Key Stats for Molson Coors Brewing Co
If you like the beer, will you love the price? Or could it cloud your judgement!
| Ticker | TAP |
|---|---|
| Sector | Brewers |
| Latest price | $97.62 |
| Value | $20,962M |
| Daily vol | $151M |
| Date | 17 January 2017 |
Useful Links
- Latest news from Google Finance and Yahoo Finance
- Latest results from SEC Edgar
- Website: http://ift.tt/16fLrPn
Description
Molson Coors is a brewer with a portfolio of brands, including Carling, Coors Light, Molson Canadian and Staropramen, as well as craft and specialty beers, such as Blue Moon, Creemore Springs, Cobra and Doom Bar.
But it's actually a little complicated. $TAP used to be a Canadian-EU business that happened to have a big stake in a JV with with SABMiller. But since BUD decided to buy Miller, they had to offload the JV on TAP. The deal closed in October, costing TAP $12bn for the 58% they didn't own.
Recent financials
We could look at the recent financials, but it's sort of meaningless. So instead let's look at the before and after!
| 2015 | New TAP | Old TAP |
|---|---|---|
| Hectolitres | 94m | 58m |
| Net Sales | $11.2bn | $6.8bn |
| Operating Income | $1.6bn | $0.9bn |
Now...let's put that in comparison with the new $BUD... $55bn of sales and $17bn of operating income.
Competition
So the competition is pretty obvious! Bud, Carslberg, Asahi, Heineken and then you can throw in local plays like CCU and SAM for good measure.
Today margins look line and returns okay...though the one thing that jumps out is the remarkable figures of BUD.
| Companies | Latest Sales | Operating Profit | Return on Equity |
|---|---|---|---|
| Molson Coors Brewing Co | $3,435M | 18% | 7% |
| Anheuser Busch Inbev BUD (ADR) | $42,038M | 39% | 18% |
| Heineken N.V. (ADR) | $21,951M | 21% | 15% |
| Kirin Holdings Co Ltd (ADR) | $18,470M | 11% | -ve |
| Compania Cervecerias Unidas S.A. (ADR) | $2,312M | 19% | 12% |
| Boston Beer Company Inc | $902M | 20% | 17% |
Now there are going to be synergies from the deal. Currently TAP is $200m of syngergies by the end of the 4th year, and the massive debt pile to buy Miller, means they'll have less taxes to pay. That should yield another $250m a year in cashflow to shareholders.
Cash / Debt?
So before deal, TAP had debts equal to 1.9x profits. After the deal and the $12bn payment it's up to 5.3x. That's rather scary. So it'll be critical to keep an eye on this.
Wall Street thinks?
The professionals on Wall Street have a $120.20 for Molson Coors Brewing Co and their recommendation to clients is Buy. That implies an upside of 23% to their target.
Valuation
At 17x earnings, it doesn't seem pricey. And the $5.68 forecast for 2017 doesn't feel a stretch.
| View Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | FCF Yield |
|---|---|---|---|---|---|
| TAP | $20,962M | 17x | 8% | 2% | 6% |
| BUD | $178,178M | 30x | 4% | 4% | 11% |
| HEINY.PK | $43,045M | 19x | 7% | 2% | 11% |
| KNBWY.PK | $15,097M | 18x | N/A | 2% | 7% |
| CCU | $3,941M | 22x | 1% | 2% | 11% |
| SAM | $1,991M | 25x | 12% | 0% | 6% |
But given the debt load, it's hard to see major dividend increases of buybacks anytime soon, so we'll have to be happy with earnings growth driven by synergies for now.
Dividends
Molson Coors Brewing Co is forecast to pay a dividend of $1.64 per share, compared to a forecast EPS of $5.86.
Catalysts
In the last 3 months the stock price has moved by -12% that compares with a change in the earnings forecasts of 5%. Ouch.
On the management team's latest call with Wall Street brokers, they seemed to confuse the analysts about the cashflow potential of the business in 2017.
Perhaps there are going to be 2 years of integration hiccups? Maybe not. But surely serving up a more global, more integrated, more streamlined TAP is good news for shareholders long-term?
Or is the real driver plain old beer sales? And if so, then it's time to reach for the bottle...
...I'm tempted. You?
View the archive of Stock a Day posts at its subreddit r/stockaday. And if you want an email reminder when we post each stockAday, tell us here?
Disclosure: I have no position in any of the stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
Author notes: u/shane_stockflare works at a financial website, Stockflare, and is a Chartered Financial Analyst.
Submitted January 17, 2017 at 04:46PM by shane_stockflare http://ift.tt/2ju7tJp
