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Diageo Kenya Jumps to 2-Month High on Outlook: Nairobi Mover

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Oct. 2 (Bloomberg) -- East African Breweries Ltd., the region’s biggest beermaker, rose to the highest level in almost two months as buyers bet the company’s earnings will beat Diageo Plc’s unit in Nigeria.

The stock of EABL, which is also part of the London-based brewer, climbed 4 percent to 339 shillings, the biggest jump on a closing basis since June 28 and the highest since Aug. 7. Investors traded about 970,000 shares, equivalent to 3.1 times the three-month daily average.

EABL trades at 27.4 times estimated earnings, compared with 27.2 times for Guinness Nigeria Plc, according to data compiled by Bloomberg. In August, EABL said full-year profit fell 38 percent because of higher financing charges.

The brewer took a loan of 19.5 billion shillings ($224.9 million) in November 2011 to buy a 20 percent stake in Kenya Breweries Ltd. from London-based SABMiller Plc and sold a similar shareholding it held in Tanzania Breweries Ltd. to SABMiller. Interest payments on the loan were made through the full year, rather than seven months recorded in the prior fiscal period.

“Post restructuring, EABL is better positioned and the long-term story is compelling,” Timothy Wambu, head of research at Nairobi-based NIC Securities Ltd., said by phone. “It deserves a higher price-to-earnings multiple to Guinness Nigeria.”

Shares in EABL, Kenya’s second-biggest company by market value, climbed 28 percent this year following a 54 percent advance in 2012. Guinness Nigeria is down 3 percent after increasing 10 percent last year. On Sept. 16, Guinness Nigeria said full-year net income fell to 11.8 billion naira ($72.8 million) from 14.3 billion naira.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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