Analysts say the firms share price rise was not necessarily driven by company fundamentals or specific business benefiting news.

Within the first seven days of its arrival as a quoted company on the Nigerian Exchange in Lagos, fast-moving consumer goods firm BUA Foods Plc surged 59.1 per cent in valuation from a market value of N720 billion (at N40 per share) to N1.2 trillion (at N66 per share), helped by an overwhelming demand for its shares that has spurred a mix of upset and suspicion among traders and market watchers.

On its sixth day of trade (January 12) at which its rapidly rising share price began to plateau at N66, little-known BUA Foods had toppled Nestlé Nigeria, the local unit of Swiss-based world's biggest food company Nestlé S.A, to become the country's biggest consumer goods and food company by market capitalisation after the latter's share price fell 7.8 per cent.

Interestingly, the Nigerian stock market, which has appreciated by 4.07 per cent since the turn of the year, has hung to the string of gains by BUA Foods to attain that feat.

That means the stock index might have to look elsewhere for another catalyst to drive gain in the near term should the share price of the debutant food company continue to stagnate or market correction happens.

In December, the firm, which produces flour, pasta, sugar, rice and edible oil executed a consolidation of its five business units into a single entity ahead of its listing.

The steep rise in BUA Foods share price mirrors, to some extent, the circumstances around the sharp increases of the shares of its sister company BUA Cement when it too listed on the Lagos bourse about this time two years ago.

Within a year, the share price of BUA Cement, which listed at N35 per unit ballooned to N85, helping lift the fortune of Abdulsamad Rabiu, the chairman by 77 per cent to $5.5 billion under 12 months and catapulting him to the sixth position on Forbes's African billionaire ranking.

Mr Rabiu and his son Abdulsamadu Isyaku Rabiu (Jnr) hold 99.8 per cent of BUA Foods shares between them, the former owns 88.9 per cent and the latter 10 per cent, according to the company's listing memorandum.

"Based on the listing price and the information on the memorandum, the implied price-to-earnings (PE) ratio is over 40 which is significantly higher than the P/E ratio of comparable players in the sector," Timchang Gwatau, research associate at brokerage and investment bank Meristem Securities told PREMIUM TIMES.

Analysts use PE ratio to know if a company's stock is overvalued, meaning trading above its real value, or undervalued, meaning trading below its intrinsic value. A high PE ratio indicates the stock is overvalued while a low PE ratio implies it is undervalued.

The PE ratio of BUA Foods, which was above 40 at the point of listing, has risen well above that level, considering that its share price has scaled up by nearly three-fifths since then, and is now well above the average PE ratio of a sector that also comprises companies like Dangote Sugar, Flour Mills, Cadbury, PZ Cussons and Unilever.

Traders, according to Mr Gwatau, said the sentiment on the stock since it listed is not quite reflective of the market.

"How can it be when the market barely knows anything about the company?" he quoted one as saying.

"Some of the companies' products are not yet launched. The ones that have been launched are not popular."

According to an analyst that asked not to be named because of the sensitive nature of the subject, whatever is driving the price is not likely to be market sentiment because the price is not fundamentally justifiable and is probably artificially driven by promoters.

The company is holding an analyst/investor's call this week, where the management has got some explaining to do about the state of things.

"The rally in BUA Foods was driven more by initial speculation from investors as they sought to ride on the wave of the news of the new listing," said Ayorinde Akinloye, research analyst at Lagos-based United Capital.

"Clearly, the rally was not necessarily driven by company fundamentals or specific business benefiting news."

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