Big Treat Plc

Big Treat Plc was listed on the floor of the NSE late last year under the Food and Beverages Sector. They are a Chinese company operating in Nigeria and are known for their legendary bread. The company found itself recently under the radar of the NSE and SEC when they were investigated for price manipulation but I guess they were able to scale through the scare because we have not heard anything about the issue again.

It was obviously one of the companies that created a lot wealth for their shareholders within a short time when the price rose from the listing price of N4 to around N20 before finding its way back down. I guess this company has made as many people as rich as it had made people poor because some investors actually plugged in at the price of N20 and the price is N6.48 as at today.

Big Treat released its first quarter results for the period ended March 2008 recently on the floor. A breakdown of the results showed that turnover during the period moved up by 24.61 percent from N0.634 billion in the 2007 period to N0.790 billion in 2008. Profit before tax grew by 29.09 percent from N55 million in 2007 to N71 million in 2008. The company’s after tax profit was however impressive, it increased to N49 million from N10 million which it recorded in the same period in 2007, indicating a 390% increase. This means that the company is not as highly leveraged as it was this time last year; their debt to equity ratio has improved considerably.

Based on this result, with 2 billion shares in issue, Big Treat has an earning per share of 2K. This translates to an 8K earning per share for the full year ending December 2008. The forward price earning multiple at the current price of N6.48 will come to about 81 meaning that the fair value is around N1.76. Now, this stock, though a growth stock, is seriously overpriced and it does not make sense to me why anybody would want to buy it at N20.