BUA Foods Plc has lost approximately N47 billion in market capitalization in two weeks as the company’s share price depreciated by 4.04% from N64.40 at the beginning of February to N61.80 as of Friday, 11th February 2022.

Prior to this, the company stock had traded as high as N66 on the 12th of January, after listing at N40.00 per share on January 5th, 2022.

Thereafter, the share price of the newly listed company has had minimal activities with prices remaining unchanged at N64.40 for three weeks before witnessing enough sell-offs to drag prices down further to N61.80 per share.

Analysts had predicted last month that we should expect some price corrections in the share price of BUA Foods as it was trading above its fair value and we experience sell downs due to profit-taking.

However, considering that majority of the shareholding is held by the Chairman of the company, Mr. Abdulsamad Rabiu, the potential for the share price to reflect its fair value seems infeasible.

According to Olumide Adesina, Analyst at Quantum Economics, “As a result of the highly concentrated ownership structure of BUA Food, the share price does not necessarily reflect the true value of the company, as Mr Rabiu and his son Abdulsamadu Isyaku Rabiu (Jnr) own 99.8% by themselves.

“The Price to Book Ratio of BUA Foods, which is above 4, suggests that the stock is highly overvalued, meaning that the recent price is not justified”.

He further stated that “However, BUA Foods plans to double its capacity of milling flour from about 500,000 metric tonnes annually to over one million tonnes annually, which suggests the stock has upside potential. The company also plans to expand the production of pasta from five to eleven lines.

“Moreover, with one of the largest rice mills in the country, and a production capacity of 200,000 tonnes of rice per year, this might be a good stock to hold after the much-anticipated market correction at the Nigerian stock market”.

What you should know

BUA Foods Plc was listed on the Exchange last month with 18,000,000,000 units of shares at N40.00 per share. Currently, the share price has appreciated by 55% trading at N61.80.
The company’s shares are currently N4.20 below its 52-week high of N66.00 per share. However, the shares of the company have returned about 53.54% gains for investors who bought them at their 52-week low trading price of N40.25 per share.
The company’s Q4 financial result revealed a 36.37% growth in Profit after Tax from N14.81 billion recorded in the corresponding period of 2020 to N20.20 billion in the period reported.
The FMCG company, reported a revenue of N92.61 billion, reflecting a growth of 39.62% from N66.34 billion in the corresponding period of 2020.

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