We maintain a BUY recommendation on Unilever Ghana at a revised price target of GHS 22.79p from the current market price of GHS17.78, after assessment of their third quarter earnings report. Our valuation is derived from forward PE, PS and PB ratios of 21.66, 2.34 and 8.93 respectively, on a peer valuation basis. Whiles our absolute valuation models –DCF and DDM models- produced a price target of GHS 20.41 and GHS 14.14 respectively.

An impressive surge in third quarter earnings, attributable to the sale of Unilever's spread business (Blue Band Margarine) boosted the company's bottom line by 206.5% on a y/y basis. Net profit increased from GHS 33.7 million in Q3 2017 to GHS 103.3 million in Q4 2018. Given the noncurrent nature of the inflow, our in-house projections and model valuations were adjusted accordingly before arriving at our price target.

We expect two key market developments to trigger share price correction towards our targeted GHS 22.79p valuation limit by Q1 2018. First, we expect an impressive final year 2018 earnings release to lower pricing ratios (PE, PS, PCF) and provide attractive entry point for institutional and retail investors. In addition, we expect the distribution of an extraordinary or high dividend from Unilever, due to sales of its spread business, to spur sustainable demand for Unilever's shares going forward.

Exchange rate pressures, spillovers from the ongoing financial sector restructuring and unexpected increase in domestic inflation remain the main risk to achieving our projected price. However, our macro-economic outlook for the period under review remains stable.

Investors can contact CAL Brokers for trade executions related to Fan Milk and other equities listed on the Ghana Stock Exchange.