nigeria africa's investment destination final

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January 2011

Analyst Report



Investment Banking * Asset Management * Securities Trading MBC Securities Limited

The Nigerian economy enjoyed consistent, robust growth over the pastdecade. According to UNCTAD, the economy experienced an annualaverage GDP growth rate of 6.32% between year 2005 and 2009.Government’s focus and investments in power generation and

infrastructure development provides enormous opportunities forexpansion.

The recent effects of global recession exposed the underlining governance challenges in the Nigerian banking industry, leading to a $4Billion rescue package by the CBN. Following the rescue was a banking sector reform aimed at creating an innovative and viable sector that isglobally competitive.

The recent revolution in the telecoms sector and growth in mobile

telephony has made Nigeria the largest market, with 67 million mobileline subscribers, and a telecoms hub in Africa, having overtaken South Africa. With just above half of the total population reached with GSMmobile services, the growth prospects are very positive.

Companies in Nigeria have recently landed 2 submarine cables, MainOne and Glo One. This development is expected to reduce drastically telephony cost and internet tariffs in Nigeria with a positive impact onreduction of business costs and percentage of individual incomeexpended on telephony services.

Part of the economic reforms of the democratic government was therejuvenation of the bond and fixed income market that has hitherto beenunder-developed. New issues from the Federal and state governmentsnot leaving out corporate firms have made the Nigerian market a choice.Examples include the recently issued Lagos State 3year N100 Billion13% coupon Bond and Kebbi State’s N2.5 Billion infrastructure bondissued in 2006.

Increased activity lies ahead in the near term in the Nigerian bondmarket as Banks plan to issue bonds to recapitalize in a bid to reposition

as better players in the banking industry both at the national level and onthe world stage. Importantly, the Asset Management Company of Nigeria is in the process of issuing 7year N2.3 Trillion in bonds.

The Petroleum Industry Bill (PIB), which is presently awaiting passageby the upper chamber of the legislature, is aimed at attracting investments to the sector and to create a level playing field forcompanies operating in this space. The objective of the bill is to improveefficiency for the national oil company, raise Government’s take andincrease natural gas utilization.

Executive Summary

The World Bank projects a 7.4% G growth in Nigeria in 2011

Fiscal policies are geared towards Nigeria one of the 20 leading economies by 2020 based o

government’s vision 20;2020 strate

Reforms in the power and petroleumsectors will open doors for greater

participation

Nigeria, Africa’s Investment destination!




Nigeria with a population of over 150 million people has beentipped to be the 5 th largest nation in the world by the year 2015 if the current rate of population growth is maintained and so

provides a market for discerning investors. The nation boasts of ayoung, skilled, energetic and dynamic workforce.

Nigeria is fast closing the gap between her rich and poor with theemergence of a middle class that has been perceived non-existentbefore now, thereby creating a more stable society by spreading the common wealth across board. This however, is a fast eroding characteristic of the developed world with the advancements inthe field of robotics meant to replace labour as a factor of production.

The nation has been politically stable over the last eleven yearssince the advent of the 3 rd Republic. The impact of democraticgovernance on the growth and development of the country hasbeen largely positive.

A projected GDP growth of 7.4%, a stable oil price at an averageof $90 per barrel, a population growth rate of about 2% coupled

with government’s renewed vigour in pusing the objectives of it’s7 point agenda’ economic policy framework, we expectheightened investment and economic activities on the Nigerian

scene in 2011. A smooth transition from one government toanother will further reduce political risk and make the country even more attractive to investors.

Growth in GDP rate and oil revenues will soon become growth in reality, evidin infrastructure and standard of living

The economic strength of Nigeria is in h

people; young, vibrant and highly skille.






Executive Summary 2

Key Metrics 4

Foreign Direct Investment 7

Policies: Fiscal and Monetary 9

Governance 11

Financial Markets 12

Industries: Banking Industry 14Company Review 1: GTBank Plc 15

Company Review 2: First Bank of Nigeria Plc 16

Food and Beverage Industry 17

Company Review 3: Cadbury Nig. Plc 18

Company review 4: Nestle Nig. Plc 19

Oil and Gas Industry 20

Company Review 5: Oando Plc 21

Company Review 6: Japaul Oil & Maritime Plc 22

Telecommunications Industry 23

Building Materials Industry 24

Company Review 7: Dangote Cement Plc 25

Company Review 8: Lafarge Wapco Plc 26

2011 Outlook: Economy, Markets and Industries 27

About MBC Securities Ltd 29

Contents




Ke Metrics - Ni eria

Population

Total Population: 158.26 Million (UNCTAD 2010 Estimate)% Urban Population: 52.17%

Population Density: 164.8/km2 Work Force: All Sectors: 51.35 Million Agriculture: 12.23 Million

Key CitiesMajor economic hubs: Abuja Capital City

Lagos Most populous City Other major cities: Kano

Port Harcourt

Major Airports: Murtala Mohammed International Airport, LagosMallam Aminu Kano International Airport, KanoNnamdi Azikwe International Airport, AbujaPort Harcourt International Aiport, Port Harcourt

Macroeconomic Indicators

CPI: 12.1 (January 2011)Nominal GDP: $173.43 BillionNominal GDP per capita: $1,142GDP (PPP): $341.57 Billion

GDP (PPP) per capita: $2,249 Average Prime Lending Rate: 15.74%3-month Deposit rate of Banks: 4.63%Price of Bonny Light: $114.0 (25/2/11)External Reserve: $33.25 Billion (28/2/11)

Products and Resources

Solid Minerals: Gold, Tin, Iron Ore, Gypsum, Feldspar, Lead,Kaolin, Limestone, Glass sand, Columbite, Laterite,Barzite, Granite, Marble, Crude Oil, Natural Gasetc.

Products: Hide & Skin, Works of art, Textile materials,Cement, Plastic Rubber, Asphalt, Premium MotorSpirit, Liquefied Petroleum Gas, Automotive GasOil, Roofing Sheets, Paints, Soap & Detergents,Beer, Soft Drinks.




Key Metrics - Nigeria

Key Economic Reforms: The focal point of the governmnet’s economic policy is the 7 Point Agenda of the Musa Yar’aduaadministration launched in 2007 and sustained by the Goodluck Jonathan administration. It isfocused on improving

Power and Energy production

Food security and Agriculture

Wealth creation and Employment

Mass Transportation

Land reforms

Security

Qualitative and Functional education

These are areas where government has concentrated investments in the last few years andopportunites abound for foreign investors in these areas.

Key new legislations: The AMCON Bill which was meant to rescuscitate the erstwhile troubled banks by buying overtheir loan portfolios and heliping to recapitalise them thus making them desirable to investors andcredit worthy.

The Petroleum Industry Bill was aimed at removing obsolescence and outdated provisions in ourcurrent laws, encourage alignment with international best practices, remove opaqueness and lack of transparency in the current statues, enhancing good governance practices and processes anddynamics of the oil & gas industry.

Other new legislatiosn include the Local content Bill and the Data Protection Bill amidst others.

2011 Budget Highlights

Total revenue for the Federal Government’s Budget is forecast at N2,836.43billion.

Aggregate expenditure for 2011 is projected at N4,226.19billion, comprising N196.12billionfor Statutory Transfers, N542.38billion for Debt Service, N2,481.71billion for Recurrent(Non-Debt) Expenditure and N1,005.99billion for Capital Expenditure.

Our expenditure plans indicate a projected deficit of 3.62% of GDP.




The stable political climate in Nigeria increased the confidence in theNigerian economy. This resulted in improved FDI flows to Nigeria.Strong fiscal measures coupled with comfortable external liquidity gave investors a reason to fill their books with investments in Nigeria.Ultimately, Nigeria attracted the highest FDI in 2006 on the Africancontinent.

The Nigerian economy witnessed a consistent year on year growth ininflow of foreign capital between the years 2000 to 2007. While theglobal crises halted this trend with a capital flight, smart money interms of foreign portfolio investment (FPI) and foreign directinvestments (FDI) is finding its way back to the economy. FDI in2009 was $5.85 Billion as reported by United Nations Conference on

Trade and Development. Based on available data from UNCTAD,FDI inflow to Nigeria in 2010 is estimated to be in the region of $2.3Billion.

Opportunities that abound in infrastructural development andincreasing globalization have made markets like Nigeria a darling of investors for the past five years. Sub-Saharan Africa has been thefavorite destination of FDI on the African continent. This is notstrange as it is home to the 2 largest economies on the continent.

Source: UNCTAD Statistics

Sub-Saharan Africa in 2006 received 65% ($35,773 Million) of FDIs in the African continent, with Nigeria absorbing 25%($13,956 Million) of the total FDI received by Sub-Saharan

Africa. Though the bulk of this inflow went into the oil and gassector, other sectors like the telecoms, manufacturing andfinancial services sectors also received substantial inflows of investments.

Smart Money is finding its way ba Nigeria

Foreign Direct Investment




In recent years, Nigeria has accounted for a large chunk of migrant remittances to Africa. Remittances, which are mainly tofamily members or for investment purposes increase thepurchasing power of such recipients and act as a layer of support

for the Naira. In 2007, Nigeria accounted for 46.5% of theemigrant remittances to Africa, 20% more than Egypt whichranked second. In 2009, Nigeria accounted for 46.06% of thetotal migrants’ remittances to Sub-Saharan Africa, 34% more thanEgypt.

As a result of the confidence in its economy, Nigeria received26% of the total official development assistance given to thedeveloping economies in Africa in the year 2006.


Nigerians are also investing in theicountry

Foreign Direct Investment




In addition, Central Bank of Nigeria, in a bid to stimulate credithas kept the benchmark interest rate, monetary policy rate (MPR)at 6.25% thereby easing rising interbank rates and portraying anaccommodative monetary policy stance.

The stimulus package helped to stem economic downturn andhas re-positioned the economy on the path of future growth.

The Central Bank of Nigeria foreign exchange policy has helpedto stabilise the Naira around N150/$1 in the last five years. Overthe same period, Nigeria has been able to control inflationthrough sound monetary policies, reducing inflation to an all timelow of 5.40% in 2007.

Government’s commitment to sound policies like single digitinflation and improved non-oil GDP growth depictsgovernment’s resolve to create an enabling environment for localand international investors alike.

Source: Central Bank of Nigeria

Policies: Fiscal and Monetary

Government’s commitment to s policies depicts its resolve to crenabling environment for inves




Nigeria, one of the few countries with the most diversifiedcultural backgrounds has enjoyed a stable polity since the end of the military rule in 1999. After presiding for 8 years during whichhe laid down solid platforms for rapid economic growth, Mr.Olusegun Obasanjo was succeeded by Mr. Umar Yar’Adua.

Obasanjo’s government focused on tackling corruption by creating institutions like the EFCC and ICPC to entrench thefight against graft. Nigeria now has a current account surplus andis building up reserves largely due to the cancellation of debtsowed to the Paris club. Nigeria under Obasanjo also made someeffective and timely legislation such as the Public Procurement

Act, Fiscal Responsibility Bill, both of 2007 and the establishmentof the Bureau of Public Procurement to instill discipline and

accountability in government processes. The government adopted the creation of the excess crude

account as a savings account. Confidence in the Nigerianeconomy was restored and economic stability stimulated.

Amongst its peers, Nigeria in 2008, ranked second behind South Africa in terms of expenditure for value creation.

In sum, the macro-economic fundamentals for growth in Nigeriaare better today than they have ever been since independence.


Governance

Macro-economic fundamenta growth in Nigeria are better tothan they have ever been sincinde endence.




Prior to the recent global financial crisis, the Nigerian capitalmarket experienced a boom which was attributed to a sharpincrease in Foreign Direct Investments in the Nigerian economy

with 2006 being a high point for FDI. The high point of events in

the Nigerian capital market in the past five years is the globalrecession which was triggered by the US subprime mortgagelending crisis.

The influx of Foreign Portfolio Investment into the capitalmarket caused a rapid appreciation in prices, providing investors

with returns as high as 73% between January 2007 and March,2008. This culminated in Nigeria being rated as the fourth bestperforming stock market in 2007, after markets like China’sShangai Index with index appreciation of 97%.

The fears of crisis in some Nigerian banks caused a widespreadpanic and subsequent deflation of the market, dropping by 45.8%in 2008. The recession notwithstanding, the Nigerian equity market (all share index) has however rebounded to the level it wasmidyear 2009, with gains up to 20% between January andDecember 2010. Previously lost investor confidence is returning gradually to the market as the market builds up to previously known high levels.

Source: Nigerian Stock Exchange

Financial Markets

The Nigerian equity market harebounded to midyear, 2009 lev




Source: FDHL Analytics

The trend of returns in the Nigerian fixed income marketbetween June 2009 and March, 2010 was the opposite of that of the capital market as investors took refuge in the less risky assetclasses for capital preservation and moderate returns. The marketover the past three years has grown steadily in terms of yield and

capitalization. By the end of 2009, the bond market had grown incapitalization to about N2.30 Trillion ($15.11 Billion) which isabout half the capitalization of the equities market, from aboutN1.25 Trillion in January, 2008.

The strength of activity in Nigerian bond market is largely due tothe dominance of sovereign bonds which takes up a large chunk of the outstanding issues. The budding corporate bond market inNigeria has a huge capacity for growth as corporate entities shifttowards exploring opportunities in the window.

Financial Markets

Nigeria has a budding bond mthat has a huge capacity for gro

This is a general overview and does not include any valuation or our opinion on specific secotr or industry.For more information, including valuations and opinion, contact us directly.




Prior to the banking reforms and consolidation exercise of 2004, theNigerian banking industry was populaated by numerous small banks

whose total volume of transactions ranked second to that of South Africa on the African continent. However, they were able not able tofinance large tiket transactions. In 2004, the CBN took a major policy decision to reposition the banking sector through a battery of reforms, with the banking system consolidation being the major. TheCBN prescribed a minimum captalisation of N25 Billion ($170million) for all banks, resulting in mergers & acquisitions and freshcapital injections. At the end of the timeline set for capitalisation, 25banks emerged out of the previous 89.

The consolidation in the banking industry attracted huge ForeignInvestments and credit lines from foreign banks. It also broughtabout greater competition which caused a sharp reduction in interest

rates. The reform –induced consolidation strengthened the Nigerianbanking industry, reduced cost and made them more internationally active. The immediate effect was the entrance of 17 of the 25 banksinto the top 1000 banks in the world.

Since consolidation, Nigerian banks have grown, veering intointernational markets through the establishment of subsidiaries in

West Africa and indeed the major financial hubs of the world withNew York, London and Paris taking prominence.

The financial meltdown which started in 2008 halted the strides of Nigerian banks as 9 Nigerian banks, 6 of which held 43% of totaldeposits failed the capital adequacy test and were rescued. Thiscaused a ripple effect that resounded through the Nigerian economy as credit lines dried up. The banks were salvaged with the injection of N620 Billion ($4Billion) into them to restore the banks to adequatecapital levels. This was however not enough as the banks had acollective loan book value of N6.17 Trillion as at Decmber 2008,thus the need for a resolution vehicle and the birth of AssetManagement Company of Nigeria (AMCON) as an interventionfund.

AMCON as a resolution vehicle aims to maximise returns ondistressed assets disposal, encourage investment in capital market,provide a vehicle for acquisition of shares of banks, ultimately strengthening the banking sector. AMCON is expected to helpstimulate the recovery of the financial system through the boosting of liquidity in the troubled banks. This will be carried out by buying their non-performing loans, helping to recapitalise the troubled banksand thus increasing access of borrowers to refinancing opportunities.

INDUSTRIES: Banking

Post-consolidation, 17 of Nige25 banks entered into the leagu

the top 1000 banks in the worl




Guaranty Trust Bank plc is a leading Nigerian bank with acorporate banking bias and strong service culture that has led toconsistent year on year growth in the bank's clientele base and

financial indices. From the early 1990s the bank has tirelessly set the pace for other

Nigerian financial institutions in terms of service quality, productfunctionality and excellent customer service. The bank has alsocreated exceptional value for its shareholders through consistentdividend payouts and bonus issues, remaining one of the few institutions in Nigeria that pays dividends twice a year andpresents its financials using both Nigerian GAAP (Generally

Accepted Accounting Principles) and IFRS (InternationalFinancial Reporting Standards).

Guaranty Trust Bank plc has a double A minus (AA-) risk rating from Fitch Rating, a triple A rating (AAA) from Agusto & Coand a double B minus (BB-) rating from Standard and Poors. Thebank also has an ISO 9001:2000 certification from theInternational Standards Organisation (ISO) and is the only Nigerian bank to have been the subject of business and brandreviews by Harvard and Cranfield Business Schools.

In 2007, the bank entered the African business landscape history books as the first Nigerian Financial Institution to undertake a

$350 million regulation S Eurobond issue and a $750 millionGlobal Depositary Receipts (GDR) Offer. The listing of theGDRs on the London Stock Exchange (LSE) in July that yearmade the bank the first Nigerian Company and African Bank toattain such a landmark achievement.

In December 2009, Guaranty Trust Bank once again set the paceby successfully completing the first tranche of its $200 milliondollars corporate Bond – The first corporate bond in Nigeria fora very long while. Over the years, the bank has been a recipient of numerous accolades and commendations for corporate socialresponsibility and management quality. A few of these are: theBest Bank in Nigeria by Euromoney, the 2007 Most RespectedCompany in Nigeria in a survey by PricewaterhouseCoopers.

Guaranty Trust Bank plc operates from 158 business offices atthe end of 2009 in Nigeria with a number of the bank’ssubsidiaries spread across Anglophone West Africa and the UK.

Through these, the bank is able to meet the growing needs of itscustomers in areas of banking, insurance, mortgage, assetmanagement and other sectors outside the realm of traditionalbanking.

Stock StatisticsSymbol GUARANTY Shares Outstanding 023,317,185,767Market Cap. N444,192,388,842.30

Year End 31 st December52 Week High N20.9952 Week Low N13.52Current EPS 1.46Current PE 12.02

INDUSTRIES: Bankin – GTBank Plc

GTBank




First Bank of Nigeria is Nigeria's oldest financial institutionfounded in 1894 as Bank of British West Africa. In 1969, theBank was incorporated locally as the Standard Bank of NigeriaLimited in line with the Companies Decree of 1968. It changed

its name in 1979 and 1991 to First Bank of Nigeria Limited andFirst Bank of Nigeria Plc, respectively and listed on the NigeriaStock Exchange in 1971. The bank currently has the largestnetwork in the country with assets in excess of N2 trillion ($13.33Billion).

The Bank engages in the business of commercial banking whilstits major subsidiaries, FBN Bank (UK) Ltd, First RegistrarsNigeria Ltd., First Trustees Nigeria Ltd., FBN Capital Ltd., FirstPension Custodian Nigeria Ltd., FBN Mortgages Ltd., and FBNInsurance Brokers Ltd carry on the business of commercialbanking, registrars, trusteeship, capital market, pension fundcustodian, mortgage financing and insurance brokerage.

Today the bank is a leader in the banking system, controlling about 12.5% market share by asset size. With extensive network of 635 branches and outlets, it has presence in both the rural andurban areas; bringing flexible and innovative banking services toits over 5 million customers. Besides the local presence, it hasoffices in London, Paris, Johannesburg and Beijing, while itcreates values for its over 1.3 million shareholders. It supports itsbanking operations with over 1,500 ATMs around the country.

The latest credit ratings of First Bank from S&P, Fitch, GCR and Agusto & Co are ngA, A+, AA and A+ respectively.

The Group has defined three growth horizons over which itintends to broadly sequence its growth priorities. Given the initialgrowth trend of new businesses and the degree of uncertainty in

African markets, its growth strategy is planned over a maximumof 5 years. Consolidate in Nigeria in 2010; Diversify the Groupand transform bank between 2011 and 2012 and build scaleinternationally, 2013 onwards.

Stock StatisticsSymbol FIRSTBANK Shares Outstanding 032,632,084,358Market Cap. N 492,744,,473,805.8

Year End 31 st December

52 Week High N18.1052 Week Low N10.70Current EPS 1.12Current PE 13.85

INDUSTRIES: Bankin – First Bank Plc




The Food and Beverage industry is one of the most competitiveindustries globally – dominated worldwide by a handful of multinational companies. The leading manufacturers of food andbeverage products in the nation are mostly subsidiaries of globalmajor players. Companies such as Nestle Nigeria Plc, Cadbury

Nigeria Plc and CocaCola Plc etc. dominate the Beverage andConfectionery segments in Nigeria.

The Nigerian Food and Beverage industry bears the handsomeresponsibility of feeding a populous and developing nation. TheIndustry has shown strong growth over the last 10 years largely asa result of the relatively stable economic climate.

Changing demographics – greater number of people migrating from rural to urban areas, more women working and morechildren attending school – have contributed to the thriving demand for the Industry’s products. The Industry’s products arefast becoming an essential part of the national diet, particularly inthe urban areas.

The Food and Beverage industry in Nigeria is at the fore in themanufacture of dairy products, hot beverages, seasonings,convenience foods, confectioneries and staple foods such asbread, pasta and noodles. The demand for the Industry’sproducts from Nigerian consumers is estimated to now be inexcess of ₦500 billion ($3.33 Billion) per annum.

The industry is dominated by wholesalers and distributors. Infact, distributors and wholesalers account for over 50% of totalsales within the industry. Their dominance is as a result of thefragmented nature at the retail end of the market. The retail endlacked adequate supermarket and grocery stores. They mainly comprise of roadside kiosks, stores, and small sized restaurants,

whose sales volumes are generally negligible. Distribution to theretail market is hampered by huge investments required fordelivery trucks general bad road network.

The global major players are largely under-represented in theStaple and Convenience segments in Nigeria; this has left roomfor smaller‐regional and local companies to flourish in thesesegments. The Nigerian Food and Beverage industry is currently experiencing solid growth and has a great deal of potential forgrowth in the long term as Nigeria is demographically young.

INDUSTRIES: Food & Beverages

Global major players are still largely under-represented in thFood and Beverages subsector,void for investors.

Growth in the subsector has beeconsistent for the past 10 years.




INDUSTRIES: Food & Beverages – Cadbury Nig. Plc

Cadbury Nigeria is a member of the Cadbury Schweppes Group(“Cadbury Schweppes”). Cadbury Nigeria engages in the productionand sale of fast moving consumer goods primarily in Nigeria.

The company operates through two segments namely:Confectionery and Food Drinks, and Intermediate Cocoa Products.

The Confectionery and Food Drinks product portfolio include;Bournvita, Bubba, Tom Tom, Trebor, Buttermint, and Eclairsproducts. The Intermediate Cocoa Products segment offers; cocoapowder, cocoa butter, and cocoa cake.

In 2005, Cadbury Nigeria was reported as an associate in Cadbury Schweppes' accounts and also embarked on a Right Issue of Irredeemable Convertible Loan Stock to raise N5 billion. Cadbury Schweppes previously owned 46.30% of the equity, but in February 2006 Cadbury Schweppes increased its holding to 50.02% (Cadbury

Nigeria became a fully consolidated subsidiary) on the back of significant contributions from Cadbury Nigeria to the Group’sprofits.

The company has since grown organically to become one of theleading manufacturers in Nigeria, with a rising profile in theEurope, Middle East and Africa (EMEA) Region, one of the fiveoperational regional groupings of Cadbury Schweppes. It wasincorporated in January 1965 when the current 42-hectare factory site was also opened, it went public in 1976.

On the 19th of January 2010, the board of Cadbury SchweppesOverseas Limited accepted a buyout offer from the American foodgiant and one of the world largest confectionery companies, KraftFoods Incorporated. Cadbury Schweppes had previously rejectedtwo hostile takeover bids by Kraft Foods Inc., Kraft acquiredCadbury Schweppes for $21.8 billion or $13.77 per share; inaddition, Cadbury shareholders received 16 cents per Cadbury share. The deal creates one of the world’s largest confectionary companies and greatly expands Kraft’s global reach.

Stock StatisticsSymbol CADBURY Shares Outstanding 3,129,188,160Market Cap. N87,617,268,480

Year End 31 st December52 Week High N34.8452 Week Low N11.81Current EPS 0.41Current PE 68.94

5 Years EPS and Dividend HistoryPeriod EPS Dividend Payout2005 - 12.55 -2006 12.61 12.55 99.52007 8.79 8.20 93.32008 10.71 10.35 96.62009 10.04 10.00 99.6




INDUSTRIES: Food & Beverages – Nestle Nig. Plc

Nestle Nigeria Plc (Nestle) is a member of the respected andtrustworthy food, nutrition, health and wellness company renowned

world-wide for its high quality products. The company commencedsimple trading operations in Nigeria in1961 and has today grown

into a leading food manufacturing and marketing company. Nestle was listed on the Nigerian Stock Exchange on April 20, 1979.

Nestle S.A. of Switzerland and Nestle CWA Limited, Ghana are themajor shareholders of the company, controlling 3.17% and 59.13%of the company respectively.

The strategic priorities of the company are focused on delivering shareholder value through the achievement of sustainable, capitalefficient and profitable long term growth.

Nestlé’s focus is food processing with an emphasis on cereals, baby food, food seasoning and beverages. All offered under a stable of the following brands - Range of the Maggi brand of food seasoning ( Maggi Bouillon Cubes, Maggi Chicken, Cray fish and super onionspices) - Nestle Nutrend ,Cerelac, Nan – Baby food, Nestle GoldenMorn - Cereal, Nestle Nido, Carnation - Milk and Nestle Milo(Chocolate drinks) and Nescafe (Coffee) brand of beverages.

These brands and products are the focus of continuous innovationso that they meet and exceed their consumers’ expectations andensure that the products are available wherever, whenever andhowever the consumers want them.

The company has started the construction of its new manufacturing plant in Ogun state, South West Nigeria. This, the company believes

would increase its reach and ensure steady supply of products andalso affect turnover on the long run. Nestle currently generatesabout 70.0% of its energy needs, up from 60.0% in 2007, furtherincreasing the cost of production.

Stock StatisticsSymbol NESTLEShares Outstanding 660,546,875Market Cap. N254,310,546,875

Year End 31 st December52 Week High N40152 Week Low N252Current EPS 13.79Current PE 27.93

5 Years EPS and Dividend HistoryPeriod EPS Dividend Payou2005 - 12.55 -2006 12.61 12.55 99.2007 8.79 8.20 93.32008 10.71 10.35 96.2009 10.04 10.00 99.




Oil and gas exports account for more than 98% of exportearnings and about 83% of federal government revenue, as well asgenerating more than 40% of its GDP. It also provides 95% of foreignexchange earnings, and about 65% of government budgetary

The petroleum industry in Nigeria is the largest industry and main

generator of GDP in the West African nation, which is also thecontinent's most populous. Nigeria's petroleum is classified mostly as"light" and "sweet" and known as “Bonny light”, as the oil is largely free of sulphur. Nigeria is the largest producer of sweet oil in OPEC.

Nigeria's proven oil reserves are estimated to be as much as35.3 billion barrels. Its reserves make Nigeria the tenth mostpetroleum-rich nation, and by far the most affluent in Africa. Nigeriais one of the few major oil-producing nations still capable of increasing its oil output.

Nigeria is among top ten nations of world with a rich reserve of natural gas of approximately 159 trillion cubic feet. It has a dearth of advanced infrastructure in oil and gas industry of Nigeria, which hasfailed to stop gas flaring, and accounts for about 40% of natural gas itproduces.

Significant investment opportunities exist in Nigeria's down-streamsector of the Oil & Gas Industry. The focus of Government is thederegulation of the sector through the licensing of private refineriesand the removal of Government subsidies to the downstream sector,and the privatization of existing ones. It is hoped that domesticcapacity, through such strategic action would at least meet demand.

The four existing refineries have significantly and consistently

produced below capacity, caused by a host of factors, one of which ispoorly managed routine Turn-Around Maintenance.

Source: OPEC

Nigeria is in need of advanced infrastructural development in its o

gas industry to maximise resource

INDUSTRIES: Oil & Gas




INDUSTRIES: Oil & Gas – Oando Plc

Oando commenced operations in 1956 as a petroleummarketing company in Nigeria under the name ESSO West

Africa Incorporated. It was then a subsidiary of ExxonCorporation of the USA. The company was incorporatedunder the Nigerian law as Esso Standard Limited. Exxon’sinterest was bought over by the Nigerian Government in 1976and the company renamed Unipetrol Nigeria Limited. Thecompany became a ‘PLC’ in 1991. Unipetrol acquired 60%stake in Agip Nigeria Plc at the cost US$86m in August 2002.

The merger between Unipetrol and Agip was named OandoPlc in 2003. In 2004, Oando consolidated its affiliate andsubsidiary companies into an integrated energy group.

The company is an integrated energy company with

operations geographically located across West Africa andprimarily in Nigeria. The company’s initial focus was on thepetroleum-marketing sector; however its interests now spanthe energy value chain.

Oando was registered as an external company in South Africain November, 2005 after being declared the quoted company of the year 2003 by the Nigerian Stock Exchange. Thecompany was also adjudged the best in the downstreampetroleum sector.

Oando provides its retail and industrial customers with PMS, AGO, insecticides, bitumen and liquefied petroleum gas. Thecompany’s primary assets include over 600 retail outlets, 7liquefied petroleum gas plants, 2 bitumen plants, 3 aviationfuel depots in Lagos, Abuja and Kano, a lubricant blending plant with a capacity of 140 million metric tonnes per annum,the most modern of its kind in Sub-Saharan Africa.

In June 2007, the Company entered into a scheme of arrangement with certain minority shareholders of Gaslink

and with OOIN. Under the Scheme, the minority shareholders of Gaslink transferred their equity holdings inGaslink to the Company in consideration for ordinary sharesin the Company. In addition, OOIN transferred its interests inOando Supply and Trading Limited, Oando Trading (Bermuda) Limited, Oando Production and DevelopmentCompany Limited, Oando Energy Services Limited andOando Exploration and Production Company Limited to theCompany in consideration for ordinary shares in theCom an .

Stock StatisticsSymbol OANDOShares Outstanding 905,084,628Market Cap. N69,021,753,731.28

Year End 31 st December52 Week High N128.5052 Week Low N53Current EPS 9.73Current PE 7.84

5 Years EPS and Dividend HistoryPeriod EPS Dividend Payout2005 2.65 2.00 75.7%2006 4.11 2.50 60.8%2007 7.51 3.62 48.2%2008 9.22 6.00 65.1%2009 11.32 3.00 26.5%




INDUSTRIES: Oil & Gas – Japaul Oil Plc

Japaul Oil & Maritime Services Plc is an indigenous company incorporated in 1994 as a private limited liability company withan authorized and paid-up share capital of N1, 000,000. TheCompany commenced active business in the oil and maritimeservices segment of the oil & gas sector, 3-years after in, 1997.

Japaul was listed on floor of The Nigerian Stock Exchange on30th August, 2005.

The company’s vision is to be the giant in all facets of theirbusiness endeavours, rendering qualitative services that arerelevant to the growth of the world economy in the areas of general marine businesses, oilfield operations and engineering constructions. The company operates in five (5) different butrelated areas: oil & Gas Services which includes Engineering,

Procurement, Installation and Construction, Pipeline/FlowlineConstruction etc; Marine and Logistic Support Services whichincludes Marine Equipment Leasing, Construction, Sales andMaintenance / Construction Support Management andSolutions; Dredging and Reclamation works; Offshore VesselChartering; Road Transportation and Logistics etc.

Following the recently concluded strategic re-positioning of thecompany regarding its listing on The Nigeria Stock Exchange,Large and Expandable Capital Base, Manpower Boost, TechnicalPartnership, Equipment/ Technical Skill Acquisition,

Technological Advancement, Foreign Loans facilities and Public Awareness; Japaul Oil & Maritime Services Plc can effectively and successfully execute multi-million dollar projects under itslines of business.

Japaul Plc has grown its business network from just one state inNigeria to three and much more beyond the shores of thecountry to United Arab Emirates (UAE) and the United States

within 12 years of operations.

The strategic business acuity of Japaul is evident in its quest foroperational diversification in the oil and maritime industry overthe years. Though it faces high risks peculiar to the industry,

Japaul is on the verge of breaking out fully into more lucrativebusiness segments of offshore operations across the West Africacoast.

Stock StatisticsSymbol JAPAULShares Outstanding 6,262,701,716Market Cap. N10,521,338,882.88

Year End 31 st December

52 Week High 2.0852 Week Low 0.99Current EPS 0.2Current PE 8.26

5 Years EPS and Dividend HistoryPeriod EPS Dividend Payout2005 2.65 2.00 75.7%2006 4.11 2.50 60.8%

2007 7.51 3.62 48.2%2008 9.22 6.00 65.1%2009 11.32 3.00 26.5%




The Nigerian Mobile Telecoms market has been referred to asthe fastest growing market in Africa. It came into themainstream in 2001 with the deregulation of the subsector.

The deregulation ushered in telecom players like MTN of South Africa, GloMobile, Bharti Airtel, Etisalat, Visafone,

Multilinks, Starcomms and Zoom formerly Reltel. The market is divided into urban and semi-urban, and rural

market. Teledensity in the urban is about 65% while semiurban is about 45% and rural is less than 15%. The market issegmented into GSM and CDMA service sectors.

MTN controls 40.54% of the GSM market in Nigeria whileother service providers like Bharti Airtel, Glo Mobile, Etisalat,M-Tel of Nitel control 30.20%, 28.11, 0.7% and 0.45%respectively. While Visafone leads the CDMA market,followed by Multilinks, Starcomms, and Zoom.

Nigeria has maintained its lead as Africa’s largest telecommarket with active subscribers of about 65million relegating South Africa to second place with about 45millionsubscribers. From 400,000 NITEL land lines and mobilesubscribers in 2001, the industry grew to over 7millionsubscribers in 2004; in December 2008 the subscribers in themarket grew to 62.99million. An addition of 22.59 millionsubscribers in 2008 alone represented 56% annual average

growth rate. Recent figures released by the Nigerian Communications

Commission as at January 2011 put the subscribers’ base at114.63 million connected lines. While GSM subscribers are inthe range of 96.55 million, CDMA subscription in Nigeriagrew from just 380,000 in 2007 to more than 12.34 million atthe end of 2010. A country intelligence report on Nigeriastated that the market is the most lucrative in Africa with anaverage growth rate double that of the continent and a marketpenetration of only 56%.

Only one of the telecoms companies in Nigeria is listed at themoment.

INDUSTRIES: Telcommunications

The Nigerian Mobile Telecoms is regarded as the fastest growin

Africa.




The Nigerian Building materials industry has experienced a slow but steady growth over the past few years with the governmentstill the dominant customer of the industry, spending $2.5 Billionin 2008. The private sector has not been left out either, providing services to high-end clients. This leaves room for players in themarket for low-income earners.

Nigeria, with the highest population in Africa ranks the leastamongst its peers on the continent with respect to expenditure inthe building industry, calling for more players in the industry tofill in the gap.

Nigerian firms are repositioning themselves to face the challengesin the industry. Dangote Cement Plc (a merger of Benue CementCompany Plc and Dangote Cement Plc) recently listed its shareson the Nigerian stock exchange and plans to consolidate all its

operations in Africa into one company.


INDUSTRIES: Building Material

Nigeria is home to the fastest growing Building materials comin the whole of Africa.




INDUSTRIES: Building Materials – Dangote Cement Plc

Dangote Cement Plc (DCP) was incorporated as Obajana CementPlc on 04 November 1992. Dangote Cement Plc, prior to theplanned special sale of shares, was 95.9% owned by DIL. DangoteCement Plc is made up of Benue Cement Company, Ibeshe Cement

Factory, Obajana Cement Plc and import terminals in PortHarcourt, Lagos and Onne.

Benue Cement Company, now part of Dangote Cement Plc was aproduct of the industrialization moves of the Federal Governmentof Nigeria and was incorporated in July 1975 as a private limitedliability company but commenced operations in August 1980.Following the 1990 privatization of the company, the company’sname was changed to Benue Cement Company Plc in March 1992.

In another round of federal government’s privatization program in2000, Dangote Industries Limited acquired federal government’smajority 65% equity in BCC and effectively took over themanagement of the company in 2004. Until the Merger, DangoteCement is the majority shareholder, as it owns 74.76% of BCC’stotal outstanding shares.

Obajana Cement Plc was incorporated by the Kogi Stategovernment in 1992. It was however acquired by DangoteIndustries Limited in 2002 and commenced the construction of thefirst cement production plant in 2004. The company’s name waschanged from Obajana Cement Plc (OCP) to Dangote Cement Plcin July 2010. Dangote Industries Limited (DIL) owns 99.14% of theissued shares of the company.

Dangote Cement Group has the highest cement importation quota, which is shared between the Lagos and Port-Harcourt terminals.Combining only BCC and Obajana Cement Plant, Dangote CementGroup has an overall manufacturing capacity of at least 8 milliontonnes per annum (5 million tonnes from OCP, and 3 milliontonnes from BCC).

Earlier in 2010, Dangote Cement announced plans to consolidate itsNigerian assets into one entity and subsequently to list the entire

Dangote Cement Group, before which Benue Cement Company (the only publicly listed entity) would have been delisted. Themerger was conceived to enhance the consolidation of the cementproducing entities of Dangote Industries in Nigeria into a singleentity thus presenting a better platform for the enlarged entity (postmerger) to optimize the opportunities inherent in the NigerianCement Industry. Further to plans for an African expansion,Dangote Industries Limited is currently establishing cement plantsand terminals across Africa. Some of the countries include: Ghana,Sierra Leone, Liberia, Republic of Benin, Angola, DRC, CongoBrazaville Sene al Zambia and South Africa.

Stock StatisticsSymbol DANGCEMShares Outstanding 15,500,000,000Market Cap. N2,015,310,000,000

Year End 31 st December52 Week High N135

52 Week Low N120 Year to date Gain --Current EPS 4.86Current PE 26.76

An additional competitive strength of Danis leverage of the extensive distribution neDangote Group

Dangote Cement operates the largest cemeSSA and is better placed to drive revenue through robust volumes




INDUSTRIES: Building Materials – WAPCO Plc

Lafarge Cement WAPCO Nigeria Plc (WAPCO), formerly West African Portland Cement Plc, was established in 1960 with itsfirst factory in Ewekoro, Ogun State. The Ewekoro factory

achieved peak production of 706,500 tonnes per annum in 1977after 2 upgrades of the facility. The second factory in Sagamu,also in Ogun State, was established in 1978. The company commenced production with an initial capacity of 200,000tonnes per annum, but this later grew with demand to about1.5million tonnes per annum. A modern state-of-the-art plant

was commissioned in Ewekoro in August 2003 to replace theobsolete and aged plant. This has led to an increase in thecompany’s capacity by over 500,000 tonnes per annum.

WAPCO’S principal activities are the manufacturing andmarketing of cement products. The Group controls a uniqueportfolio of businesses, Cement (57%); Aggregates andConcrete (35%); Gypsum (8%). Lafarge designs and producesbuilding materials to meet the market requirements throughoutthe world for housing, transport, healthcare, education andessential infrastructure for economic growth.

The company’s brand – Elephant Cement – is of impeccablestandard and quality. The company has consistently won theNigerian Industrial Standards (NIS) Certificate for productquality by the Nigerian Standards Organisation for over twodecades now. The company was listed on the Nigerian Stock Exchange on February 16, 1979.

As a result of its takeover by Blue Circle Industries Plc, UK on July 1, 2001, Lafarge SA of France became the majority shareholder in Lafarge WAPCO. With the acquisition, Lafarge

WAPCO has integrated into the Lafarge culture, implementing process reengineering and imbibing Lafarge’s best practices.

The company won the Nigerian Stock Exchange “QuotedCompany of the Year” award in 2006

In February 2008, the name West African Portland Cement Plc

was changed to Lafarge Cement WAPCO Nigeria Plc, to reflectthe rebirth of the company as part of an internationalorganization, strategically positioned for greater heights. Itsubsequently commenced its expansion project tagged‘Lakatabu’, a 2.2million tonne plant which will double theoutput of the company. The expansion project is expected to becompleted in 2011.

Stock StatisticsSymbol WAPCOShares Outstanding 3,001,600,004Market Cap. N126,067,200,168

Year End 31 st December52 Week High N46.17

52 Week Low N24.90 Year to date Gain --Current EPS 1.89Current PE 22.17

The Company’s brand, Elephant Cement is oimpeccable standard and quality.

Lafarge Wapco Plc has embarked on an ultra2.2 million tonnes line, taking the aggregate 4.2 million Metric tonnes.




The Nigerian economy is expected to grow at an average of 7.4%in 2011 as the Nigerian economy recovers, creating improvedgrowth across the economy. We expect a slowdown in growth inthe first half of 2011 as all focus will be on the elections. Majorconstruction contracts will be put on hold till a new government

is sworn in. Economic growth is expected to be in full throttle by the second half of 2011 as suspended focus on reforms get on the way. This will continue in 2012 as we experience more stability.Economic indices like inflation are expected to rise due to theincrease of money in circulation. We expect an increase in MPR as a measure to curb inflation.

Growth in the telecoms industry is expected to continue and alsoimprove with the actualization of rural telephony. MTN Nigeriarecently invested N6 Billion ($40 million) in rural telephony in abid to capture the market yet unreached. With the arrival of MainOne and Glo submarine cables, we expect tariffs to drop muchlower than it currently is, thus providing room for increasedactivities both for telephony and internet subscribers.

The Oil and Gas industry has been stable with prices averaging around $77 per barrel with a standard deviation of about $4.16,implying stability around a mean of $75per barrel. It should benoted that the stable price range began in the third quarter of 2009, coinciding with the start of the global economic recovery. Itis anticipated that the second half of the year (2011) will

experience better economic activity, leading to stronger oil usage. As always, OPEC stands ready to take the necessary decisions tosupport oil market stability. There is now a broad consensus inthe market that crude oil prices around the current range havebeen accommodative in promoting adequate investment while atthe same time supporting the economic recovery. This translatesto stable returns for Nigeria, ensuring a stable foreign exchangeand economy at large.

As growth strengthens and the outlook becomes brighter in theoil and gas sector due to improved growth in the BRIC countries,

we expect a rub-off on the construction industry in Nigeria.Considering the large void in infrastructure, we expect a renewedsurge in the spate of constructions in Nigeria with the FederalGovernment being the major spender. The private sectorhowever will not be left behind as there will be a need for theprivate sector to augment the efforts of the government. This willpush the industry back to the level it once was before therecession. This is expected to continue into 2012.

OUTLOOK: Economy, Markets & Industries

The Nigerian economy is expecte grow at an average of 7.4% in 20

The government will intensify efreduce fiscal deficit to below 3%GDP in 2011 and 2012.





We expect a commensurate growth in the financial markets asother sectors of the economy grow. Currently the equity market isexperiencing some sort of stability largely due to returning investor confidence in the market. We expect that the stability

will continue into first half of 2011 with reduced volatility. Marketconfidence will improve after the 2011 elections as the nairastabilizes and more FPI flows in. Also the capital expenditurefrom the government is expected to impact the market as themoves to improve infrastructure deepens. The fixed incomemarket will not be left behind as activity in the improved marketcontinues.

Nigeria boasts of an energetic young population that is expectedto increase as the nation becomes the fifth largest in the world by the year 2015, according to UN projections. According to UNestimates, Nigeria has a population of 157.4 million people with

about half of that as its workforce. The nation is said to have low literacy level, the rate of growth in education is quite rapid. In asituation where countries like the UK, Germany, France andChina are battling with the problem of aging population, Nigeria’sdemography remains a strength.

OUTLOOK: Economy, Markets & Industries

Inflation risk will significant in 2due to major democratic election




About MBCSEC

MBC Securities Limited was incorporated in March 1995 as a private limited liability company.

Commenced operations on July 31, 1998.

MBC Securities is a dealing member of the Nigerian Stock Exchange (NSE) and is registeredby the Securities and Exchange Commission (SEC) as Broker/Dealer and Investment Adviser.

The firm is also a member of the Financial Markets Dealers Association of Nigeria (FMDA).

MBC Securities has a strong investment banking franchise with presence in securities trading,asset management and corporate finance.

Securities Trading

AssetManagement

CorporateFinance

Full Service Investment Banking Firm

MBC Securities Limited ,2nd Floor,South Atlantic Petroleum Towers,7, Adeola Odeku Street,

Victoria Island, Lagos.

Telephones:Lagos – 234-1-2708003-4, 2623136, 2623138.Port Harcourt – 234-84-756712.Emails : [email protected] Web: www.mbcsec.com

Jimi Ajibola +234 8068166514 [email protected] Analyst

Toyin Ayoade : +234 [email protected], Securities Trading



This report was prepared by MBC Securities Limited research team and represents the viewsopinions of the analyst about any and all of the subjects discussed. In the case of non-currency of of this report, the views and contents may not reflect the research analyst’s current thinking.document has been produced independently of the issuer.

While all reasonable care has been taken to ensure that the facts stated herein are accurate and tharatings, forecasts, estimates, opinions and views contained herein are fair and reasonable, neithanalyst, the issuer, nor its directors, officers or employees shall be in anyway responsible for the hereof and no reliance should be placed on the accuracy, fairness or completeness of any infocontained in this document. No person accepts any liability whatsoever for any loss howsoever arisany use of this document or its contents or otherwise arising in connection therewith.

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