has hedged against the impact of the divestment.

In a notification to the NSE, the Company Secretary of GSK Nigeria, Mr. Uche Uwechai had said the principal terms of the offer would set out in a circular to the shareholder.

“If the shareholders and regulators were to approve the sale, the retained business of GSK Nigeria would include its wellness, oral healthcare, nutrition and pharmaceutical/vaccines businesses and the company would remain listed on the NSE,” he said.

The company has also   indicated that subject to the completion of the disposal and receipt of the purchase price the company will pay a special dividend of N716 million (60 kobo per share) to the shareholders.

Analysts at FSDH Merchant Bank said going by their estimate, the contribution of drinks business to the total revenue of the company is not less than 35 per cent, adding that the divestment is one of the  negative factors that would affect  the company’s performance going forward.

But on the positive side, the analysts cited the company’s new route to market, long standing reputation and brand activation to improve market share.

According to their forecast, GSK will grow its revenue at a rate lower than the inflation rate in the medium term.  They estimate a turnover of N24.89 billion, N27.38 billion, N30.12 billion, N31.25 billion and N32.41 billion for the periods ending December 2016, 2017, 2018, 2019 and 2020.

“We estimate earnings before interest and tax (EBIT) of N0.56 billion, N2.16 billion, N2.58 billion, N2.83 billion, and N3.28 billion,  and earnings before interest, tax depreciation and amortization (EBITDA) of N1.92 billion, N3.72 billion, N4.40 billion,  N4.97 billion,  and N5.80 billion, for the same periods,” they said.

The analysts projected  PBT and PAT of   N0.60 billion, N2.20 billion,  N2.62 billion,N2.88 billion, N3.32 billion and N0.50 billion, N1.52 billion, N1.81 billion, N1.99 billion, and N2.29 billion in 2016, 2017, 2018, 2019 and 2020 respectively.