P Z Cussons - Kate Moss plus Goodluck Jonathan

P Z Cussons: Forget the old bar of Imperial Leather soap that Granny used to cherish, Kate Moss is their more recent inspiration. What is not to like about a health and beauty consumer goods company that now derives over 40% of revenue from Africa? It’s main trading territory there has a population of c175m and a high birth rate. Thanks to natural resources it is a rich nation, with a growing middle class, albeit there is still much inequality. Elsewhere in developed markets, major brand names include Carex, Charles Worthington, St Tropez and Venus. The answer to my earlier question, in a word, is Nigeria. Whilst blessed with an exciting future, Nigeria is currently facing renewed internal strife ahead of Presidential elections early next year, with religious tensions and unrest rising. The collapse in the oil price has badly affected their currency and the budget. Whilst now officially Ebola free, regional cross-border trade has been adversely affected.

This has been reflected in a trading statement for the half year to 30^th November 2014, with Europe and Asia on track for increased profits, but Africa (mainly Nigeria) down. Overall operating profits are down 4% as a result. Last year (to 31^st May 2014) eps were 17.9p, so a 5% set back, (which seems plausible) would leave them at 17p for the year to 31^st May 2015. The shares have been weak of late and at 309p (against a 12 month high of 403p) the forward PE is 18.2x. Given the good long-term prospects the dividend is likely to go up, with say a 5% rise taking the total to 8.15p for a yield of 2.6%. Given the massive opportunity that is Africa, PZ Cussons is a stock that has exciting long-term prospects. Just now though, despite the weak shares, the valuation seems full enough given all the uncertainties in Nigeria. (Neil Cumming^, 11^th December 2014)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower