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Honeywell
 
Flour
 
Mills
FBN Capital Equity Research
3
rd
December, 2008
 
HONEYWELL FLOUR MILLS PLC.
Medium / Long Term BUY
We provide coverage on Honeywell Flourmills Plc (“HFM Plc”) –a leading flour milling and consumerfoods player in Nigeria. Honeywell Flour is offering an opportunity for investors to share in its growthand success within one of the fastest growing sectors of the Nigerian economy via an Initial PublicOffer.Our BUY recommendation is based on the strong growth prospects of flour based products such asbread, baked products and other flour derivatives over the next few years. In particular, theopportunities from vertical integration through Honeywell Super Fine Foods Ltd (“HSF Ltd”) areconsiderable. HSF Ltd is the manufacturer of the O! Noodles brand. The company plans to expand intopasta production as well as developing, producing and marketing a range of processed and semi-processed food products including snacks, spices and condiments.
SUMMARY
 
In addition to the above, our recommendation is premised on a number of other factors includingfavourable valuation, high product quality and brand visibility,positive macro environment for sectorgrowth and the company’s overall strategy. With respect to
valuation
, the analysis we performed givesa range of values per share from N8.04 to N14.32. Therefore at N8.50 per share, the offer price isattractive even in current market conditions as this compares favourably with previous public offers inthe sector, as on page 2. As seen in Figure 4, the price is alsoconsiderably low compared with marketprices of comparable companies such as DangoteFlour, Flour Mills Nigeria Plc and Northern Flour MillsPlc.
Offer Price Comparables
Source: FBN Capital Research, FBN Capital Estimates
Table 1
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